The wait is over. Last week, Slack laid bare its portfolio, looking to Wall Street to judge its worth and viability among the ranks of publicly traded companies.
On Friday, Slack filed direct listing documentation, revealing $400.6 million in revenue for FY 2019, nearly quadrupling the $105.2 million in revenue it earned in 2017. The pace of Slack's revenue growth is only as strong as the market allows it to be because the company carries losses.
The company reported nearly $139 million net losses in 2019. Slack expects to "continue to incur net losses for the foreseeable future" because of the market's rapid evolution and has "yet reached widespread adoption," according to the company.
Costs will steadily increase with the expansion of partnerships, operations, infrastructure, and enhancements to its application programming interfaces. Going public sets Slack up for other costs it didn't have to deal with as a private company, like legal and accounting necessities.
If revenue slows or declines, "we will not be profitable in future periods."
"We may not be able to sustain revenue growth consistent with recent history, or at all," according to Slack's S-1 form. "Further, as we operate in a new and rapidly changing category of software, widespread acceptance and use of Slack is critical to our future growth and success."
Going public is an exercise in confidence for Slack. It's a pure play company unique in the market with competition from offerings at larger providers, like Microsoft Teams and Workplace by Facebook. Even with its startup-like agility and loyal user base, Slack knows that going public will unveil its weaknesses, even if it has a plan to overcome them.
Now is the time for communication and collaboration companies to expand to users in and outside of the workplace. "It's time for a good corporate communication and collaboration strategy to transform their tech savviness into productivity," said Wayne Kurtzman, research director, social and collaboration for IDC, in an email to CIO Dive.
No slowing down
The collaboration market has added a few industry heavyweights the last few years, including Microsoft, Google and Facebook. It has also lost a couple of competitors, like Atlassian and IBM. With steady growth, Slack has remained.
Slack announced its intentions of going public in February armed with a "unicorn-hubris" flare for making a strong case on the market. The company boasts more than 500 employees across engineering, product, research and design and since its launch, Slack invested more than $455 million to build its service.
Slack has 88,000 paying customers, 575 of them are on a paid subscription plan that add more than $100,000 in annual recurring revenue. Those customers, identified as paid customers more than $100,000, accounted for about 40% of the company's revenue for fiscal year 2019.
Slack's paid customer growth
| Year | Paid Customers | Paid Customers >$100,000 |
|---|---|---|
| 2017 | 37,000 | 135 |
| 2018 | 59,000 | 298 |
| 2019 | 88,000 | 575 |
SOURCE: Slack's S-1
"Our Paid Customers base has expanded through increasing awareness of Slack, further developing our go-to-market strategy and continuing to build features tuned to different industry needs," according to the company.
The company's initial x-factor was its ability to reach users unable to purchase a subscription, it was also easy to sign up.
Slack has more than 500,000 organizations using the free subscription model before diving into a paid subscription. Microsoft adopted the free model version in July, but "Microsoft is providing numbers that cannot necessarily be reconciled with Slack," said Kurtzman. Unlike Slack, having a Teams contract doesn't automatically translate into adoption because of the way it's bundled in Microsoft's software package.
Organizations usually trial Slack with its free version first, according to the SEC filing. Customers upgrade to the paid version when their company begins integrating its preferred third-party applications or spread use throughout a company.
Slack's sweet spot
One of Slack's strengths is its vendor-neutrality, which makes its platform a hub for any workplace application. The company has avoided rebuilding the functionality of other enterprise applications through strategic horizontal integrations while maintaining its pure play identity.
Companies are moving away from the "one company provides everything model," said Kurtzman. Instead companies want a platform that "leverages all the technologies the enterprise plugged into it."
The average enterprise uses more than 1,000 cloud services, according to the SEC filing, contributing to the addition of more and more specialized software and "fragmentation of attention" within a company.
The disorder of too many cloud applications is where Slack finds its sweet spot as a "flexible platform" that houses applications from Google, Salesforce, Atlassian, Dropbox, Microsoft and more.
Most recently Slack answered the "highly requested" demands of enterprise customers, enabling workflows powered by Microsoft Office products accessible on Slack. The company has a similar partnership with Google and Google Drive.
What about Teams?
After just two years on the market, Teams eclipsed Slack in terms of paying customers, but Microsoft isn't a pure play company and Slack was borne of collaboration.
Slack is a "platform-focused company and not distracted with other product offerings, as Microsoft may be," Jonathan Cantwell, executive director and head of software at GP Bullhound, told CIO Dive.
This leaves Slack with "plenty of greenfield opportunity" to surpass Teams, according to Cantwell. But it's easy for companies to orbit around the two-sun solar system — Microsoft and Amazon — when it comes to cloud-based software bundles.
"The question is how can Slack push deeper into the companies that it has, and grow the number of companies who have yet to add collaboration platforms," said Kurtzman.
Although Teams "can be effective at keeping a team together," it lacks the robustness and the permutation Slack has, according to Kurtzman. "They provide two different work experiences, especially if enterprises integrate their key business software in Slack."
The additions Slack has made to its platform, like email bridges that connect non-Slack users to conversations on the platform through email. In March, Slack announced its Enterprise Key Management that added an additional layer of protection in encrypted data sharing.
The additions of more enterprise-focused integrations is making it easier for Slack to garner positive results, said Kurtzman, deepening existing relationships with customers.
