Slack: The Accidental Empire
How to Build a Billion-Dollar Company Accidentally
Some of the most successful companies—Airbnb, Uber, Shopify, Stripe, Dropbox, WhatsApp, Zoom, and of course, Slack—were built out of necessity. Slack’s founder and its team built a product they themselves wanted to use—they were the customers.
And because of this, they knew exactly what problem they needed to solve and what features they needed to build to make Slack a successful company. And this is exactly what happened, it only took Slack 8 months to become a unicorn!
Shout out to one of the subscribers who suggested last week that I should cover Slack’s growth strategy. But when I started researching and dug deep into Slack, I found out that Slack's growth strategy isn’t very interesting or unique, but what I did find interesting was its founding story.
Slack is an accidental empire. The reason I’m saying it “Accidental” is because Slack wasn’t the product its founder and team were building in the first place. It’s a by-product of another gaming company they were trying to build. The gaming company failed but Slack was born—the story couldn't be more interesting.
So this week’s deep dive is devoted to Slack. I’m going to take you through the founding story of Slack, Slack’s founder's failed attempt to build gaming apps, how Slack dominated its niche and became a go-to communication tool for businesses, the competition it faces now, and its future. If you’re a founder, leader, or someone who uses Slack, you’re going to learn things about Slack you don’t already know, that’s my promise.
Get your popcorn ready, and let’s dive in!
Connecting the Dots
Most people who tell the story of Slack start it from 2009, but I think that’s not where the actual story began. The real story starts in 2002, when Stewart Butterfield, a nerdy dude who later founded Slack, was obsessed with multiplayer games.
To follow what he was obsessed with and to transform the multiplayer gaming industry, in 2002, he founded Game Neverending, which was more like a multiplier game but players also could interact with each other and manipulate objects—kinda a fun game.
Stewart and his team built many “Cool” features inside the game, and one of them was “Players could share pictures and images” which was widely used, as the team recognized. However, it’s sad to say that the idea was good, but they made the game so complicated that no one wanted to play it. The game only had beta users as it was never publicly released, realizing that the game had no potential—but they could double down on this “Photo” thing.
They shut down Game Neverending and released its core feature “Share files and photos” as a standalone product called Flickr in February 2004. Since there weren’t many good software and tools for sharing files and images, the app quickly gained popularity. As a result, just 12 months after founding the company, Yahoo acquired Flickr for ~25 million in 2005.
After the acquisition, the founder and Flickr crew worked at Yahoo for 2-3 years to further scale Flickr. But after realizing that Flickr wasn’t going in the right direction under the leadership of Yahoo, Stewart Butterfield, after working for 3 years, left Yahoo in 2008 to start a new venture.
Now here things get interesting.
Stewart could’ve started a different company than gaming, right? But guess what, he didn’t. The guy was obsessed with multiplayer games, and he wanted to transform this industry by making it more fun and social. So in early 2009, Stewart again, with some other folks, founded a gaming software called Glitch, the team behind Tiny Speck.
Glitch was based on a pretty similar idea to Game Neverending. The only thing was, this time the guys behind the game were somewhat successful (from Flickr.) So they built Glitch for two straight years before making it live in 2011. The company had raised ~17 million in VC money and hired more than 40 employees, but what happened next was shocking to them.
Despite raising millions of dollars, hiring dozens of employees, and building the game for almost two years, they shut it down within 12 months of release in 2012. This begs the question: What went wrong? There wasn’t a single factor that led Glitch to obscurity. The game had so many problems, for example, it had high operational costs, relied on aging Adobe Flash Technology, and had difficulty attracting a large user base.
As Stewart recalls:
Despite all of our efforts, there just wasn’t a viable business for Glitch. It was expensive to build and keep online, and we had not attracted enough players to bear that expense. Moreover, with the rise of smartphones and the incompatibility of our Flash-based game with mobile, we didn’t have an easy way to meet new players where they were spending their casual gaming time. “If we keep going as we are, we’ll burn through the rest of our money in a few months and be left with nothing to show for it,” Stewart explained. We walked in silence for a few paces, the low clouds dull and drizzling overhead. I hunched into my rain jacket as I realized what this meant. My colleagues and I without a job. Tens of thousands of players abandoned. Hundreds of thousands of hours of collective creative work lost. Another failed startup. Fuck.
But the interesting part? In the process of building Glitch, they had built an internal communication tool for the team to share ideas, chat, and collaborate—as the people who worked there were from different locations. For example, Butterfield and Mourachov lived in Vancouver Canada, Henderson had set up camp in San Francisco, and Costello managed client development from New York City, making it the most valuable internal tool for the company.
So guess what? They said, screw Glitch and let’s double down on this communication tool. And this is where one of today's widely used communication and collaboration tools, Slack was born.
The full story in saga:
Founding Slack
Before Slack, communication for businesses was rough and tough—back and forth emailing, scheduling meetings for small things, and waiting days and weeks to get simple things done. It was chaotic at the same time frustrating.
But no one knew that Slack would come and transform the way businesses and organizations communicate with their teams and employees—a revolutionary moment. When Glitch was shut down in late 2012, its founder, Stewart Butterfield gave a mysterious hint about what people could expect next:
After closing Glitch in 2012, the involved people soon began building Slack, started beta testing in 2013, and released the product for public adoption in 2014. Luckily, the Slack launch was super successful, receiving 8,000 signup requests from businesses and organizations (this was not individuals, which is massive!), and within two weeks, the app received 15,000 sign-up requests. These were literally businesses that came from word of mouth, wanting to pay money to use Slack, which is just unusual for most newbie startups.
The team had iterated Slack so many times that when it came out in the market, it was “So good” which made its growth unstoppable. On top of that, Tiny Speck, the company behind Slack, was backed by some of the world-class venture firms like a16z, Accel, Social Capital, and Google Venture (GV), raising hundreds of millions of dollars in VC money. The result? It only took Slack 8 months to become a unicorn ($1B in valuation) with just 8 employees!
However, it wasn't smooth sailing for Slack and its team. Many investors who had backed Tiny Speck doubted whether Slack would succeed after pivoting from Glitch. As one of its investors from a16z, Ben Horowitz recalls:
“The thing that made me think that [it] was probably not a good idea was Stewart himself,” Howoritz said. “[He is] about the most artistic CEO we had in the portfolio in terms of his whole persona. Every time I saw him it looked like he had been up all night, smoked four packs of cigarettes, you know that kind of personality. So I’m like Stewart, do you really want to run an enterprise software company, that seems like not you? He’s like no, I think this product is good, I think it would work and we are like well, $6 million isn’t going to make any difference to our returns, so sure, continue with it and that tool turned out to be Slack … I couldn’t have gotten it more wrong.”
Despite this, one of the prime reasons Slack succeeded was because it was genuinely a good product that businesses and organizations badly needed. They had seen the potential of Slack and how it could transform their business. So it really didn’t matter who thought what, and this is why since Slack was released its growth never went down.
Growth and Acquisition
Slack is one of the fastest-growing business platforms in recent times. While there are many similar software like Slack that came and died, Slack stuck around. And this made me say that what Slack has accomplished is nothing short of remarkable. Let’s look at Slack’s number in two different timelines: 10 years ago and today, 2025:
Slack’s Numbers in 2015:
Total users: 2 million
Total paid users: 417,000
Total revenue: $30 million
Valuation: $2.8 billion
Daily active users: 1 million
10% of Fortune 100 companies use Slack
Slack’s Numbers in 2025:
Total users: 80 million
Total paid users: 25 million
Total revenue: $2.2 billion (projected)
Valuation: $26.5 billion
Monthly active users: 40 million
80% of Fortune 100 companies use Slack
Pretty remarkable number, isn’t it? This begs the question: How did Slack do this all? What’s its growth strategy? Well, this is exactly what I’m going to cover in this section and show you what are the strategies and factors that helped Slack grow like no other business platform.
#1: Timing
The biggest factor for Slack's success was its perfect timing. When Slack was released, there were no such tools in the market, making it stand out and solve the biggest problem businesses and organizations had—communicating and collaborating with their teams in one place. Email existed but it was inefficient, and the reason Slack marketed it as “Email Killer.”
As Stewart Butterfield said:
“Email has many benefits — it’s the lowest common denominator for official communications. But it’s a terrible way to manage internal communications.”
Slack was ahead of the curve with its unique feature called “Channel” that’d allow users to send the same message to 10 people and 10,000 people. It was revolutionary. But I’d argue that if Slack was released in 2024, it might have gone nowhere, because there were already dozens of similar products in the market like Slack.
Slack was very early. However, seeing Slack's success, Discord was born, Microsoft introduced Microsoft Teams, Google introduced Google Workspace, and many other similar software emerged. Now Slack directly competes with them.
#2: User-Centric Approach
Slack was obsessed with its customers like Amazon did growing up. Every piece of feature they’d built, every tiny change they’d to make, and every small tweak they’d deploy was for making the customers’ experience better, efficient, and seamless.
Slack partnered with MetaLab to design its UI, and frankly, they did a great job at not designing Slack as a business tool, but more like a gaming app. Here’s what Andrew Wilkinson says about designing Slack:
“We gave it the color scheme of a video game, not an enterprise collaboration product.”
Moreover, to give the best experience possible, as soon as the Slack team knew that key customers were complaining about XYZ, they’d fix the problem immediately. As the CEO Stewart Butterfield had said, “When key users told us something wasn't working, we fixed it—immediately.”
But they didn’t stop there. Slack kept improving the product. They integrated so many new tools like Google Docs, Google Drive, Dropbox, Jira, Hubspot, and more to make their customers' work easier and more efficient. This helped Slack stand out and dominate the market rapidly.
#3: Freemium Model
Unlike other business tools that mostly offer an “Only” paid tier from day one, Slack didn’t follow that approach. It, from the beginning, had a free tier where any businesses and individuals could signup and start using the product. However, the free tier had limited features for example, users couldn’t see and search messages older than 10k, only had 5GB of free storage, and the user could only integrate 10 tools.
But guess what? It worked. Businesses could upgrade the plan as they go. Slack wouldn’t force its users to upgrade by sending marketing emails or sending pop-up notifications like most business software do. Slack’s freemium model worked. The result? In general, for most tech companies, the free-to-paid conversion rate is around 2-10%, in some cases 25%, but do you know what Slack's free-to-paid conversion rate is? Above 30%!
#4: Word Of Mouth
When your product is used by tens of millions of “Businesses” there is no way, people aren’t going to talk about it. The unfair advantage of Slack was that it was used by businesses that had individuals working for them, which meant Slack had a large pool of user-base driven by businesses.
For example, if you’re working at some of the world's most successful companies in the world, and your company uses Slack to communicate, there is no way you’re not going to talk about it to your friends, family, and the people you know. This is what exactly happened, driving Slack user growth rapidly.
Although, the product has to be good in order for people to talk about it because no one wants to share and recommend a product that just sucks. But Slack, from the beginning, was actually a good product, otherwise, there’s no way Fortune 100 companies were using it even though it was fairly new.
Here's what the CEO of Slack, Stewart said about Word of Mouth:
Unlike almost any enterprise software ever, people would talk about it…. [T]hey would post to Twitter and say…I recommend it. And…you know, no one ever says that about the software that they have to use at work.”
Another reason Slack's growth exploded was because its CEO and founder, Stewart Butterfield was already a famous individual in the tech and business community, known for his previous ventures. So he would talk about the product with the people he knew, and recommend it as a solution to the businesses that’d potentially need a tool like Slack.
The interesting part is that Word of Mouth is one of the biggest factors for purchasing decisions, which means this massively benefited Slack early on.
#5: Other Marketing Channels
What else drove Slack's growth? There are a couple more things that Slack did. For example, it used social media marketing. Today Slack is followed by more than 400k people on Twitter (X), 2 million followers on LinkedIn, and almost 90k followers on Instagram.
They have also run TV commercials. For example, the following Slack commercial video has brought 16 million views, which is posted on YouTube:
That being said,
Slack went public through Direct Public Offering (DPO) at a valuation of $20 billion in the New York Exchange in 2019. At this point, Slack had turned down 10 acquisition offers. But then there comes Salesforce who successfully acquired Slack for $27.7 billion in December 2020.
Watch this video of Slack’s CTO, Cal Henderson talking about Slack improvement, being customers themselves, and Slack's impact in the world (Great video):
Competition and Future
When Slack first came out, it was revolutionary and created an entirely new market. But as I believe, the Blue Ocean Strategy doesn’t work. The company (Slack) had to compete at some point or another—no matter who created the market.
This is exactly what happened with Slack. Seeing Slack’s success, many new similar software and tools emerged in the market that they became the competitors of Slack. As a result, Slack now has many competitors, including the major one Microsoft Team, which was released in 2017.
And surprisingly, Microsoft Team is literally crushing Slack:
Microsoft integrated Microsoft Team into Microsoft 365, and since millions of businesses and individuals already use it, Microsoft Team growth surged, crossing Slack’s total daily users.
Microsoft also recently announced that they are sunsetting Skype to go all in on Microsoft Team. Well, what does this mean? This means that Microsoft will die trying to crush Slack and dominate the market. So Slack's future definitely isn’t going to be smooth sailing from here. To win the market and thrive, it will need to consistently improve and innovate the product.
However, when it comes to the competitive advantage of Slack, there are many things that help Slack stand out in the market and position itself as not just a better but a different product. For instance, it has a user-friendly interface, integration capabilities, customization options, scalability, search functionality, and security measurement.
Will Slack continue to grow and thrive in the market? Pretty tough to say, especially given the distribution power Microsoft has, and so many, I mean so many similar tools exist in the market. As technology continues to advance, the way businesses communicate is rapidly evolving, thus Slack has to make sure they are ahead of the curve if they want to thrive.
Thanks for reading, catch you on the next one.
This week stack was pure gold! Keep publishing the good work my friend🤝
Great post! Spend a decade failing at what you want to build, and you might accidentally build what people actually need.