Feb 25, 2016 · 6 minutes

“Is Slack for real?”

This is a question I’ve been asking the company’s investors for much of the year. Not “for real” like is it a great product. We use it at Pando, and I know that. And clearly every other journalist feels the same way. Slack gets more Twitter shout outs than any other piece of software, including comment management systems.

But is it for real as a “viral” software growth phenomenon worth billions of dollars as its investors have claimed? Because we all heard the same thing about Zenefits. “Fastest growing ever” can suddenly switch to exactly the opposite.

Zenefits and Slack clearly had very different cultures. The former where young people partied and had sex in stairwells, the latter where there’s a focus on diversity and most of the office goes home to their families at 5 pm, at least according to the PandoMonthly we did a year ago with Stewart Butterfield.

Another big difference? Butterfield is possibly the least chest-thumpy guy in Silicon Valley. He told us a year ago that valuations were “arbitrary as fuck,” well before the market turned. Further from Erin Griffith’s excellent recent fortune piece:

Stewart Butterfield graduated high school to become part of the slacker generation, which is coincidentally reflected in the name of his business software startup, Slack. His Twitter bio includes an apathetic “shruggie” emoticon (¯\_(ツ)_/¯) and a mea culpa: “I’m trying my hardest!”

In other words, he’s not terribly concerned with creating the illusion of “crushing it” that so many other Silicon Valley entrepreneurs painstakingly project. 

So when Butterfield actually brags -- not even just humble brags-- on social media, it’s noteworthy. And yesterday he Tweeted this astounding stat:

Someone on Twitter asked whether the active user-base has grown by that much or Slack is just a “revolving door app.” Butterfield replied that “daily active” is net of any churn and that Slack doesn’t have meaningful churn anyway.

There’s no doubt Slack solves a big problem (email, for starters) and there’s no doubt this is a huge market hundreds of entrepreneurs have chased for a reason. There’s a reason Microsoft spent much of its life as the largest tech company in the world.

The biggest question may not be whether Slack is “for real.” Instead: If indeed Slack is finally the “enterprise 2.0” solution to the seemingly simply but thorny problem of how people can best communicate at work, will they stay independent?

Butterfield has obviously had a poor experience with acquisition before when Yahoo bought Flickr and after that he spent years toiling on a game that he eventually scrapped. So he knows how rare a huge hit is. You can imagine he’d rather keep building this than go back to the drawing board and risk another rabbit hole. Indeed, he’s said in previous interviews he had no interest in selling, and he’s surely had offers.

But the math in enterprise software is closer to how Facebook thinks about acquisitions than how the rest of the consumer world thinks about them. It’s less about how much revenue you make, but about how much revenue you are dislodging from the giants. They have entrenched market positions and huge amounts of cash. This was the logic when it came to open source acquisitions in the early 2000s: These companies aren’t worth what they are making, but the revenue they are taking and could continue to take from us.

And it was clearly the logic when it came to Microsoft’s $1 billion purchase of Yammer.

So under that math, if Slack has finally cracked the code on modern, social feeling, chat based workplace collaboration software, what is that worth? A WhatsApp number? At least? It would certainly take something that’s not only in the billions but in the percentage-of-market-cap range for Slack to consider the deal.

What could drive that number higher-- should anyone decide they need Slack at any price-- is the potential of three bidders to pay a WhatsApp+ price: Google, Microsoft, and Facebook.

Microsoft has the most to lose should Slack continue its ascendancy, and Satya Nadella has made people bullish on the company again. He’s intimated he’d go on a buying spree in Silicon Valley once prices get rational again. Maybe he learns from what Marissa Mayer did wrong and makes one big purchase instead.

Google has signaled to the world that it’s very serious about business software with the acqui-hire of Diane Greene to run its cloud business and it’s first high-profile customer win in Spotify. Greene too had a mixed experience when VMWare was bought by EMC and didn’t see herself working for a large public company again. But the opportunity at Google changed her mind.

You could easily see Google making a WhatsApp like offer to get Slack’s software and Butterfield as a Tony Fadell level mini-boss inside Alphabet to finally turn all of Google’s productivity apps into a real area of focus for the company, and a devastating blow to Microsoft. Infinite resources, autonomy, huge price, and huge market opportunity. Google can offer someone who “doesn’t want to sell” a lot more than Microsoft could beyond just price.

And then there’s Facebook, which also has ambitions to get into the workplace productivity market too. It has two routes: A David Marcus-like mega-hire or a WhatsApp-like deal. Given how many people have tried and struggled to crack the seemingly simple problem of making teams work better together (including Facebook co-founder Dustin Moskovitz with Asana, an offering beloved by many tech companies but much more complex to get an organization using than Slack), I’d be stunned if Facebook tried to build a solution itself before making a run at Slack.

And you could argue that Facebook has even more to offer someone like Butterfield than Google. It’s clearly willing to make whatever offer a founder who’s said they don’t want to sell to sell. It has the cleanest track record of leaving companies alone, but helping them grow when they need it at the same time. And in some ways, the products go together better. There’s zero overlap, and most people have Facebook open on their desktop at work as is. Meantime Messenger and Whatsapp have likely also reduced email when it comes to personal relationships.

I’ve argued before that Facebook should make a WhatsApp like offer to take out Snapchat, and hence own every major mobile messaging platform. Depending on where their priorities are, an offer for Slack may make even more sense.

The panic around how bad 2016 will get is starting to sort out into those having a good year and those having a bad year and those having a rebuilding/treading water year. For those having a good year, it’s a great time to get even bigger.