By Alex Rivera | TechBiz Insider | Published October 15, 2023
In the cutthroat world of Silicon Valley, where ideas rise and fall faster than stock prices, few stories embody the American dream of entrepreneurship quite like Slack’s. What began as a quirky side project buried in a failing video game studio has ballooned into a $27 billion communications juggernaut. At the heart of this transformation? A bold pivot that turned desperation into dominance. This is the tale of how Stewart Butterfield and his team went from coding a multiplayer game no one wanted to launching a tool that revolutionized workplace collaboration—and culminating in one of the most anticipated tech IPOs of 2019.
The Spark: A Game That Wasn’t Meant to Be
It was 2012, and Stewart Butterfield—co-founder of Flickr, the photo-sharing pioneer sold to Yahoo for $35 million—was knee-deep in his next big bet. After leaving Yahoo, Butterfield assembled a team at Tiny Speck to build Glitch, an ambitious massively multiplayer online (MMO) game. The vision was whimsical: a vibrant, pixelated world where players could build, chat, and adventure together. Funding poured in—$17 million from heavyweights like Accel Partners and Andreessen Horowitz. It felt like destiny.
But reality hit hard. Glitch launched in 2011 to modest fanfare, only to struggle with user retention. Players trickled in, but monetization was elusive, and engagement flatlined. By late 2012, Tiny Speck was burning cash with no clear path to profitability. "We were building this game that nobody wanted to play," Butterfield later reflected in a 2015 interview with Recode. The team was demoralized, facing the prospect of shuttering the company.
Yet, amid the rubble of Glitch‘s internal tools, something magical emerged. To coordinate their distributed team—spread across time zones and working asynchronously—the developers hacked together an internal chat system. It was simple: real-time messaging, file sharing, searchable history, and emoji reactions. Nicknamed "Slack" (short for "Searchable Log of All Conversation and Knowledge"), it solved the chaos of email and IRC threads overnight. Team members raved about it. "Suddenly, we were 10x more productive," said one early engineer.
The Pivot: From Pixels to Productivity
Pivots aren’t glamorous—they’re survival instincts. In January 2013, Butterfield called an all-hands meeting. Glitch was done. The servers would shut down by the end of the year. But Slack? That was the future. "We realized we had accidentally built a product people loved," Butterfield said. The team shifted gears overnight, repurposing Glitch‘s infrastructure—its robust real-time engine and scalable backend—for a standalone business app.
This wasn’t a minor tweak; it was a complete reinvention. Gaming tech powered seamless messaging, while Glitch‘s collaborative ethos informed Slack’s user-friendly design. They stripped away the game elements, focused on enterprise needs, and beta-tested with friends in tech. Feedback was electric. Within weeks, companies like Etsy and Shopify were clamoring for access.
Slack launched publicly in August 2013. No massive marketing budget—just word-of-mouth from developers. Growth exploded: 8,000 users on day one, 15,000 in two weeks, and 30,000 by month’s end. By 2014, daily active users hit 120,000, with zero paid acquisition. Investors, sensing blood in the water, flooded in: $43 million in Series B at a $250 million valuation.
Scaling to Stardom: The Growth Machine
Slack’s ascent was meteoric, fueled by product-market fit and impeccable timing. Remote work was rising, email fatigue was rampant, and tools like HipChat lagged behind. Slack’s freemium model—free for small teams, paid for enterprises—lowered barriers and hooked users. Features like integrations (thousands, from Google Drive to Zoom) turned it into a "digital HQ."
Revenue followed: $12 million in year one, $60 million by 2015. Competitors like Microsoft Teams emerged, but Slack’s culture-first vibe won hearts. It became a verb—"Slack me the doc"—and a cultural phenomenon, powering everything from startups to Fortune 500s.
Funding rounds piled up: $160 million Series D in 2015 valued it at $2.8 billion (a "unicorn" before the term was cliché). By 2018, annual recurring revenue topped $300 million, with 8 million daily users. But whispers of an IPO grew louder as Salesforce circled with acquisition rumors.
The IPO Pinnacle: Public Market Magic
June 20, 2019: NYSE bell rings for ticker "WORK." Slack direct-listed (no underwriters diluting shares), debuting at $38.50—above whispers of $26-$28. First-day pop hit 49%, market cap soaring past $23 billion. It wasn’t WeWork’s flop; it was a validator of pivots paying off.
Butterfield, now CEO, emailed employees: "We’ve come a long way from that side project." Revenue guidance? $400 million-plus for fiscal 2020. The pandemic turbocharged it—remote work demand sent shares to $45 peaks.
Today, post-Salesforce $27.7 billion acquisition in 2020, Slack thrives as the CRM giant’s crown jewel. Its pivot playbook? Pragmatism over ego.
Lessons from the Slack Odyssey: Pivot Like a Pro
Slack’s story isn’t anomaly—it’s blueprint. Here’s what entrepreneurs can steal:
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Listen to Your Data, Not Your Dreams: Glitch metrics screamed failure; internal tools whispered success. Validate ruthlessly.
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Repurpose Ruthlessly: Leverage sunk costs. Glitch‘s tech was Slack’s secret sauce.
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Freemium Fuels Virality: Low-friction onboarding turned users into evangelists.
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Timing + Team = Triumph: Butterfield’s Flickr pedigree attracted talent; post-2010 remote trends amplified it.
- Culture as Moat: Fun, transparent comms built loyalty amid competition.
Pivots demand courage—most startups die clinging to plans. Slack proves: sometimes, the best idea hides in your biggest flop.
Stewart Butterfield summed it up: "Success is just a series of happy accidents." For founders staring at failure, that’s gospel. What’s your side project hiding?
Alex Rivera covers tech entrepreneurship for TechBiz Insider. Follow for more startup sagas.
