Slack, which is a fast-growing collaboration app, unveiled its IPO filing last week. The buzz is that the deal could be on par with Zoom’s, which soared over 70% on its debut (here’s a recent post I wrote on the company for Forbes.com).
In terms of the timing, the Slack offering is likely to hit the markets in a few weeks. The shares will be listed on the NYSE under the ticker of SK.
OK, what are some of the notable details in the IPO filing? Well, let’s take a look:
The App: The founders created Slack because they were frustrated with email. So they reimagined the experience, with a focus on team-based channels — not individual inboxes. Here’s how the S-1 describes it: “Channels offer a persistent record of the conversations, data, documents, and application workflows relevant to a project or a topic. Membership of a channel can change over time as people join or leave a project or organization, and users benefit from the accumulated historical information in a way an employee never could when starting with an empty email inbox. Depending on the size of the organization, this might provide tens, hundreds or even thousands of times more access to information than is available to individuals working in environments where email is the primary means of communication.”
Growth: It’s certainly robust. From fiscal 2017 to 2019, revenues jumped from $105.2 million to $400.6 million. Although, the company continues to post losses (they were $138.9 million last year).
A significant driver for the growth has been the expansion within organizations. For example, the net dollar retention rate is 143% and 575 customers pay at least $100,000 per year, compared to 298 in the year before.
Engagement: To get a sense of this, look at the metrics for the week ended January 31st. There were more than one billion messages sent and on a typical workday, a paid customer averaged nine hours connected to the app and more than 90 minutes of active usage.
Powerful Ecosystem: Slack has built a strong community of more than 500,000 developers. They have created over 450,000 third-party applications and custom integrations, which have provided for a much richer platform. Slack is even creating a low-code system that should mean even more growth of the ecosystem.
Market Opportunity: It’s massive. Based on Slack’s own analysis, the spending on communication and collaboration tools is at about $28 billion worldwide.
Competition: It’s intense. Slack must fight against some of the largest tech companies in the world, such as Google, Cisco and even Facebook. Yet the company considers its primary rival to be Microsoft.
In fact, the Slack S-1 notes: “Moreover, we expect competition to increase in the future from established competitors and new market entrants, including established technology companies who have not previously entered the market.”
Investors: They include tier-1 players like Accel Partners (24%), Andreessen Horowitz (13.3%) and Softbank (7.3%).
As for the co-founders, Stewart Butterfield holds 8.6% of the equity and Cal Henderson has 3.4%. They both have supervoting shares. However, there is an expiration provision for this.
Unusual IPO: Most companies use Wall Street firms to facilitate a public offering. But Slack is taking a much different approach: a direct listing. This not only means not having to shell out large fees but also allows anybody to purchase shares on the debut.
Keep in mind that the direct listing will not involve a capital raise. But then again, Slack has about $841 million in the bank.