Business messaging start-up Slack, which was valued at $3.8 billion after its latest round of funding in April, could go public within the next two years. The company initiated an IPO readiness program last year, which included its first external audit, new rules, and security practices. Last November, founder and CEO Stewart Butterfield told The Australian that "the absolute earliest that we could IPO, if everything came together right, would be 18 months from now."
The prospect of a Slack IPO excited some tech investors, since its daily active user base topped 3 million in May -- triple the number it had just six months earlier. Nearly a third of its users pay subscription fees, which could help Slack generate $64 million in recurring revenue this year. However, Slack isn't profitable, and Butterfield stated last year that it was incurring losses of a "couple hundred thousand dollars" per month.
But a lot can change over the next year. If Slack's growth stabilizes and it heads toward an IPO, investors will be interested in the company's early investors -- who stand to profit -- and the companies Slack itself has invested in.
Who has invested in Slack?
Slack's major investors include well-known venture capital firms like Andreessen Horowitz, Social Capital, Accel, and Spark Growth. Last December, Slack launched an $80 million app investment fund with several of those firms to fund third-party apps that can be tethered back to its platform via its API (application programming interface).
The only investor with a public presence is Comcast (NASDAQ:CMCSA), which invested in Slack through its venture capital arm, Comcast Ventures. The business participated in the venture round of funding earlier this year, which raised $200 million from six investors. We don't know how much money Comcast invested, but it probably only accounts for a small percentage of Slack's current valuation.
Microsoft (NASDAQ:MSFT) reportedly wanted to buy Slack for $8 billion earlier this year, but eventually abandoned that idea, perhaps because it needed the cash to fund its $26 billion acquisition of LinkedIn (NYSE:LNKD.DL), announced this week. However, Microsoft also recently launched a venture capital arm called Microsoft Ventures, which gives it more freedom to invest in Slack without buying the whole company.
Who has Slack invested in?
Slack has been investing in smaller companies on its own. That list includes Lattice, which creates a goal management platform for teams; chatbot makers Awesome and Howdy; and productivity software maker Small Wins.
Slack's investments in bots indicates that more parts of its platform could be automated in the near future. Howdy's bot runs virtual meetings by asking team members for updates via direct messages, then aggregates the responses to quickly get everyone on the same page. It's an elegant solution to inefficient meetings where people repeat the same bullet points and members don't offer any useful input. Awesome's bot organizes conversations and cuts through the noise with sidebars, highlights, and recaps.
These bots, along with many others, are already integrated with Slack to improve its efficiency alongside third-party apps. Slack isn't the only growing tech company investing heavily in bots. Facebook (NASDAQ: FB) recently integrated chatbots directly into Messenger to help companies engage customers through automated conversations instead of traditional apps. While Facebook's target demographic is different from Slack's, both companies believe that bots can make automated assistance and data collection feel more natural and conversation-based.
How much bigger could Slack get?
Slack is still tiny by enterprise standards, but its rapid growth and disruptive potential could redefine how employees communicate with each other. Slack will probably require much more capital as its user base expands, and an IPO would be the quickest way to raise those funds.
However, Slack still has a lot to prove before it can go public. Bigger companies like Microsoft can bake new features into Office 365 to challenge Slack. Rival companies like Atlassian (NASDAQ:TEAM), which went public last December, offer similar services like Confluence and Hipchat. If Slack doesn't rise above these companies, it could get lost in the shuffle as another challenger evolves into the top dog of enterprise communications.
Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Facebook and LinkedIn. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.