Stewart Butterfield's inspiration came when he was 'puking my guts out in a hotel in New York'

Slack founder Stewart Butterfield’s life is the stuff of Silicon Valley legend.

But if there’s one lesson to be learned from him, it’s this: within the mess of every failure is the seed of success. You just might have to be delirious to see it.

His business success has come sort of easily, if you discount the fact that both of the blockbuster startups he founded, Flickr and Slack, rose from the failure of the companies he was really trying to build.

Butterfield first gained notoriety cofounder of Flickr, a photo-sharing service which Yahoo bought in 2005 for around $US22 million.

But now he’s better known as the CEO and cofounder of Slack, one of the fastest-growing apps in the history of the internet.

In less than two years Slack grew to over 1.1 million daily active users, 300,000+ paid seats, 180+ employees, and $US25 million in annual recurring revenue. Its growth impressed VCs so much that they invested a whopping $US340 million into the young company at a $US2.8 billion valuation.

Butterfield may have been destined for a great career in tech, but he’s had plenty of drama along the way.

Computers since age 5

Butterfield was born in 1973 in the tiny fishing village of Lund, British Columbia, where his parents lived in a log cabin and didn’t have electricity until he was three. At age five, they moved to Victoria and got their first computer, and he fell in love with tech.

“I was among the first cohort of kids to grow up with computers,” he told us.

Stewart Butterfield 5K contest5K contestThe 5K contest still has a website

He taught himself to code as a kid and earned money designing web pages throughout high school and college.

In the heady days of the 1990s Internet bubble, he joined his friend Jason Classon at Classon’s startup, Gradfinder.com. A month later, the bubble burst.

And six months after launch, they still managed to sell Gradfinder.com for what Butterfield describes as “a healthy profit.”

Classon went to work for the acquiring company (Highwired) and Butterfield went back to web design freelancing.

Just for fun, Butterfield created the “5K competition” a contest for building website in under 5 kilobytes These were the days when internet was a slow dial-up thing and big web pages took forever to load.

“It became unexpectedly huge, in every country in the world,” Butterfield told us, and it gave him a pretty big profile in the Web design world to land high-paying freelance jobs.

Then Classon left Highwired and the band got back together. He joined Butterfield and Caterina Fake at a startup called Ludicorp.

They wanted to build a massively multiplayer online game. Butterfield and Fake also fell in love and got married.

And things went downhill from there

“We had raised friends and family money, trying to build the thing. But this was after dot-com bust, after WorldCom, Enron, 9/11. No one wanted to invest in consumer and especially not something as frivolous as a game. We couldn’t raise any money,” Butterfield told us.

“The only person that got paid was the person that had kids, and we were out of money,” Butterfield said.

Then he got on a plane to New York for a speaking engagement and things got worse.

“I got food poisoning. I was up all night. The whole idea for Flicker came to me while I was puking my guts out in a hotel in New York.”

Butterfield’s game had added a feature where you could share photos with people. It didn’t work very well. You could only share photos when both of you were online.

In his food-poisoned delirium, Butterfield realised that the awful photo sharing feature could become a very cool thing on its own: Flickr.

“We made a bunch of changes and it started taking off and grew through the summer of 2004,” he said.

That growth caused several big internet companies to take notice, including, briefly, Google. Offers came in from Yahoo and AskJeeves, and Flickr sold to Yahoo, nabbing Butterfield, Fake most of the team as employees.

Working and leaving Yahoo is a right of passage for many Valley stars. So in 2008 the couple left. And a couple of years later they split up, too.

From the ashes of Tiny Speck

Butterfield still wanted to build that multiplayer game. He got the crew from Ludicorp/Flickr together again, including engineer Cal Henderson, and the two of them cofounded Tiny Speck.

Slack cofounder Cal HendersonSlackSlack cofounder Cal Henderson

Tiny Speck “turned out to be not a good idea,” Butterfield says.

“We raised $US17 million in 3 rounds and had 45 people working on it. But by 2012, it wasn’t going to become a business that would justify $US17 million. It had a hardcore cult following that exists to this day,” he says.

They had made some wrong technical choices and, “the game was too weird for most people,” he said.

This time, he didn’t need food poisoning to start looking for something new among the wreckage to save the company.

It turned out to be the app the team had built to chat and communicate together. They all loved it and never wanted to work again without it. They turned it into a product called Slack and it went nuts.

Why Slack went crazy

Butterfield credits Slack’s success to a few things.

Slack appSlackSlack

1. A simple design that works particularly well on smartphones.

2. The whole world is online now, with coworkers using phones and PCs to communicate.

3. The press, who knew Butterfield from Flickr and Yahoo, paid attention to the app. They tried it, liked it and brought it to their companies, and they continue to write about it.

Business Insider uses it. So does BuzzFeed, The Wall Street Journal, The New York Times, and many others.

Why he raised so much money

Having been through the first crash, Butterfield isn’t sure if we’re headed for another one.

He took so much cash for Slack because “It’s a fantastic time to raise capital. It’s very cheap so that’s good for us. I don’t know if it’s a bubble, if people are overpaying. I’m sure some investments won’t work out,” says.

But he also said, because most of the developed world uses the internet, internet companies “are getting to significant amounts of revenue in short amounts of time — Airbnb, Dropbox, Uber,” he said.

VCs are raising larger and larger funds, and can only invest in so many companies a year. Ergo, deals are bigger and VCs are demanding less equity for their investments.

“Flickr at at time was a very big deal. We were on the cover of Newsweek.” But because there are “10 times as many people online,” he said, ” Slack is much, much bigger than Flickr was.”

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