Jul 11: Canadian Startup Success Stories: Slack

Johnathan Holland

It feels strange to use words like “beloved” when describing a workplace communication app. Words like “fanatic” and “superfan” also seem out of place for an application that people use in place of email in the workplace. However, Canadian startup Slack has won the hearts and minds of millions of teams in industries all over North America and around the world. The story of how they came to be a 3 billion dollar company from a failed video game developer is as compelling as any novel or Academy Award winning film. How did this small team of programmers and designers create one of the most widely used and universally adored workplace apps? Let’s go back to their humble beginnings and see what has made Slack one of Canada’s most successful enterprise software companies.

Chapter 1

The Beginning

Slack founder and CEO Stewart Butterfield is anything but a typical enterprise software developer. He grew up in a commune in British Columbia, and was named Dharma by his loving hippie parents (Obviously, he changed his name). Butterfield holds a master’s degree in philosophy from University of Vancouver, and originally intended to become a professor of philosophy. However, about halfway through grad school, he began to notice a trend among his PhD-holding friends struggling to find jobs. Meanwhile, he also observed that his friends with coding and programming skills were riding high on the rising wave of the 1990s dot-com boom. Butterfield was earning money during summer breaks making websites for cash. It was then that he decided to change plans.

Fast Forward to 2002, and Butterfield had brought together a team for the purpose of developing a massively multiplayer online game called Game Neverending, intended to be a world-building fantasy roleplaying game with elements of social media. His cohorts on this project were Eric Costello, Serguei Mourachov, and Cal Henderson. These four would become the central nervous system of Slack along with Caterina Fake, Butterfield’s girlfriend at the time and later his wife (although they did divorce in 2008). The one problem they could not have predicted is what led to their downfall.

Chapter 2

Rolling with the Punches and Flickr

Butterfield and company’s timing for creating a big online game could not have been worse. The dot-com bubble burst, Enron and WorldCom ended up being a significant one-two punch to the American economy, all of which spooked investors and made startup capital scarce. The team, based on a brainstorm by Butterfield, decided to take some of the social media components they had written for Game Neverending and convert them to a photo-sharing tool. The idea worked so well that Flickr (as it came to be known) began growing so rapidly that the company couldn’t afford the servers necessary every week to host the massive amounts of photos that users uploaded.

Yahoo! came to the rescue with an offer of $25 million to acquire Flickr, which seemed like the answer to all of their woes. However, Flickr was folded into the wrong division within its new owner’s company. It languished there while Facebook and YouTube continued their meteoric rise to the top spots of the social media industry. Cal Henderson and others who had helped create Flickr felt as though their brainchild had been run into the ground.

Butterfield made it three years at Yahoo! Before striking out on his own in 2008. He re-assembled his team and started working on another MMO game called Glitch. Once again diving into the social fantasy genre, the developer raised $17 million from venture capitalist Andreessen Horowitz and Accel Partners, but yet again their timing was less than ideal. The mobile device gaming platform was already on the rise, and Glitch was a desktop game. Following a number of difficult conversations, the partners decided to shut down the project in late 2012. They offered their investors back what remained of the money, but were told to keep the money and do their best to work on a different project with a severely reduced staff.

Chapter 3

The Birth of Slack

As they reflected on the various intellectual properties they’d created over the years, they were suddenly struck by an idea so blatantly obvious that none of them recalls who brought it up first.When Glitch was in development, they communicated via IRC (internet relay chat), which organizes all conversations into channels. Being able to message in real time was vital to their development process at the time because Costello was in NYC, Mourachov was working out of Vancouver, and Henderson was based in San Francisco.With Butterfield back and forth between Vancouver and San Francisco, it was a rare occasion that the whole team was in the same time zone at any given moment. To make communication easier and more effective, they had actually built their own IRC app, tweaking and adjusting it to suit their needs.

The name Slack was Butterfield’s idea, which he based on a midnight brainwave visualizing the concept as a loose piece of string connecting two tin cans. “Communication is one of the things that causes tension in an organization, and we wanted to relax that,” he stated in a 2014 interview. His team was less than thrilled with the name, most of them raising the objection that slacking is the complete opposite of meaningful work, which is hardly an asset for a an app that was focused on improving productivity. Sticking to his guns because the name was so very anti-establishment, Butterfield created a “backronym” justifying the name: Searchable Log of All Communication and Knowledge. Needless to say, the name stuck.

For the following two weeks, Butterfield wrote his pitch explaining Slack to the business world: a communications app that kept everything in one place, had powerful searchability options, would be available anywhere via mobile or desktop, and would complement other productivity apps like Excel and Powerpoint without recreating or reinventing them. This pitch would become the basis of everything Slack stands for and has worked towards since its inception.

Since that time, Slack has grown to 300 employees. Their offices occupy a 48,000 square foot space sublet from Eventbrite, and they are still looking to expand that space in the near future due to their continued rapid growth. In 2015, they were valued at $2.8 billion thanks to the $160 million they raised from Social Capital and other major venture capital firms.Further proof of their ability to run with the big dogs of enterprise software is the recognition and competition they are receiving from long established rivals like Facebook and Microsoft. In fact, Microsoft went so far as to call their collaboration features in the latest version of Microsoft Office a “Slack killer”. Clearly, Slack is rattling some very big cages, and Butterfield couldn’t be happier.He knows that their way of running a company will have them outperforming the competition for years to come.

Slack’s approach to application development has proven exceptionally effective, and is as rare in the software world as it is successful. Butterfield attributes their success to the Zen-like development process where they weren’t initially trying to make an app for consumers, but for themselves. “We were totally non-self-conscious about it,” he says. “It was just, ‘It’s driving me crazy that I can’t search’ or ‘It’s driving me crazy I can’t post from iOS,’ and then we’d spend the minimum number of minutes fixing it.”

Another Slack touchstone is their approach to customer support, which combines the personal touch with effective problem solving. Slack wants every customer who reaches out for help with their app to experience a personal connection with the customer service representative on the live chat or via phone. They tend to hire customer support personnel who display a knack for emotional intelligence and demonstrate superior writing skills. Technical knowledge is a matter of education, but personality can’t be taught. The liberal arts and knowledge about those topics are of paramount importance to the company, as they are seeking to create a customer support experience akin chatting with someone about Slack while sipping coffee at your favorite shop.

Ultimately though, Slack realizes that its “secret sauce” is a combination of working hard and going home, focusing on what customers and fans want from the app, and doing everything to make their app the one to beat for many years to come. As for what lies ahead, Butterfield and company aren’t slowing down. They continue to win fans among more Fortune 500 businesses every year, and many businesses are actually highlighting their use of Slack as a perk of working for them. Their unique ability to generate buzz and add new customers with barely any advertising speaks to the truth of the idea that when you build something truly exceptional the people come to you.They are one of the top new entrepreneurs to come out of Canada in the past decade, and their dedication to excellence, their commitment to finding and supporting the best talent, and their perseverance in turning perceived failure into success is both an inspiration and a valuable lesson to entrepreneurs everywhere.