How Slack Went From An Unsuccessful Video Game To A $26 Billion Dollar Company #scottsthoughts

Welcome to Success Story, the most useful podcast in the world. I'm Scott D. Clary and today I'm going to walk through how Slack went from an unsuccessful video game company to a $26 billion instant messaging communication powerhouse. I'm going to walk through the story of the founder. I'm going to walk through how they grew, how they pivoted and some lessons that anybody can take from this regardless of whether or not you're in your career or you're an entrepreneur. They are an incredible story. I hope you enjoy. Stay tuned. So one of my favorite Slack quotes is from their founders Stewart Butterfield. He said this in 2010, way before Slack was what we know Slack is today. He said, and I quote, we have an excellent chance of being successful because we failed before and the odds of failing twice on the same thing are astronomical. Oh, how naive Mr. Butterfield was when he said this. And you know when you when I tell you the story of Slack, you'll understand why this is a hilarious quote because they failed a lot. They iterated a lot. They did a lot of different things. The story of Slack is an incredible story of perseverance, of grit, of determination, all the things that make up a successful entrepreneur and they definitely didn't have an easy ride. So if you don't know what Slack is and I would assume that if you work in a large company or you even work in a small company, you've probably used it. It's the instant messaging software that many companies use. They have a huge hold on the market. So the fact that they have this huge hold on the market now, and if you've worked in some sort of modern company or tech company and you use it to communicate with your peers and your coworkers, something's obviously worked since Stewart said that in 2010. So what exactly was their story? Well, today it operates as a cloud-based instant messaging system. It offers basically a live real-time private communication network. It allows you to share files, content, it allows you to communicate direct message in real time. Compared to emails, it's efficient, it's real-time, it's synchronous and it's much more organized. But Slack was actually created by accident. Slack was a byproduct of what the company was supposed to be, which was a video game. Let's rewind the clock and look at the history of Slack. So like I said before, Stewart Butterfield was the founder. He was working in tech when he made the decision, a super courageous decision to quit his job and go raise $50,000 to go build a video game. The game was going to be called GradFinderCom. And he actually did raise that money. He found somebody who was willing to give him $50,000 for a video game. He built it for six months and sold it for a little bit under $100,000. It was a private sale so the details haven't been released. But he obviously didn't make that much money on it, considering he probably had to pay back the original $50,000 that he borrowed to build it. But he did make enough to take a little bit of time off and think about his next project. So now he has one successful, quasi-successful exit under his belt. He wants to build something else. But he obviously has less than $50,000. So he has to figure something quick or he has to go get another job. So he obviously had a couple of friends that worked on the first game, some peers from you know, past life and working with companies. They decided they wanted to build their own video game company. Not just build a game but build an entire company. But they wanted to start with of course one game to sort of kick off this company that was eventually going to create multiple video game. And they also wanted to make sure that the games that they created were unique, that they really weren't anywhere else on the market and that they would really be doing something different. So they actually had the great concept of creating a game where people could collaborate with their friends, which fast forward to 2021. This is pretty much every single game that's out there now. But back then it wasn't as popular or wasn't really as widespread as it is right now. So they developed a prototype of a game that was based on interactive, cooperative experience between players. There was a small tribe, a community of diehard fans that really really loved this game, but it was very small. Most people really didn't get into the game. They didn't achieve any sort of massive success. But regardless, because they had a diehard tribe of people that were willing to play the game and really really loved it, they thought that if they could double down and pursue this project full time, they would find more similar gamers that would really just love the niche novel concept of this game. Now although Stewart raised money, he raised $50,000 for his first venture, his second venture he thought he was originally going to raise money but he had a lot of trouble finding investors. Venture Capital was not as interested in investing in video games or even in tech as they are now. Remember, this was several years ago. Now there's an over abundance of capital. Now it's almost too easy to find money and you have to make sure you're finding it from the right people. So when they pitched repeatedly, they went out to investors, they weren't getting any bites. Nobody was really interested. They decided to fund it themselves, which is very risky. So they poured about a year of their lives into it and kept trying to build up this game. Ironically, the game was called a game never ending and after a year, it still wasn't finished. They were also running out of money at this point. So they had to find a way to boost their finances and remember, they went to venture capital lists before, they couldn't raise money. It's a year later, the game's not done. They still haven't made any money off the game, so how are they going to go raise money? And they're all full time developing this game. Some of them are using their own savings, stewards using a little bit of money that he had saved up from that first initial exit. There's not a lot of money left. So because the game was focused on social interaction, they thought they would create a website that would support that concept and support community and support interaction amongst players. So they created a website that allowed people to upload photos, have chats with other players, basically a community or a chatroom, whatever you want to interpret it as, that allowed people to connect with other gamers. So gamers connected with other gamers outside of the game environment. Now by 2004, the team had started to build this website that was focused on community and photo sharing and they're still building the game at this point. So they're still developing the game. Neither of them are really making any money, but they realize that if they're going to get anything done successfully, the community photo sharing tool was taking off and the game still wasn't done yet. So they decided to actually double down and focus on the photo sharing tool. They believe that they could finish it much quicker than a full-fledged video game with a very limited development team. So what did this photo sharing service turn into? Well, they gave it the name Flickr and they launched it and it grew like crazy. Only a year later Yahoo noticed Flickr and purchased it from them for roughly $20 million. And let's not forget that Flickr started off as a side hustle that turned into a $20 million or exit. So now fast forward about three and a half years, Stuart has the money, team has the money, he wants to build something else. He still remembers that that video game, not the first one, the first one was a relatively minor success at $50,000 one, but the second video game, the one that they shelved to build Flickr was never really completed. So he never really got the bug of producing an incredible video game out of his system. So in 2009, he announced his intention to build an MMO RPG, a mega multiplayer online role-playing game. The hardware and software that was used to build incredible games in 2009 was much cheaper and more efficient than what he was using originally in 2002. And due to his previous success with the Flickr exit to Yahoo, he was easily able to raise venture capital for his new video game. So he raised $17.5 million to build a video game that had no customers, no proof of concept, no path to revenue. But because they had the resources and technology had advanced, they released the game Glitch two years later. Glitch was a flop, it had a diehard community, wasn't accepted by the masses. So Stuart now has $17.5 million that he has to make up for, he has another decision to make. So he's able to build down on the video game, or should he try and build something with some of the tech that he's been building out throughout the process of developing this video game that could actually be an incredible application. And he chose to do the latter. So what did he do? Well, video games are complex, a $17.5 million video game is very complex, a lot of different people working on projects, a lot of moving parts. So to help them work better as a team, the developing team on Glitch built out a software that allowed them to communicate. It was basically an internal chat system that they had developed themselves. And they felt that this added a level of efficiency in their communication that ways surpassed emailing. And they also felt that there was nothing on the market that really helped an internal team communicate well. And realizing that they had actually built a product that solved the need that many businesses have, which is efficient, lightweight, user friendly, instant communication, they decided to double down on that product and they called it Slack. Now the Slack team only consisted of around eight people at the start. Remember, they have a large company building up this video game, but the Slack team only consisted of around eight people. Those eight people were able to turn it into a consumer product. They onboarded four companies, four free that were allowed to use every Slack feature that the MVP, the minimum viable product, or the first iteration of Slack had completely free. And that basically proved out that this would be useful for potential companies. And a little side note, those four initial customers still use Slack to this day. Slack finally took their product to market and actually launched the Slack app in 2014. After working with those four customers, to make sure that it sort of ironed out all the bugs, the QA process, after its launch, Slack made $1 million in its first two weeks of launch. Six months later, they raised $120 million venture capital round. That put the company's evaluation at roughly $1 billion. They were a unicorn in six months. In June of 2019, Slack IPO'd in its initial public offering the company was valued at $19 billion. Imagine this. Slack. A multi-billion dollar company used globally to help facilitate businesses, help let teams communicate all of this started as a two times failed video game company. One of the two main things that you have to learn from this story, one, most businesses fail. And it's pretty normal. And two, sometimes the best ideas are literally right under your nose. You have to be ready and willing to accept new ideas and just run with it. So this was an incredible story. I took 10 more lessons that I thought would be great lessons for entrepreneurs from this story. One, you will fail a lot and it's really normal if you're building your own thing. Number two, apparently it's quite hard to build a video game. I don't know any other entrepreneurial video game stories, but holy shit, that would seem like considering their success and the fact that they failed twice, maybe that says something about how to build a how building a video game is really, really difficult. Number three, don't always feel that you have to stay in your lane. So they were building video game companies and Stuart had this a little bit of an obsession with video game companies, but he was okay pivoting. Like he went from video game to photo sharing, video game to communication. You don't always have to stay in your lane, try new things, especially as an entrepreneur, even if you are doing one thing, you're trying to build one thing, maybe you discover something else that looks like it could work. That's not exactly 100% in line with what you're doing, explore it a little bit. Don't go all in, but just explore it. The version of your product when you start a company will look drastically different in 10 years than when you start it. This is the same with every entrepreneur I've ever spoken with. And also, let's just extrapolate that to like yourself as a person. The version of yourself in 10 years is going to look drastically different than who you are right now. And that's a good thing. So whatever you start with, know that you will have to change it, iterate on it multiple times, and that's okay, and that's expected. And in 10 years from now, it's going to look quite a bit different. The lesson, side hustles can turn into main businesses quickly, never stop trying new things, iterating, testing, moving forward, so important. If you're dedicated to anything for a long enough period of time, there's going to be something good that comes of it, even if it's just experience, but more often than not, it's actually true success. Raising money, selling, and marketing something has less to do initially with a tech and more to do with your network, success, resume, and accolades. Learn how to sell your story better, but then back it up with a kick-ass product. So being able to sell something, being able to network and have a group that supports you is incredibly important. Notice that the only difference between when Stuart tried to raise money the first time and the second time was he had a success under his belt. The product was not built either time, it's not like they had revenue on the books either time. So it's just a point there. Another lesson sometimes you need to remove any sort of inhibitions to prove to people that your product is as good as you say it is. So this is a common theme that I see with entrepreneurs that are trying to build something and are successful in eventually selling it. Sometimes you have to give it away for free to let people try it out, test it, trust you. Because what are the inhibitions in buying something is that they don't trust you, don't trust the product, they don't trust you as an entrepreneur as an individual, and you have to sometimes remove that friction and remove that impediment to them potentially purchasing your product. So slack did that by giving it away for free to four companies, to prove it, to prove that it works. And then last lesson, when things start to take off, they really take off. And this is something that I actually hear from a lot of entrepreneurs sometimes are not ready for how fast things take off. And it seems like a good problem to have and it is. But I mean, when things take off, you saw in two weeks, they made a million dollars. You know how many entrepreneurs would completely screw that up and not know what to do with that. And then in six months, they raised $120 million. That is incredibly fast. Most people do not want that much stress. You think you're thinking big numbers, oh that's great. There's a lot of stress that comes with that much money that quick. So if you're going to commit to something, when things take off, they will really take off and be ready for that success and be ready for it physically, mentally, and also with your systems and processes that you've hopefully at this point built into your business that will allow you to scale. Anyway, that is a story of Slack. That's some lessons from Slack. I hope you enjoyed. Have a great week. We'll talk soon.