Slack, the workplace messaging company, has hired investment bank Goldman Sachs to lead its IPO next year, according to a Reuters report. Reuters’ sources say the company is hoping to nab a valuation of “well over $10 billion.”
The WSJ reported back in September that Slack was “actively preparing” for an IPO in the first half of next year, with an eye toward going public as early as the first quarter. It said, too, that the company thought it could achieve a valuation well in excess of the $7.1 billion that it was last assigned by private market investors.
Slack, which is based in San Francisco and Vancouver, revealed back in May that it had 8 million daily active users. At the time, it said that 3 million of its users were also, crucially, paid users.
In August, when the company announced its most recent funding round of $427 million, it told the New York Times that it still had eight million daily users, though it noted that it had just half that number in the summer of 2017.
Slack’s investors include SoftBank Group’s Vision Fund, Dragoneer Investment Group, General Atlantic, T. Rowe Price Associates, Wellington Management, Baillie Gifford, and Sands Capital, with much earlier investment coming from Accel Partners and Andreessen Horowitz (a16z).
In fact, when Accel and a16z funded Slack, it was technically a different company, one called Tiny Speck, and it worked long and hard on an online, multiplayer game called “Glitch” that failed to gain enough user traction to be continued.
It was only in the process of unwinding the company that it occurred to founder Stewart Butterfield that the messaging infrastructure he had created to privately communicate with Tiny Speck’s engineers and other employees might be an even more promising idea to pursue.
Butterfield had discussions with these early investors about returning their capital as he prepared to change course. As Accel’s Andrew Braccia told us several years ago, “We had a discussion about, ‘Should I return the money.’” But, said Braccia, “I told Stewart, ‘If you want to continue to be an entrepreneur and build something, then I’m with you.’”
It was a smart move on the part of Braccia, who spent nine years at Yahoo as a VP before joining Accel and met Butterfield there after Butterfield, with cofounder Caterina Fake, had sold their photo-sharing business Flickr to the company.
It was also a giant leap of faith, based on Butterfield’s potential alone. “I don’t think we understood how valuable, important, or fast it would grow,” Braccia admitted during that sit-down several years ago. “We just knew the use case was really strong at Tiny Speck and that if it was strong there, perhaps it could be strong other places, too.”
Slack’s thousands of customers include Airbnb, Time, Samsung, and Oracle, and it has reason to think it will be well-received in the market, judging by its popularity with those users and the performance of numerous other subscription-based enterprise software companies to go public in 2018, including Dropbox, Zuora, and DocuSign.
That said, the market may well be shifting, judging by the recent performance of the U.S. stock markets. Stocks dropped sharply today, capping what has been a stomach-churning week for Wall Street. In fact, a disappointing jobs report and strained U.S-China trade tensions appeared largely responsible for sending the Dow Jones Industrial Average to such a low point that it erased its gains for the year.