Slack CEO Explains Why He Thinks His 8 Month Old App Is Now Worth $1.1 Billion

Source: http://www.businessinsider.com/slack-ceo-explains-11-billion-valuation-2014-10

Slack Founder Stewart ButterfieldThere’s been so many billion-dollar startups these days that it’s almost starting to feel routine in tech.

Slack, an enterprise work collaboration app, is the latest one to join the club. It announced on Friday that it’s raising $120 million at a $1.1 billion valuation.

It’s hard to imagine a company as young as Slack — it launched publicly in February — to be worth more than a billion dollars. But when you’re growing as fast as it is, especially in the enterprise space, anything is possible.

When we asked Slack CEO Stewart Butterfield about it, he agreed his company’s numbers are still small in absolute terms. But the $1.1 billion valuation has more to do with the rapid growth it’s been seeing, and the fact that it hasn’t spent a dime in sales and marketing, he said.

“We still have a long way to grow to justify the valuation,” Butterfield told Business Insider. “But it’s largely on the basis of the trajectory that we’re on, and most of all, because that’s just been happening organically.”

According to Slack, more than 30,000 active teams send over 200 million messages each month. It has more than 73,000 paying customers, and it’s adding $1 million in annual recurring revenue (ARR) every month. At that pace, Slack would surpass $10 million in ARR this year, and become the fastest-ever software-as-a-service (SaaS) company to do so.

For comparison, Butterfield m! entioned Workday, a publicly traded enterprise SaaS company that’s now worth $17.8 billion. Butterfield said it’s not an entirely fair comparison, since Slack and Workday are in different businesses, but it took Workday about three years and roughly $30 million in sales and marketing — while losing about $75 million in total — to get to $10 million in ARR.

“We’ve established that people would pay for us. Slack is being valued based on its ability to make money rather than something more speculative,” Butterfield said.

By: Dr. Augustine Fou Friday, October 31st, 2014 digital

Dr. Augustine Fou is Digital Consigliere to marketing executives, advising them on digital strategy and Unified Marketing(tm). Dr Fou has over 17 years of in-the-trenches, hands-on experience, which enables him to provide objective, in-depth assessments of their current marketing programs and recommendations for improving business impact and ROI using digital insights.

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