Slack + Salesforce Emergency Pod with Packy McCormick of Not Boring

Transcript from https://podmenti.com/t/691da5f657b5ab87

Since I think I'm uh editing this one, trying to make it as easy as possible. Yeah, we didn't actually talk about that. Thanks, Ben
Hopefully we can just one take this.
Welcome to this Emergency Pod of Acquired, the podcast about great technology companies and the stories and playbooks behind them.
I'm Ben Gilbert and I'm the co founder of Pioneer Square Labs, a startup studio and venture firm in Seattle. And I'm David Rosenthal, and I am an angel investor and independent advisor to startups.
Based in San Francisco. And we are your hosts.
Well, David, uh here we are live on the scene. Uh we've got a special guest.
What are we talking about today?
We are talking about
Slack.
And we have to do it.
The best in the business.
The number one
Internet and Twitter, Slack Bull out there and probably
Probably we're gonna we're gonna discuss how happy, but probably a very happy man here today. Packing McCormick of Not Boring. Welcome to the show. So great to be here. And I'm both happy and sad, which I'm sure we'll dive into. So much to us with mixed emotions.
All right, David, you've got this lovely introduction written up here. Take us in. This is uh non traditional in so many ways, because this is a big week here at Acquire. We've got DoorDash
We've got Airbnb IPOs coming up. We're gearing up for those. We're gonna be live on the scene for those. We have Roblox, which maybe we'll cover next season, a couple others happening. Um we literally just recorded an awesome special episode, which is coming out later this month. But
We knew this was happening. So last week we'll dial we dialed up Packie on Twitter. We said, Hey, if this happens, can you come on the pod? Will you do an emergency pod with us? And uh here he is. Super excited to do it. Yeah, why doesn't every company just like leak their, you know, their uh
acquisitions ahead of time. So that way we have a little bit of warning. I think we got totally blindsided if I remember with LinkedIn, with Whole Foods. I woke up to like a frantic text from David uh around the Whole Foods acquisition.
And LinkedIn was acquired for right around the same amount. If I remember twenty four billion, that's right.
Yeah, I think that's probably the interesting comp.
Um but
I w I don't want to get ha too far ahead of myself.
All right listeners.
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So we've talked about Slack a little bit here on Acquired before. We did a full episode around their direct listing that we'll link uh in the show notes when this comes out as a podcast. You can you know, if you wanna um
Remember Stuart's epic
uh blog posts we don't sell saddles here or uh or perhaps start growing up on a commune in British Columbia. Yeah, we will we will not recount all that today. We'll focus more in on on this transaction, um, but go check out the the history there. Packy, you wrote a piece you think two weeks ago. Uh w tell us what that was about.
Two weeks ago, yesterday. And so the piece was I have been a long suffering Slack bull. And the piece was I'd kind of touched on Slack in a few different cases. And this one was, Once and for all, I'm just gonna put down my full my full bull case on the company because, you know, from its direct listing, it's kind of suffered. It's tanked, it
rises back up a little bit, it tanks again, so I wanted to
put out there that I thought that the bears were wrong and obviously the the big knock on Slack was that Teams was just gonna come in and kill it. It's actually reported really strong numbers, which just because the narrative has been so bearish, you look at Slack's numbers kind of through this this
the lens of ah they're not doing so great because compared to Zoom, they're not growing, or compared to company X, their net dollar retention isn't so good, but they're really one of the best SaaS companies in so many different uh category of metrics that you know just wanted to put that that bear case. Yeah. Top quartile in just about every metric across the
That's from our emerging cloud intersect, right? Exactly. And I mean right, that the fast the fifth fastest growing company and the second best net dollar retention uh up there in terms of gross margin. So like all the things that you look for in a SaaS business, plus the fact that pretty much any fast growing startup that you can name uses Slack, and as they grow, Slack grows with them. Um
And you know, Slack is as we'll discuss, I'm sure, just reported earnings and their numbers look good yet again. Um so you know, it's it's one of these companies that has been underappreciated, but I think over time was gonna build into a juggernaut. Well, so you hit publish on that not boring piece two weeks ago. You C C
Mark Benny off. And uh although it he's probably a subscriber at this point, right? I mean he's gotta be. I I did, I have to admit that I looked it up and he's he's not. There are other videos. That's he didn't want to be trapped. Yeah, because he didn't he didn't want to pref preface the deal. If you see like Bruce Wayne or sort of like uh
Hawaii guy seventy two just signed up. So maybe maybe that's him. Love it. Uh so he got the memo.
He got the he got the he got the post.
Today.
A in Salesforce earnings twenty seven point seven.
billion dollar total purchase price.
Works out to I think forty five, eighty six a share.
In cash and stock.
Think mo a little
heavier on the stock than the cash piece, I think if I'm right. Um
But roughly fifty fifty, like fifty five, fifty seven percent stock. Uh, that's a fifty five percent premium to where Slack was trading before the news was leaked last week. Eighty five percent premium to the most recent Slack stock price crash after their
their earnings in September. Yeah, we should be clear, is this the first time that the price per share is above their the the first day of trading? I think so. I think it might be
Certainly.
I don't think it has been this high.
Yeah, so re like reminiscent of Dropbox in that way, where it's sort of
never really it kinda traded down and then flat and then down and then flat and then we've we're we've been kind of in one of the flat spots for a while.
Yeah.
And uh so let's see, Slack is gonna remain independent.
Uh Stuart is staying with the company, staying as CO of Slack.
Uh deal is expected to close next year.
still has to get shareholder approval from Slack shareholders, which we might discuss. Might discuss Packy's thoughts on that. Uh
And it is the largest software deal.
since IBM bought Red Hat two years ago in twenty eighteen.
Wow, is it really?
I guess.
Yeah, I guess you don't see these these these public to public mergers that often.
Yeah.
Well I think though
Actually pure software deals. I can't
Yeah, I I can't think of anything else that's happened since.
Mm.
Yeah, the the thing I I definitely feel like it's the most akin to LinkedIn, at least the way that it's big, you know, hundred billion dollar plus valuation or market cap tech company buying something that
Um
You know, was started
Decades? Ma probably one decade. Uh w yeah, multiple decades after their founding. Because one was Salesforce. Salesforce was
Uh
Early two thousands, right? No, I think it was late nineties, it was mid ninety nine.
Ninety eight, ninety nine, I think so it was started.
Yeah. So they're sort of buying into the next uh next generation of enterprise software.
Yep, yep, and of course, um
The other bidder for LinkedIn.
Was Salesforce. Salesforce. And then they filed an antitrust suit against uh
Microsoft about it, I think.
Really?
I think they sued to block the deal, yeah.
Well, I think we're already on to the sort of uh early theme of this episode, which is gonna be uh the the battle with Microsoft.
Yeah.
First.
Packy.
Let's unpack the emotions. How you feel I'm like a sideline reporter here. Like how you feel in
Are you like are you ready to go to Disney World? Are you declaring victory?
Is this a is this a tough loss? Is this both? What's going through your head right now?
I think it's a little bit of both, right.
I when I wrote about the company, it was trading in the you know mid twenties. And so for anybody who bought after reading a not boring awesome win for me.
Great win, love all of that, but my bull case was not to, you know, wherever this ends up in the forty five dollar range, depending on where Salesforce trades. I mean, even if you look at
just kind of the other top quartile BVP cloud companies and how they've traded. Slack, if you know, assuming they just trade in line with those companies kind of from the beginning of the quarantine, I think that puts them in the low$50 share range. So
And that's right now. And I really think Slack's potential is long term as they build and grow and they keep retaining and growing with customers. So you know, I was really hoping that this was kind of a three to four X stock and it's just such a rarity.
right now during coronavirus to find a SaaS company that you think is somehow undervalued. And so now I have to go back to the drawing board and find kind of what the next what the next slack is. But you know
Underpriced SaaS companies that are growing at forty nine percent year over year are hard to come by right now.
Totally. I mean that's like
I mean we might as well just get right into it. Like what?
What was the disconnect here?'Cause this is crazy. Like every
Other
SAS company out there, especially, you know, a work from Homestock.
has been just off to the races and like what has
Kept slack.
You're so beaten down for so long.
The biggest number one thing that has kept Slack beaten down is just the threat of Microsoft Teams and not just
kind of a specter of Microsoft Teams, but Microsoft Teams and Microsoft generally
has gone after Slack.
by name and to hear Stuart talk about it, that's because if Slack threatens email, then Outlook is threatened and then the whole Microsoft suite is threatened. And so they've put particular emphasis on the fact that they're crushing Slack. And so Slack, you know, has 12 million users or whatever. And then Microsoft reports that they're just flying by Slack. And when they
release their charts uh showing that they're passing Slack.
You know, a atypically
They put Slack's name right on the chart and call him out and and according to Stuart, that's something that nobody except maybe Larry Ellison and Oracle a couple of decades ago ever would have done calling out a competitor by name. And so it was this like real kind of threat that Microsoft felt, again, according to Slack. Um, and so they put everything that they had.
going after Slack. And so I think you can look at the numbers a couple of different ways. You can either say
you know, Slack is growing faster than forty nine of the fifty four companies or
Slack and Zoom are really kind of the two most public facing or consumer-y of all of the work from home stocks.
And Zoom is growing it.
three hundred percent and Slack's only growing at forty nine percent. What's wrong with this company. That's one of the reasons that I love it so much long term is you know, there's I think switching costs and motes in general are these double edged swords and Zoom
doesn't really have a mode, right? But it's really easy to hop on a Zoom. We uh don't have a shared Zoom account and we hop on a Zoom in in one link. And so it's really easy for Zoom to grow. Whereas Slack, you have to set up an org, you have to build your integrations, you have to do all those things that pay off over time. So and there's no reason why anyone would
Join Slack, let alone join Slack as a paid member, unless you're part of a
Company.
Whereas
There are, especially post Covid, like a million use cases why, you know, like my parents have a paid Slack as Paid Zoom account now. Yeah, if you get sick of that forty minute limit, you're just gonna pay off it's only, you know, fourteen bucks a month and and so you go for it.
So I think that's been the big thing. Then there's other things like, you know, chat is just annoying and distracting. And particularly right now, people are like oh man, another Slack notification. I'm sick of this. But
The real the real reason it's kind of separate has been, I think, that that team's fair case. Yeah, Packie, how much
of uh give us a sense of the relative user counts of Microsoft Teams versus Slack. And then on the Microsoft Teams one, um, you made a great point around, hey, it's actually more of a Zoom competitor than it is a Slack competitor. Can you dive into that a little bit?
Yeah, so I I think let's say that
Microsoft Teams has about ten times the number of users as as Slack doesn't big
cross maybe like the hundred million dollar range or the hundred million user range recently and where Slack's in that twelve million range and they haven't really reported numbers uh recently on that. Um they also have a really growing and we'll talk about Slack connect because I think that's one of the reasons Salesforce bought it, but this growing connection between companies and that's growing super, super fast.
Um
But Microsoft Teams, I mean it's
It's not architecture the same way that Slack is and that you can just continually
add teams within your organizations and have different kind of sub channels. It's it's limited in the number of teams that you can set up. Kind of you have to be really, really thoughtful from day one in how you set up your channels and your teams within within Teams.
It's getting confusing with the nomenclature there. Um but it it's not meant to be
A ten thousand person
org chat tool. It's meant to be the hub for kind of all things.
Microsoft within an organization. And so that's
really good because you're able to grow Microsoft is phenomenal at distribution.
But I
don't use a PC, but my wife and my mother in law do, and I go to their computer sometimes when they're opening it.
And teams just pops up, even though they're not team users. And so you know that the active users can, I think, and and Slack has called this out in the past.
is potentially a bit inflated. Well but it is also forever. I mean um
Back in the Azure days, they were including
Oh three sixty five in the Azure numbers and so they'd report numbers to the street be like, Oh, Azure's on fire and it's like it was Microsoft's fastest business ever to a billion dollars in revenue, but I'm pretty sure that included the internal accounts as
Yeah, as revenue drivers.
So they're up to their you know they're up to their old tricks again. And in this case, depending on how you think Salesforce competes with Microsoft.
Kinda worked, right? Like if you really do think an independent Slack
is a threat, then Microsoft strategy and Microsoft using its
distribution kind of
bully pulpit uh really kind of knocked out a competitor here. So what do you think like th yeah, this is super interesting. Why
We'll get back to Slack itself and Salesforce.
In a minute, but um
Why do you think Microsoft
Why do we think Microsoft

so directly comparing teams to
Slack because it's as you point out in your in your piece and
You know, I d I think to it's really not like Zoom is the big competitor for teams.
And yet you don't hear Microsoft talking about Zoom.
At all. Like what's what are the what's they thinking here?
Zoom is not a
platform and doesn't have line of sight to being a platform, whereas
If you're on Slack and you can use
G Suite and it's integrated, and you can use Figma and it's integrated, and you can use the twenty four hundred different integrations that they have.
Then Slack all of a sudden becomes this hub for essentially a a
office suite that
is comprised of best in class software and then all brought into one place together. And by the way, it potentially kills email, certainly internally and maybe increasingly externally. And so it's just a more direct threat. Whereas if people use Zoom
They use Zoom, but you're still gonna go back and use Excel and PowerPoint and email and all the other things that you would have used.
Otherwise. So it doesn't
It's not a threat to Microsoft's cash out in the way that Slack would have been.
Interesting.
'Cause yeah, that's like
One of my big questions here too is like
Why wasn't Zoom the one that acquired Slack here? Like to me, that's a very compelling combination. Like why wouldn't you use it to go make acquisitions?
I wrote a whole piece on on Zoom and this exact point that what do you do when you have a stock that is by all measures incredibly, incredibly expensive and you have no modes? And the answer is you go out and acquire companies. I I didn't have Slack as one of them.
Probably'cause I just wanted to remain as an independent company, but you don't want to trade your shares in for Zoom shares. Not at that not at that valuation, I didn't, but I didn't they've they've tanked a little bit over the past uh the past day or so, but
Yeah, I mean I think Zoom should be more acquisitive here.
Totally.
Um but yeah, that's a good point on Microsoft like z
Their whole
It's always, even though you know, it's new Microsoft under Satya and all that, and and it totally is in many respects, the strategy remains the same.
Which is
We have
the best distribution channel in the world.
For enterprise software.
We have
Core.
use case is where we're the dominant app in the you know
vast majority of businesses that exist in the world.
Primarily being email, but also word and Excel.
And PowerPoint too.
Um
And we feed stuff into that channel.
And so like
The stuff that they feed into the channel is great, an additive of which video is super important, and that's why they're doing what they are with on the product side with teams.
But Slack as small as it
is compared to Microsoft is actually like the one that's like, hey, we wanna and s and stored as said.
And many times like we want to be the next Microsoft. You don't hear Eric saying
We wanna be the next Microsoft.
Eric is happy having just a very
Well running video product. Exactly.
Yeah.
Well, I I I I do think and I can give a couple of more data points too. I mean Microsoft um
a couple of years ago decided to go all in on teams. And so they're they're shutting down or rolling in Skype uh into Teams. Um
they've you know, the the communicator and link are long since sort of dead and rolled into the Skype brand, but all that is sort of becoming Teams now. Um same with a lot of their the what used to look like Office 365 dashboards Team is become Teams is becoming that sort of central hub for
um for everything. And I know they did a lot of internal reorgs too to kind of put a lot of people who were working on um suite wide or cross platform things under the auspice of teams. And so that they really are
Um
You know I uh
they really are looking at it like
Well
we can bring a lot of users right away, even if they don't know that they're users, and then sort of um increase time in app and engagement and usefulness of of this app um over time. And I think
You know, Packy, I I uh the thing I go back to is let's say Microsoft has that sort of hundred and twenty, hundred and thirty million active Teams users. Most of them are probably using that
either because they have Office three sixty five and it's a launcher of sorts, because their team technically uses it, even whether or not that it's sort of their main mode of um communicating, but more importantly, because we're all in work from home and they're using it for their video calls because it's the free and corporate approved video calling software that they can use. And so
I I really liked the point that you made, which is like it is a total red herring to continue
uh comparing Slack's users to Teams users because it's complete apples and oranges and the Slack share price is depressed because it it doesn't look good compared to this thing that you really shouldn't be comparing it to.
Exactly right. Yeah, if you compare it to video products when everybody is on seven video calls a day and it's very easy to set up.
It's not going to look.
nearly as good as it would if you compared it to anything else that's a little bit tougher to set up and involves the full team's participation.
Yeah.

Well, I I think the
My kinda
thesis on this whole thing is what we're really seeing is like the the anti Microsoft
Um
I don't think it's like an alliance. It's really like the anti Microsoft consolidation where
Uh
I if Microsoft is this isn't like the Rebel Alliance here. This is like uh another empire stepping in.
Right. And I think uh a a a blog post just went up by Aaron Levy um talking about how
uh this is the a show of force from best in breed applications. And whenever you see best in breed in the enterprise, the way to sort of um decode speak that is
Microsoft is not best of breed. Microsoft is the full integrated system that's best at nothing. And I I don't I don't know if I totally want to s make these my words, but this is the the viewpoint of um the the best of breed argument.
They're best at nothing, but they're the best integrated. And so if you're buying from one single provider, it's the proverbial enterprise one throat to choke. You know, it it works best together. You can have one person for your support. You can have one rep, you can have one license, um, you get bundled pricing, all that stuff.
And when you see best of breed, what that usually means is people buying from a bunch of different vendors, but it's the best per you know purpose built software for um for each of those things, it's very interesting to start to see consolidation among best of breed um
applications being from one company. And one does have to wonder, is this the first of several? Um Slack might be the most important because it is the platform, the entry point, the place which
all you know, you can branch out to many of the other apps from there, but
Uh if if Zoom weren't so expensive, you know, would we see that? Wha is there some way that um Salesforce has ambition to um find other best of breed applications and bring them into the umbrella too?
Yeah.
You know, you have to think uh
Uh regardless of whatever
Aaron and Box.
Wants to do themselves.
This is fantastic news for them, uh and for their valuation, right? Because
At a minimum, you know, file storage is
Going to be a big part of that puzzle.
Uh so
Either.
Or maybe drop box.
Is
One of the next items on the list.
Uh for Salesforce.
Or if not, at a minimum they just got a lot more strategic.
uh and they can do I'm sure they already have a partnership with Salesforce as a distribution channel, but that's gonna become even more important. And if Salesforce is now gonna be pushing this, like
Hey.
best of breed, not easiest to buy for for your IT department. Uh, you know, this is gonna be
A tailwind to all other
You know, yeah.
I'll I'll use this term. I don't mean it pejoratively, uh sub scale.
software and productivity companies out there. I just mean subscale in that like you're not Microsoft or Salesforce. Um, this is this is just gonna be
I think it's
Great.
For their
Go to market and distribution. Yeah, the developer equivalent of this is the Microsoft stack versus the open source ecosystem. And now you sort of have the Microsoft productivity stack versus the best of breed ecosystem, of which Salesforce is now the very credible centerpiece.
you know, it it it in the open source ecosystem, it was like, well, you know, and this is a decade ago, I use PHP as my scripting language, which means there's this whole variety of open source vendors that I use for all the different pieces in my stack, or now Python or Node or whatever. And I think the the way to think about that, um
in the productivity world is like well yeah, we use Slack and
The question th that this is the leap. It's like we use Slack and sales for like the the the analogy starts to fall down. Okay. So this is I have this queued up. I need to quote this. Here's the key line in the press release. Combining Slack with Salesforce Customer 360 will be transformative for customers and the industry.
The combination will create the operating system for the new way to work, uniquely enabling companies to grow and succeed in an all digital world.
And then you scroll down and you see Slack will be deeply integrated into every Salesforce cloud as the new interface for Salesforce customer three sixty Slack will transform how people communicate, blah, blah, blah, blah. So
What does it mean to be this
new interface to Salesforce Customer three sixty.
And
Like like what does that actually mean in practice? Does that mean that this Salesforce customer three sixty is like
the very best Slack bot to ever exist and people interact with three sixty th like from Slackbot to uh Salesforce bot.
Oh then he are fat. Yeah.
Yeah, I I I was talking to my friend about about this deal earlier and he was like uh getting
Getting Salesforce as a company is like somebody giving you like the chassis of a car and then a box of parts and then having to figure out how to put them all together before you drive it. The last company I was at, the Salesforce implementation was one of those things that
every month was about a month from being done.
And so it's really hard and and maybe that's why, you know, Slack over time becomes kind of the on ramp to the whole Salesforce ecosystem and they do figure out a way to integrate it'cause Slack
for all the work that they've had to do to make their onboarding a little bit easier. And I they have struggled there, it's certainly a much easier product to onboard your organization than something like a Salesforce.
Might be.
I don't know. I read all that and I'm just like
That translates to me as
Slack just uh
Up to their sales their
Their owners
Sales.
uh force.
uh by like a hundred X in terms of headcount and power and that's what that translates to.
For me.
Yeah, in in the sort of like classic acquisition category that we always do on episodes.
I mean
This is a distribution deal, right?
Like this is not
Like the product velocity is not gonna change. Salesforce is probably not gonna integrate the Slack product deeply into the existing Salesforce.
I mean they say they are, but it's uh unlikely.
Um, I think it looks a lot more LinkedIn where it's a totally separate thing and they leverage the Salesforce
distribution to be able to get it into more enterprises.
That sounds right.
You know, the uh Becky, I think you made the this point well several times.
Slacks.
Growth story.
over really its whole life as a company.
has been we get
Small
innovative organizations.
To start using the product.
Uh and and sometimes that's um
small innovative organization teams within larger companies, uh, but oftentimes it's startups.
We get them to start using the product and then it grows as those companies grow
Weaker. Oh.
Uh and you made the point that like, yes, you're spending all the sales and marketing to acquire these customers early on, but then as those customers grow and they retain and they
Um
And they expand with you, like that's gonna lead to a free cash flow.
Monster, hopefully in the future.
Um
What's missing from that playbook is a credible way to go get
the big organizations. Uh
And this feels like the unlock to that.
Yeah, this makes sense. The only question in my mind then is if you look at it like
great, you know, sales f uh Slack is a great way to
You know
index startups. Basically if you want to make a bet that startups
grow and then have lots of money to spend in the future because they're cash generating machines and need lots of great tools like
maybe the place that Salesforce actually ends up investing is a migration path from you've loved Slack and now we make it easy to onboard to the full, you know, Salesforce CRM suite.
Um, I just don't you know, it's probably my product background, but like I don't
I don't see that. Like it's hard for me to imagine like what that bridge looks like where you're like, Oh, great, you and your teams have all been communicating in this place and therefore somehow your Salesforce CRM implementation will now be easier.
Well, I think the big thing here, and they've m they mentioned it in the press release as well, is Slack Connect.
And to the extent that you think that
Slack connect will be a a way that teams can
that that a company can communicate with all of the different partners or clients that it has, then that makes a ton of sense.
for a sales force integration where you're not just
plugging into email and tracking your email conversations, but you have your lead right there. You click start a
start a Slack connect channel and then you're in conversation right within the Salesforce product. So to the extent that there is an immigration, that's where I see that happening. Slack just reported their numbers and they grew, I think, from
three hundred and eighty thousand Slack uh Slack Connect endpoints to five hundred and twenty thousand Slack Connect endpoints
in the last quarter alone. And so this has been a huge area of focus for the business, maybe in retrospect, uh rearing up for a Salesforce acquisition because this certainly does make them a lot more attractive as that kind of I think Ben Thompson called it the the work social network. Um, but certainly I think that's the most appealing piece of the product, if I'm Salesforce. Yeah, but let's all
Well let's talk a little bit more about Slack Connect. Um
Well, w why is it so strategic for
Slack and
Th I mean, this has been the drum that they've been beating basically.
Not their whole life as a public company, but
Most of it, right?
Yeah, I think it's it's strategic for Slack.
Um
So when Stewart's talked about
the product and how to describe it. And I wrote about this in the piece, so I'm repeating myself here, but
When they've talked about the product, they've always said it's hard to explain, but when you try it, you know it.
And so I think what Slack Connect represents is
If you want to work with Stripe or if you want to work with Amazon and the Stripe or Amazon team thinks it's a lot easier for you to communicate in a shar, then guess what?
Law firm, finance firm.
Blender, all of that, you're gonna join Slack.
And then you're gonna try it. And because the product is better than a Microsoft Teams.
you're gonna love the product. And then maybe you'll start paying for Slack, and then maybe it'll spread in your organization. So I think more than anything,
It's a way for people to kind of try before you
Try before you buy the Slack product because your kind of innovative partner has told you that they want you to use that product. And it actually, you know, when I was at Breather before.
Cushman and Wickfield, the first time that they use Slack was to set up a Slack channel to talk to us. And so I think like that, you know, that's that in action, right? You can see that happening kind of writ large, just so the companies can kind of keep that whole conversation in one place in one interface that they're familiar with.
Hm. And how does shared channels between organizations play into that?
So I think share channels is kind of
Become a part of
Slack Connect and that's what Slack Connect is. So I think share channels was just the first kind of iteration, but what Slack Connect is is a bunch of share channels between organizations.
Yeah, that makes sense.
I ha I mean, for what it's worth, and we have a super unique
use for Slack at at Pioneer Square Labs because we have one for the studio and then we have one for every company and it helped it actually is very meaningful and helpful in the transition in the transition when we spin out a company to be able to have shared channels until that company starts closing them off to us and then actually uses them on their own. But at the very beginning, you know, or the whole team except for the founders. So it's it's great
to have that um that bridge. But yeah, I do wonder
You know I it it has always seemed like
Um

pre-public lifetime, they were an internal tool and email was the external tool. And it seems more and more like Slack is trying to also find natural ways to be your um your external tool.
Which
It's kind of an interesting analogy to Salesforce, where Salesforce is a way Salesforce is an internal tool, but it measures all of your external communications and external deal status. And so there's gotta be some
You know, a again, loosey goosey on the
um the actual product implementation, but you can see how that philosophically aligns with where Slack wants to go.
And there is this
Great tweet. And I think they are kind of trying to kill email at this point, but this great Slack tweet from 2013. There's like people saying we want email dead.
If we wanted email dead, it'd be cold and in the ground. So they've been kind of dancing with whether or not they're an email killer for a very long time, but it seems like that's exactly what I've got to do. One of the best parts of your piece, you had um use the way back machine and you had Slack's like marketing positioning and how to like
You know, I mean I think this is the
To me, this is the whole point of the story here, which is like
their pros and cons to Slack and like they've done some g really good stuff for the past year and they've done some not so good stuff. And I think one of the things they've done not so good on is like
the hell is this positioning? Like I get Storyt's quote. Like I get it on Slack too. You gotta use it to know but like come on, man. You're like an eight year old company at this point. You're a public company. You gotta be able to explain what you do succinctly. And like even as a public company, they've been just iterating
That's just like iterating. They've been massively changing their main marketing message several times. Well, I give them credit for that. I mean they they they became they went from a thing that was like
trendy in startups to like useful
In addition to all your other forms of communication to oh my God, we're all working from home and now it's essential. So like they're they're their full pivot to like we're your virtual office. I can't remember exactly what the phrase is, but I think it transitioned from like where work happens to your virtual office.
Uh
You know, more power to him for that.
Fair enough.
But there was the moment in there where it was like we're the email killer.
Yeah.
Yeah.
That resonates with people though, right? Like I I think, you know, it doesn't describe fully what they do, but something as simple as we kill email is something that people can really rally behind versus
We're where work happens, people don't know what that means. And so there is like maybe you know, Stuart was a philosophy major and and
you know, logician and all of that. And so maybe there is too much
of an emphasis on getting those words exactly right versus just resonating with what people wanted the product to do.
It is also a a classic sort of PR move.
Um
to describe a problem.
and let people assume you are the answer to it and assume it in their own way.
Because uh, you know, i in fact Salesforce has a great example of this, and we tweeted a snarky comment about um their old no software.
uh slogan. But people hated all the configuration that came with on premise software, so they just made their tagline no software. You know, be software with a thing crossed out of it. And like that doesn't say what they are, but it does say, Oh yeah, I hate
that. Like awesome. You guys are the answer to that. And you can imagine what the answer would be. And I
The one of the th the funny things about enterprise software broadly and Salesforce specifically is unless you are an individual contributor whose job it is to use that software, you actually rarely get a glimpse of it.
Like it's it's not like
like indie developed software that proudly shows screenshots on the website. It's sort of like uh the UI is is hidden from you until the very last moment when you actually have to use it. And often in s in sales demonstrations it's not actually shown to you, um, especially if you're you're not the actual end user. So um
I guess that this is a little bit of a roundabout way of me saying like uh have have either of you ever seen Salesforce's new lightning interface?
Like I've heard it talked about a lot. Have either of you seen it?
No.
I I I think that's that is in stark contrast to um Slack's sort of like
philosophy of everybody listening to this knows what Slack looks like. And even if you, you know, didn't use it at your company for a while, y you were well aware of what the feature set of that software is and Salesforce is the ultimate
Um
sort of uh embodiment of uh
Enterprise software is sold through traditional enterprise ways. We don't need to show you pixels until we absolutely need to, which is often post sale and like we're gonna sell you on a dream.
I don't exactly know what point I was making there, but I'm not going to be able to
Yeah.
It is true though. I mean I got I remember the first time
That I actually used Salesforce.
Not
the lightning uh interface, whatever whatever that looks like. I was just like appalled at
How bad it was.
Yeah, but it wasn't software, and so whoever bought it.
Whoever bought it sort of assumed that it would solve their problems.
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Well, I think this is a an interesting time to move into pricing and and sort of conversation around, you know, they they paid twenty seven point seven billion dollars. Let's contextualize that in the size of the the business um
in revenue. Um and obviously they're they're not profitable. Packy, you're, you know, one of the best educated people in the world on on this, having just done a bunch of research. So uh
How big of a business in the is this and then how reasonable of a price is it for that business?
Yeah, so the business is and they just again released their numbers for this quarter, so two hundred and thirty five million dollars this quarter. Say next year, you know, this is a billion dollar run rate company with
eighty six percent gross margins that just became free cash flow positive and grew from ten million, I think to thirty-six million in free cash flow this quarter. So that's a really nice improvement from the company and kind of the thing that you expect to happen when you spend a lot of money to acquire customers up front. And then over time they retain and
uh more of that cash drops to the bottom line. So it's a moderately sized business, right? Like you're paying
Twenty seven point seven.
times next twelve months revenue. So it's not a not a cheap multiple
uh on the business there by any stretch of the of the imagination. I don't even know.
Yeah. Um
So it's yeah, it's not cheap. Nothing's cheap right now. Uh
Yeah, it depends. We'll see if if you think it is strategic and if they can just push it through the the
Salesforce distribution channel, but you're essentially paying twenty seven, twenty eight times next twelve months.
revenue for this business, but a business that is still growing forty to fifty percent year over year. Um, a business that does have phenomenal margins and a business that is
you know, increasing its free cash flow to pretty rapid
Right here.
What's the um
Uh
I don't know if you
Uh
had time to look yet at the
Uh, you said it was two forty revenue for this quarter, or two thirty five, something like that. Two thirty five, two hundred thirty five million. What year over year growth rate, is that still sustaining in the
Forty percent. Last quarter it was forty nine percent year over year. This quarter it was thirty nine percent year over year. So pretty dramatic.
Yeah, that's
So they had a bunch of good news to announce this quarter in
Slack connect.
But
Yeah, that's that's gotta be a pretty concerning top line number. Like
If you're
'Cause there's no reason that should be slowing, right? Like
Um
There should be tailwinds at the company's back.
They should still be getting net expansion.
Now in the beginning of the pandemic
Uh
that expansion.
got hit because p companies were laying people off and so that was leading to contraction in monthly revenue.
Uh in their existing accounts.
But I gotta think most of that's behind them, so
Hm.
Interesting.
Yeah, paid customers up 140% year every year, Slack endpoints, uh connect endpoints up two hundred and forty percent year every year.
I'm looking to see if they talk about
net expansion,'cause that's obviously been something that they've been
pretty uh pretty proud of that does not show up at least in the press release. And so maybe, you know, if that contract's again from
one thirty before the pandemic to one twenty five to now one twenty and revenue slows a little bit, then that begins to, you know, paint a picture that
Maybe you want to get out before that happens.
Yeah. Well'cause that's a that's the um
To me that's a big question here, which is like okay, we've talked about a lot of the strategic reasons to do this deal, all make sense and whatnot, but they did just flip into cash flow of positive territory, them being Slack.
Um
They were still growing rapidly. They're still top quartile in
All these Bass American Emerging Cloud index
Metric.
Why sell? You know, like
Um
I mean unless they just felt like they were gonna
continued to get hammered by Wall Street and didn't want to deal with that. But like
Um
It's a fifty five percent premium, David.
Like
I you know.
That's pretty rare as a public company to get. We w we in the past we've looked at these and we've said like, Well, twenty percent
premium is basically baseline and if you can get up to thirty percent
or forty percent even like that, you know, that's good, do the deal. But if your stock price hasn't
Ever hit your
Listing price.
And you've been basically flat, if not down, over, you know, the eighteen months or sixteen months since being a public company, and someone offers you a fifty five percent premium, it's hard not to take it.
I mean I think that's true. Well, I wanna hear Packie's thoughts.
No, I mean I I think that's true. I I I think
for me not having to sit inside of Slack and sell against Microsoft every day.
I think this could be, you know, triple on its own in the next year or so. And so it's disappointing from that perspective.
on the other side of the table to say, yep, we're gonna plug you into Salesforce's
Salesforce, and you're gonna be able to kind of match the distribution power or at least approach the distribution power of a Microsoft, and you're gonna be able to do all of these things that you want to do for you know to to connect the full ecosystem of best in class products.
You can see that that's kind of a tempting
thing to be able to do in Microsoft, you know, to the
for the amount that they say that Microsoft isn't that big a threat, they also
sued Microsoft for kind of, you know, for for leveraging their distribution advantage against them. And so
It's not as
Big a at the very least it's a
big annoyance and a a pain to deal with uh day in and day out. And so maybe if you combine that
with the fact that it's a fifty five percent premium.
You're happy to to take that deal.
Yeah.
I think they're
There has to be some element though of just fatigue on Zoom's
Part to do this because
Or sorry, Zoom is not fatigued on Slack's part to do this. Um
Because again to me just like they're coming back to like they just flipped a cash flow
Positive. So
Like
There's no gun to their head, you know, other than just people being mad at them. Uh and
Um
I wouldn't have necessarily thought that they would care too much about that.
On the other hand, I also don't think based on our
episode or main show episode that we did on
on Slack. Um
I don't also don't think that adding several more billions to his net worth
matters that much to Stuart. So maybe he was like, Well
This is gonna be the best chance to realize the mission the soonest.
Um
But it's still extended. It's a little perplexing to me.
Yeah, you wonder if they couldn't have gone out and just acquired Frank Slootman to come in and
And rally the troops and rally the sales force and go out and sell against Microsoft. And you know, Stuart's very much a product guy and not a sales guy. And maybe maybe that's the other answer here. And so instead of bringing on a new CEO who's really more of an enterprise SaaS guy.
You just sell the business and you know, you have this successful exit at a fifty five percent premium.
And all of that. And Stirk gets to continue
Being Stuart and being the product guy and
You know, Slack Connect, like it's a big vision and it's a big product, and they've done really well for the product standpoint from that.
And he doesn't have to go be Frank Sleepman and Benioff can be Frank Sleepman.
Exactly.
You have to wonder if this is the beginning of the rebundling of enterprise sales.
Like we spent the last five to eight years
In
An era
Of
Well
If you think back like fifteen years ago, bring your own device happened and then the last five to eight years it was anybody with a credit card gets to buy any old SaaS service and there's subscription fatigue in a big way, uh
at at any company. I mean we uh
like we're a twenty two person company at PSL, we have a spreadsheet to manage all the subscriptions that everybody signed up for, and then there's harassing at the end of every month. Who signed up for this? On what card?
I can only imagine how painful that is at at enterprises. And so you have to imagine too if Salesforce is kind of saying
Actually we have the opportunity
to run the Microsoft playbook here. Um and uh
Um and we're gonna continue to see more more consolidation here to alleviate the pain of procurement around
Um
Well, basically people going around procurement.
And I think yeah, I don't know. I think
That's an interesting point. And
I can't imagine that, you know, as the companies that are used to buying
Microsoft and Oracle and even Salesforce and all those.
kind of age out.
Yeah.
the new wave of startups is gonna be like, you know what we'd really love to buy from is
Salesforce, or we would really love to buy from Microsoft. And so maybe there's this transition period that we're in, which is like a five to ten year thing. But I think the way that that ends up getting solved is, you know, their company is like
ramp on the corporate card side that
that is trying to show you your spend in one place and show you where you can save. And so whether it's a corporate card, whether it's a software solution that kind of comes in and and
kind of p replaces the spreadsheet there. I think there will be other solutions than
Companies, you know, growing tech companies are becoming a bigger and bigger part of the market, and I can't imagine that
They enjoy
Working with Salesforce more than they hate.
Managing all of those expenses. And and Pack, you raise a great point too. I think it's it's uh
sort of novice of me to suggest that the point of integration
in twenty twenty one would be the same as the point of integration in
two thousand five, like the rebundling won't happen in the same way that it got unbundled. The rebundling will be at the credit card level or, you know, in a you know, not someone's not gonna go build the Microsoft bundle the way Microsoft built the Microsoft bundle.
I think that's right.
Yeah.
So it makes this fun.

Indeed, indeed. Well, um
Speaking of prognosticating about
The future. Um
And uh
Strategic decisions in the landscape.
Um
I don't think we can leave
this section without talking about
What I think you read about really eloquently.
Um
in your piece about your take on the bear case.
For Slack as an independent company.
Um and this actually totally jives with um
Our friend Jake Saper over at Emergence is about to publish a blog post uh about this, like the the flip of this being an investment theme. He calls it deep collaboration, but like
that there are all these other
workflow apps out there now, whether it's Figma or Notion or whatever that
Actually have
chat and collaboration built into them. So you don't need to go over to Slack in order to
collaborate on a Figma document or uh if you're working on a legal document with ironclad or something like that.
Um
Let's talk about that,'cause I think this is this is a really astute observation.
Yeah, that's fascinating. And a lot of this comes from Kevin Quak, who's more more astute than than I am on on these things. But the point being that, you know, h his point that he makes in the great piece that he wrote on on Slack is that
Slack is really, you know, once every piece of what a business does has a Figma like software that has collaboration embedded.
Then Slack becomes this kind of like
Back up.
use it for emergency. Something has gone wrong in the collaboration tool. So let's go over to Slack and chat about it.
Or it kind of becomes, you know, what email is today, which is like we make a company announcement here, or we do things that are more broad, but when we actually want to get work done, then you're right, we go into Figma or we go into, you know, pitch to do our presentations together.
in there. So there's all these different things. I think that is that does get a little bit confusing. His solution and one I think you know is a uh
gonna be a pretty hot target right now is something like a Discord that is a chat tool that exists on top of all of the other kind of collaboration tools and you can be video chatting. I wrote about remote work and kind of all the the work from home products that are being built natively for remote work yesterday. And there's
ri five good options that I saw just in a couple of days of research.
that are trying to really kind of build something that
feels like an HQ, both in terms of like
Schemorphically it.
Feels and looks like an HQ, but then also
You know, there's different noise levels that you hear when you approach people or when you go further away from people, or you pull up the code that you're working on in in a you know right there on the screen and you all have your little video circles around that. So that there's some really interesting software being built in the space.
And so maybe that's I mean, to me that's the bare case, right? If if your bullcase on Slack, which mine is, is that they can acquire all the young fast growing companies and become this kind of like central hub for everything that they do and grow with them, then the biggest threat to the company is that
there's an even better kind of newer wave of software that comes in and cuts off that bottom and takes all of the younger companies that are coming in and maybe even starts going up and stealing the stripes in the other companies there. So to me, that's the big risk is that there's one collaboration software that people interact with
directly and then to the kind of next generation of Slacks that are built more for this world where we all have to be collaborating.
with kind of whatever that software is as the central hub versus as something that we chat with
Chat with each other on in the office.
I love that point. I think it's so astute that like the the worst nightmare for Slack is that chat gets good in apps.
And and suddenly I'm like, Oh yeah, Slack. Uh I pop in there to like drop a gif in random.
Um happy birthday is just seemed to be a big use case. Right. But yeah, to the extent that work stops I mean it's funny, where work happens, to the extent that w work
gets federated and happens in apps rather than in the central, you know, communication nexus.
They're in big trouble. And I love your idea of um open up the s the Slack API, not in a way that's like build b build bots within Slack, but in a way that's like
Embed Slack in your app so that you don't have to roll your own
Slack, because it's a crap ton of work. Anytime's like, Well, let's implement chat. Like see Zoom as example A. It's chat is awful. Like sometimes randomly I'll paste a link and it won't hyperlink it. Like I I mean there's
Uh uh this is a uh massively successful company with a just
Uh
a chat where every time I try and send a message to one person, I accidentally send it to everyone and
I think that like
Uh there's there's huge
um defensive opportunity for Slack to to be the way that you implement chat in your app.
And they just started hitting at it too before this. I and he was on he went on the 20 minute VC with Harry Sabbings and talked about kind of being this connective tissue between different apps and like really like what the next level of integration looks like for Slack. And so
That would have been an amazing way to do this, I think, to be able to just embed Slack in different apps, because to your point.
everything that they've done that seems really simple and that makes chat seem really simple is really, really hard. Like I've I included the graph of all of the decision tree that needs to happen to decide whether at
eight o five PM to send you a notification if I slack you. And it's really complicated. And so like there's all that stuff that you can just
Yeah.
offer as a service through other products that
you know, would have been interesting and maybe will still be interesting, um in the combined company.
What um
If either you are
more knowledgeable than me'cause I've only used the product a little bit. Can we double click on Discord a bit and talk about how that's
Different. Uh
And
Why
Uh
It's maybe more suited to this
I don't know, I wanna g probably the wrong word, but embedded type use case.
Or like coexisting with
The actual apps.
Let me first make my snarky comment, which was if you thought Slack was unintuitive to learn, wait till you see Discord. Um It's the first piece of software that's really made me feel old.
Exactly.
And my my second, you know, the the the con the other side of that, which is viewed as a positive, is it's much more customizable. Not like crazy. I mean it's not MySpace with an open HTML canvas, but it's um you know, it's the Android to Apple's iPhone, where it's it allows far more extensibility in the chat canvas.
So
Um
The question is, so their go to markets have been entirely different. Obviously, gaming and influencer communities, um, rather than the enterprise. And in fact, Slack has uh
made it sort of difficult to use the product for any of that uh anything that's not the enterprise and have to sort of turn a blind eye to our acquired slack. Yeah. Oh my gosh, I've been beating the drum with so many people there. I've been like, please give us some basic features. We are evangelizing your product. Yeah.
Uh and my favorite the my you know uh
longtime acquired Slack members will know that my my uh particular B and my bottom around that is because we are using it as a community product, um, it doesn't
like respect how admin y we wanna be and so it will email like all users and tell them like oh you're hitting X limit.
And you're like, What? It's like thousands of people getting this email and it's reporting analytics like, Oh, there's this many of you are active this month or this week and you're like, Why are you sharing that with all these random So
Um
Yeah. No, we're not gonna pay you three million dollars a year or whatever we have to for our
six thousand people in the acquired slack. But it that is such a good point, right? It's not just the product, it's also the way that they the way that they charge in the business model where Discord
Makes people pay for upgraded
features like better video or different like
Things that maybe super users might want.
But it doesn't penalize everybody else. And so I don't know how you do that if you're Slack and then how you communicate that to the enterprises that people are getting all these other so it's more complicated than just
Do what Discord does, but
Certainly from the business model perspective, Discord handles
Those use cases.
A heck of a lot better. Much better. Yeah. I mean so so there's the marketing side of it and like the ideal customer profile where um can be you know
Slack targets the enterprise and Discord targets communities. Um but
It's I think an overly simplistic view of the two products to call them
similar or or the same other than who they're sold to because I think
when you think about all the deeper features of each, they're way different. So like the ability to have a shared channel between two enterprises or the ability to create a Slack bot around that communicates with a time tracking tool. Like that those are not the types of things that Discord has has ever built toward. Um and I think it's like

you know, uh enterprise software especially, but all software is that iceberg where the ninety percent of the the real hard work is below the surface. And I think it's only that ten percent above the surface between Slack and Discord where it it actually feels like the same thing.
I think that's I think that's right. But I do think that this next generation you know companies like
How don't
are gonna come out and and kind of
combine the best of Discord with all of the below the the surface level kind of features of Slack.
It'll be interesting to see where those turn out, but
But I think there's some promise there.
And frankly, if Slack was gonna get cut off at the knees where someone else was gonna be the tool for the new upstarts,
Um, if that was already true, being owned by Salesforce is gonna make that way more true.
Like if your bet on Slack is to to
You know, the same way that you would bet on Stripe, like that the next great company is gonna use this as an infrastructure choice. Like
That has to be the bet that you that
Uh you can keep making and
I would say
Salesforce buying it loosens my conviction in
In um
You know, that dream scenario staying true.
Yeah, I would assign a negative.
Price to the rest of the sales force.
Three sixty cloud.
Yeah.
All right, well, Packy, there we go. There's the remaining part of your upside is just invest in
In somebody that's gonna
Build the next one.
Messaging deep collaboration layer for the Enterprise with Discord type features for the Enterprise. There we go. Or as we all know and love, we can just invent uh invest in ten cent and own a little piece of Discord that way.
Yes. Uh
Well so uh the more I think about Tets in uh uh
Yeah, disclaimer we're uh
Oh at least.
Uh I'm a shareholder. I think you are pack out or my pen. Um but uh
Uh
It's kinda like I I feel the same way about Berkshire, right? It's like I could go
Uh I I can't even, but if I could go invest in
KKR and Sequoia and like all these funds and whatnot.
That are gonna give me great returns, right? But I'm gonna pay
Two and twenty or three and thirty on that.
Or I could just go buy Tencent shares or Process shares, uh, which is the spin out from Nasper's or Berkshire shares.
I could pay no management fees and no carry to get access to
equally good, if not better, investors globally. I looked this up yesterday, coincidentally.
Do you know how much since I wrote about ten cent, call it you know, in August, since I wrote about ten cent, how much
the value of their holdings in their top ten holdings has increased.
Oh I well, I saw your tweet, so go for it.
billion dollars. And it's sixty four if you assume that Epic has kind of grown at the same rate that Unity has, and I would imagine that, you know, if you're public it it would. Which is just wild.
Meanwhile the share price has been you know, it's like up a little bit, but but relatively flat.
What do you know what the basis is, like when you look at all the purchase prices of all those investments?
It was so I pulled a hundred and three of their seven hundred investments by, you know, translating things in Google Translate from Chinese from Mandarin to to English. So even if I don't have the research, I think. I don't have the basis on a lot of them, but certainly they've been in companies for, you know, snap their investment just
doubled, right? And Tesla they had five percent. And so that obviously has done phenomenal well. Spotify has doubled. Right. So like just all these massive companies that that sit in their portfolio and have doubled plus
Epic.
Plus Roblox, which is about to IPO, plus Discord, which has had its valuation shoot up and is now even more attractive. So like any good company that you can think of and you're like, ah, I wonder who's invested in them. Ten cent is probably there.
Well, the good news for you is
I don't think anybody's gonna acquire Tencent, so I think you can let that ride for a long time. How do you think the US government would feel if if Amazon tried to acquire Tencent? I feel like the US government would be fine with that. Yeah.
Yeah. Oh man.
Alright, so let's let's try and get to some like what's the bottom line here.
There's been a lot of takes.
I'm gonna close my eyes on price for a minute and just and let's just talk about like narrative bottom line. Like Pack, if you had to summarize this and they're like well TLDR, tell me about, you know, w why is this acquisition interesting um and and why and what's your take uh after an hour here of talking about it, what do you think?
I think the acquisition is interesting for a few reasons. I think the acquisition is interesting. One, because as you guys pointed out
it gives Slack this massive professional sales force to go push their product into all the orgs where it's struggled to to gain a foothold so far.
I think product wise, it could potentially be interesting if they can figure out a way to integrate Slack Connect and Salesforce and make it really easy for people to communicate with both of their clients and even with potential targets on on big enough deals that they'd be willing to enter into a Slack channel together.
And I think it's interesting because
And we haven't talked about this, but Salesforce is kind of the biggest acquirer that didn't get dragged up in front of Congress. And so is Salesforce in this really unique position where they can be this under the radar company that just picks off all of the targets while everyone else is is uh kind of exposed to antitrust scrutiny? Well might know
Mm.
Did they n they they were involved in some of that, right? Oh, maybe in the more in the later one.
Yeah, they were.
That's a fair point. They certainly for any trust reasons pro they're probably the only one who actually could not have acquired Slack, whereas everyone else, maybe optically it wouldn't look good.
Plus Microsoft's gotta have such a hangover from the DOJ. They do. I well, my data's eight years old, but yes.
Um actually, Ben, you can talk to like what are the internal processes and controls within Microsoft to make sure that like
You never write the word monopoly in a document. It wasn't as bad as you would think. It's only like if something really gets elevated to um, you know, serious discussion of a big strategic move that it gets considered. It's not really at at sort of the I C level. I will say there was a thing
Um there was a whole milestone, and I'm trying to remember how long Microsoft's milestones were, maybe six months in Office, um, where it was like the documentation milestone or the cleanup milestone or something like that around the Office file format. Cause a lot of the DOJ stuff was around
Wait, you claim to have this open file format, but you're the only ones who have any documentation on how the file format works. So um so I do know like that there there's entire sort of like billions of dollars that had to go into the manpower of cleanup after that. So then there's there's some processes in place, but um
No, it's it th there's not like a thing that blinks at your at your computer if you type the wrong word.
Company game night, you can play anything but Monopoly.
Yes.
The um
Uh
Well it's too big now, but when uh the days when uh
Uh Gates used to have all the interns over to
his backyard, just like have like a like he'd get up on stage and be like, All right, here's your orientation. Like you must absolutely not say these things, do these our enemy is the government. Uh
Well let me let me come in with my so Pack, great I think great three points. Um the one other point that I would make uh that that's sort of the thing I've been noodling on
um that we didn't really talk about is
uh this notion of growing by acquisition, which is something that we've talked about especially on the LP show with uh
um with Will Thorndike, author of The Outsiders. It's a famous sort of um
move by media companies and other outsider CEOs where the core business
has growth, but not insane growth. Um, and you know, you grow the company by acquiring high growth assets. And, you know, again, we can debate whether Slack is a high growth asset relative to some of these other SaaS companies these days, but they're a
um large enough enterprise company where if what Salesforce wants to do is meaningfully
grow their enterprise revenue quarter over quarter. Um
They gotta acquire their way into new revenue streams to do that. And where are there possibly large future revenue streams that they could acquire? Slacks. So I think that's a um
If I sort of had to describe why why would you do this deal if there's not real product integration to be done, um, but you sure as heck can, you know, uh increase their their growth
Through your own
um Salesforce, but because the market is relatively under penetrated with this Slack product, uh that's how I would describe um what Salesforce is up to here.
David, anything else?
Um
I think the only thing is uh
We could do a quick what would have happened otherwise on uh
Other potential.
Interested acquirers
Probably namely Google. We touched on Zoom a little bit. Maybe we can circle back to that too. Let's do let's do Google and Zoom.
Google Google I wrote about actually a couple of months ago, I wrote about a Google Slack acquisition.
I think that one. I mean
You know, part of the press around this is that it's now
Salesforce versus Microsoft.
I don't think that's really the case in s in unless people start using
Quip documents to replace Word and whatever else, but I do think that a Google plus a Slack with Google's distribution.
really is a powerful combin combination when you have G Suite, you have Gmail as your Outlook competitor. You have
Google Sheets, which, you know, maybe the finance team still needs Excel, but most of the other rest of the company can use Google Sheets and Google Docs and all those things. Then you really have this suite that
You can onboard a new company.
by just signing up for Google plus Slack plus Looker, which I like better than Tableau. And like there's you know it's just really it feels like they're building kind of this new wave office bundle versus even Tableau. Like I love Looker, my brother loves Looker, my dad loves Tableau.
Um, and so I think it it does make a little bit more sense in that Google suite of products, which is what I thought they're building. And Google hasn't been
Google's actually to me been maybe the most disappointing thing in terms of their kind of innovation or their growth unless some one of the other bets pays off. But they have, you know, this ad business, which for now is spinning off a ton of cash. The i the idea that they wouldn't
Play in this.
I don't
even know how to read that, but it just seems like
such an obvious move for Google to come in. And then there's Amazon on the other is the other one. They had a partnership where, you know, they powered uh Slack's video product and Slack used AWS and all of that. So
That's another one, but Google to me makes
A ton of sense.
Yeah, do we know was Google a bitter at all in this? Or had I d I didn't see anything about that.
Nor did I.
You're right, it makes a ton of sense for them. Especially when you consider like
the the startup productivity stack. Um and I would say not the bleeding edge. Um
pre-Casm crossing startup stack that's like Notion and Airtable, but you think about like the
like you know, five hundred pl five hundred to five thousand person companies. It's a Google Docs company that uses Slack for internal communication. Like that that is a that's sort of a natural bundle.
Yeah, the Google Google Suite is
The G Suite is really like one of the best integrated things.
into Slack where the docs pop up and that it it really is one of the nicest integrations in the product.
Which is customer happy about.
They they the there was uh like CEO conversation to custom build some stuff there. Like especially around the different types of sharing and how you can grant access from within Slack. Like that was custom work that Google had to do in order to enable that in Slack.
All that work down the drain.
That that's the appetition they should have been.

And that's the kind of thing like
You know, for the founders listening to this who have never sold a company before, that is the typical kind of thing that forms a relationship between companies that then leads to acquisition. Like that's the way to do a dance where you're like, Well
You know, let's do a partnership. No, not like a bundle distribution go to market partnership. What's an interesting product thing that we could do that would provide value for both of our users? Cun companies get to know each other, they get to understand each of their user bases, and then that's the kind of thing that tends to lead to to a deal. So Packie, now that you bring it up, like it is surprising to me that we are we aren't seeing Google's name here.
Yeah, boring one out for that deal.
Especially since I hear you been that like
You know, fifty five percent premium, that is gonna but uh when I think about
Relative to the potential of Slack.
And the multiples for some of these other class companies out there.
Uh this price does not feel high to me. Right. And what if what if Google makes what if Google makes free Slack
An ad product, right? Would you guys accept ads to to get rid of sending emails to everybody?
Maybe. Uh I probably.
Um
Well no and also, you know, the other pieces here is um
Financing. So like a saleforce is taking out debt to finance this. Um now, of course.
They have strong balance sheet, they can do this. It's not like a problem for them. Google's just got like literally an infinite amount of money sitting there spending, you know
What it's twenty seven point seven billion purchase price for sales for Google could have spent thirty five, forty billion, no problem, wouldn't have made a dent in their treasury.
Mm.
When do the documents get disclosed?
Uh, David, you probably know this with like uh party A, party B, how the how the deal went down
Uh
Probably when it'll come to a vote to Slack shareholders.
Okay. So we'll know in the next
quarter next next few months. Um
If there were if there was a bidding process here.
I love public purchase.
Yeah.
And then I think the
The other
question, we touched on it at the top of the show is is Zoom, right? Like
What's uh Zoom's market cap now, gosh, if I recollect is one hundred and thirty ish billion, maybe a little more.
Um
Sounds right.
And so this would be a big chunk to do a stock deal with Zoom. Uh it would it would be a pretty big chunk, which is probably why it didn't happen. I mean, maybe Slack didn't want Zoom stock at this price.
Could be.
But I also, you know.
If if you're if you work at Zoom and know the answer to this, I think David and I and Packy would would love to know personally, but I would also chalk it out to like
In all likelihood, Zoom has an underdeveloped corpdev function where like this would have to be a
Eric wants to do this deal and is gonna shovel other s other stuff off of his plate to pursue doing this deal. And and and
You know, look this up. They have a two person or at least you know, two months ago or a month ago when I wrote about it, they have a two person Quark Dev team that's both
You know, a couple months old at the company.
Right. Oh yeah. So it's like slammed. For a company of that level of maturity, it would have to be a CEO pet project in order to
make a make any progress on it. Yeah, video there's plenty to do in the video space and that has always
been kind of their strong p strong suit is how focused they've been.
On video.
Yeah. And that actually I would
Uh this would be fun, maybe we could do a sidebar here. Uh I would disagree with you a little bit, Packy, on uh the view on Zoom. Um
I think that view makes sense if you think of Zoom as a
Enterprise productivity tool.
Um
Which I think a lot of people do, but to me it's actually much broader and the opportunity is
this that we're doing on Zo right now. It's like yeah, they're good, great enterprise productivity product.
Make a lot of money on that? Perfect.
But like the huge opportunity is they are the video platform.
For
The entire economy.
And so I could totally see Eric being like
That's our focus. That's what we're doing.
I'm not gonna get distracted on this.
I completely, completely agree. There should be a million startups built on top of Zoom instead of Agora in the next year. And so their focus should be on becoming a platform.
Yep, yep.
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Grading.
Greating. Let's do it. Okay. So we thought
Let's do two uh separate gradings here to bring it home.
One.
Will grade Slack's tenure as a public company.
I'll render a grade on that over the past, was it uh fifteen, sixteen months or so.
Uh and then two
We'll do our looking forward, let's paint an A plus C and F scenario for the next five years of Slack within Salesforce.

Alright, so
Taking Slack's tenure as a public company.
I'll go first.
Mm.
Huh, I mean
It's really hard for me to come up with
reasons not to grade this pretty harshly. Um the Which for those of you who don't know David Rosenthal personally, that is David being mean. Like David can't say it's not
David can't come out and say like they've done terribly. Like that you won't hear him say that. So this is like This is not in my D this is pretty bad. So uh I'm gonna go with a C minus.
uh tenure as a public company.
I maybe it deserves to be worse, but um
You know, like the outcome here is above the
DPO the final the first day of trading on uh the direct public listing.
Um
So
It's not like they destroyed value in the public markets.
On the other hand, like
Didn't
come close in trading to um
in a you know, fifteen, sixteen months as a public company too.
meeting that day one price or
Let alone eclipsing it.
Um
And I think you do
Let's go.
Maybe it would have been impossible to fight this Microsoft Teams
Bullying narrative.
Um
So maybe this was an unwinnable battle, but like they lost it. Right. Like you know, the point like Packy, I think you have great points. Like Teams is not the competitor here. And
This is a great company with great metrics.
And yet
Uh they let this become the narrative.
That like Teams is just gonna
Destroy these guys.
Uh and I think that's why we ended up here.
Yeah, I mean.
It's interesting,'cause it's not actually
If we're grading the performance as a public company.
Um
The stock price movement is a failing of the CEO's ability to
give the market confidence in the future of this company.
Um
If we were to take a and I think Hamilton points this out in Seven Powers, and Packie, I know you're a um avid reader of uh of Hamilton's work with Seven Powers too. And uh
Yes, I think it's worth bringing up.
Public market investors are not short sighted.
They over index on recent signal, but the reason is because
This
Docks.
price and the enterprise value of the company is primarily formed by an investor's view of what the next thirty years of cash flows are gonna be. And they
w of course over index on recent signal if it
paints a picture um of of how those thirty years are gonna go. And so what we're seeing here is despite relatively strong
performance as a business.
The
Um
market doubted the business's long term prospects, even though the business did even better quarter over quarter over quarter as a public company. So it's interesting, like
Um
Yeah, depending on what we're grading here, uh you you'd sort of grade different things. Like I'm in camp B ish, B plus, uh as actual like
execution on their goals, um but you know, F on the ability to to, you know, generate um
Yeah, value for shareholders.
Well, not half, I guess,'cause it didn't go down, but like C minus.
Yeah, I think
It's interesting that this communications company's biggest problem was
Communications.
Well but telling its own its own story, but
I think my answer actually changes, right? Like I I've suffered through this kind of just like bouncing in the twenty five to thirty down to sixteen like
range as a public company below the the DPO price.
Um and been fine with it because
I thought that there was
You know, that they share the long term vision that I had.
for the company.
In which case, if you just ask me to grade it on the spot, I'd say it's totally fine. Everybody's misjudging it. They also see that this thing just compounds over time and compounds over time and compounds over time.
obviously this deal changes my perception of how they view themselves. And so in that case
you know, I kinda have to give it somewhere in the C range as a public company.
Just because it
stayed pretty flat, which is, you know, it's average. It's C, and it's underperformed the market pretty significantly in particular at a time where people are more you know
You're discounting.
future cash flows for those three years, which should be Slack's
Yeah, to Slack's great benefit, you're discounting it at this tiny, tiny, tiny discount rate.
And yet
it's not being reflected in the stock price.
If they're not taking that long term view then I think, you know, it can't be any better than
That's C for me, unfortunately.
Fortunately, uh for you, you kept buying and not just at the DPO, right? And I mean that's part of their legacy as well, right?
The biggest DPO.
Today.
Yeah. Direct listing. Yeah. Uh
Uh I don't know if Slack or Spotify was bigger.
They might have been about the same size. And Spotify has per well, Spotify had doldrums for a long time, but it's performed excellently recently.
The the the one thing I will say is like uh how I was
Whatever I was there, B or B min B minus uh C plus on on execution. Um
Uh.
I uh
But Pack, before reading your piece and before talking with you was much more negative. In fact, I had like a joke I was about ready to make on Twitter um that
Uh
Actually let me get it word for here word for word for word. Uh Slack has basically stopped updating the product and when they do, we all complain about the new worse UI. I think they'll fit in just fine at Salesforce. And I ended up not tweeting it because I think like the work that they are doing is the ninety percent work that's below the surface, where like
I you know it's
it feels like I haven't gotten an update other than, you know, shared channels and and multiple work space spaces since twenty fifteen. But like if you look at the app ecosystem and the way that that's been strategic for their business, that's actually huge. So I think I
I wanna like wave my arms around and say
Uh I think anybody who's knocking Slack for um decreasing product velocity is just looking in the wrong place.
Completely agree with you there.
Alright.
So
A plus
C and F scenarios.
within Salesforce for the next five years.
I mean the F the F is always obvious, right? Like And and to be totally clear, this is uh how good of a use of twenty eight billion dollars was this for Salesforce versus the history of other uses of capital by companies.
Um
Both in internal and external investments.
Well maybe the F is not obvious. I think the F
To me, we can all debate is um

They're wrong strategically, that
building a
Uh you know, what if we decide to call it not a arm the rebels, but a an alliance, uh an alternative alliance. Anti Microsoft Alliance, best of breed alliance is actually not the right strategy.
Um
Big
Enterprises don't really care about that anymore.
They're still happy to buy on credit cards uh distributed across the organization. It turns off all the startups.
And
uh innovative high growth companies are like ew.
Slack as part of Salesforce. I don't want that anymore.
I'm moving over to Discord or or whatever. Um
That feels like the F to me.
Yeah. I don't know. I don't think that sort of like stenches real. Um
Or is it gonna meaningfully impact people's decisions whether to adopt or not.
Um
Th but what I do think is real along those same lines is
Uh
this decreases the likelihood that Slack comes out with that next innovative
Um
I don't know, feature or user experience that makes people go, Oh my God, I have to use this product.
Yeah, I think the F to me is
Yeah, trying to
Integrate Slack and Salesforce.
The products and
failing and turning Slack more into Salesforce than Salesforce more into Slack. I think that's that's enough for me. Um and I think another, you know, potential F is I I do think there's a a stench if all of a sudden you start getting cross sold.
Salesforce, uh when you sign up for Slack and you know the acquired FM Slack
starts getting hit up with emails for Salesforce three sixty and lightning and all of that. Right. Which I think it happens. I think if if the distribution channel one way and it's just pushing Slack to Salesforce, then
Those are corporate buyers anyway, whatever. But if it goes the other way, then I think that could be pretty ugly.
And I think the risk of this is very low, to be clear. Like
You look at Salesforce's other acquisitions, like did users of Quip start it getting sold
You know, Salesforce and the three sixty five interface and um you know, did Heroku users start no, like you didn't even know that Salesforce was the parent companies of those things. Now did they both atrophy? Absolutely. Like did why wasn't Quip Notion? Yeah, why wasn't um Arcoda.
Really. Yeah, great, but yeah, that's actually the better comp. Or why is it that uh every startup that we start now at PSL is started on um AWS directly? Like we no longer you like you don't you don't need to use Heroku. You don't need that middleman that makes it easier to spin up a cloud app. Amazon actually has made it.
You know.
both more confusing and easier. You know, they've made it more complex, but then they've also created relatively simple onroads. So um To be fair, that's probably not Salesforce's fault.
Hiroku and all the past players were probably dead anyway.
But that's the thing. Why did they buy him? Like that they did they think they were buying the next generation of category leader among those things that was going to s you know s surpass Microsoft in those ways?
Or not. And if they're looking at Slack to be, you know, is this their third attempt, or maybe even more than that, to buy the next generation tool
Um
You know, are they buying it at the peak and it's gonna product atrophy from here and therefore people are gonna go you know, startups are gonna go use the next generation of um, you know, of collaboration software. That that is the biggest existential risk in the F scenario.
A plus.
Yeah, let's let's do A plus. We'll do we'll do the exciting stuff.
Um A plus to me is that uh
Slack on its own has been a reasonably high growth SaaS company and they were six and and Salesforce is successful at buying fast growing SaaS revenue and now they get to pump it through their channel and their channel receives it well. And they just like are able to massively increase the revenue growth uh uh for Slack and have more and more companies adopt it.
Um, in fact, they may even be able to convinced um large companies, maybe not enterprise, but large companies, um, that uh, you know, it's now a trustworthy vendor. Uh it's not some startup they're buying with the, you know
full seal of approval from sales from Salesforce and that comes with a Microsoft like, not quite Microsoft, but Microsoft like level of um yeah yes, I authorized this use uh at at the you know thirty to fifty thousand seats throughout my organization. So
Maybe there's a new market unlock there.
Um
I think that makes sense. I think actually the to me that's like a
A A minus to A, probably A. I think the A plus
Is this catalyzes
Mm.
Uh the sales force, the anti Microsoft
Alliance.
centered around Salesforce as a
totally viable and successful new distribution channel for best of breed.
SaaS companies and we see superhuman uh go into
The Fortune One Hundred and we see Coda go into the Fortune One Hundred. Uh and um
And Notion and Figma and well, Figma doesn't need any help, but uh you know, uh
Uh all of those.
New
SaaS products now use this as a distribution channel. Whether Salesforce acquires them or not, probably not, but now this opens up the door to
whole new markets for them.
I like that take.
Yeah, I think mine is somewhere similar and it just revolves a little bit more around
Slack Connect really being what they think it's going to be and not just
Creating the work.
kind of social network or this horizontal layer.
But also making being, you know, a a target in Salesforce.
a better experience, kind of like humanizing the whole sales process a little bit, uh versus getting hit in some awful drip campaign. So to me, it's a you know, if it can make the sales process writ large a little bit more enjoyable, then
that's a win while, you know, creating all these links between all these companies and really kind of building these network effects up.
Awesome.

Well, I think uh
That listeners is the complete set of opinions that we have on the deal with the facts that we have today, a mere two hours after the deal was announced.
Um
Any closing thoughts before we uh we wrap up and
Do our little closing here.
This was a blast. Yeah, it was super fun.
It's your first time being on YouTube too, if you're listening to the pot. Um
Yeah, it's it's fun. Uh we tr we tried YouTube live here, so we got to read some of the comments in real time. And maybe for future uh emergency pods we will do the same.

Well, first of all, thank you to Packy. Uh where can listeners find you and subscribe to not boring.
Sure, so they can subscribe at uh not boring dot substack.com or I'm on Twitter at at Packy M P A C K Y M.
Thank you guys for having me. This has been
A blast.
Of course. So fun. We're so glad you could join.
And uh yeah, definitely subscribe to not boring and
Follow Pecky on Twitter. You're one of the best followers on Twitter, especially tech Twitter. Thank you.
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Um, we didn't mention the LP program this time, but I think most folks probably know what it is. Um and if you liked this a little bit more informal type conversation, um, we get to have a lot of this uh this conversation. And Packy, you've you've been in those uh Zoom calls. How how's how's it been for you?
It's an absolute blast. I told you guys after after the last one, but doing
The Outsiders Book Club with Will Thorndyke after having written about the outsiders and being obsessed with the book is just such a cool opportunity with a bunch of smart people. So yeah, total, total blast. Highly recommend it.
Cool. Well if you've if you've been teetering on the edge, um
You can uh you can join and uh and we have a link in the show notes to become an LP at acquire.fm.
Slash L P
I think that's it. We talked a lot about Slack this episode. We've got one of those. You can join it. Acquire it Fm slash Slack.
Yeah.
Yeah, with that listeners.
Have a good one. We'll see you next time.