The Perseverance of Stewart Butterfield
The Long Journey to Slack's $27.7 Billion Exit
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Stewart Butterfield, the co-founder of Slack, had to overcome failure repeatedly to find his big success.
He performed one of the most successful pivots in business history and built a $27.7 billion company because of it.
Fascinated by the idea of connecting people through technology, he’s spent his career building companies to do just that.
And yet, as you’re about to find out, this all might not have happened, had it not been for the advice of his professor in 1998.
Let’s get to it.
While he’d eventually start multiple tech companies, Stewart grew up in a log cabin in Canada with no running water and no electricity for the first 5 years of his life.
Fun fact, he was born Dharma Jeremy Butterfield, but he changed his name to Stewart at age 12, a name he thought was more “normal.”
Stewart’s mom was someone he’d describe as “incredibly supportive” and his dad was a real estate developer who had a big influence on him as he was able to see 5 or 6 different businesses because of him.
As a child, he taught himself how to code, much like Patrick Collison who would go on to start Stripe, the $50+ billion behemoth. You can see why I was happy to have Sabio be our first sponsor - being able to code is immensely valuable.
Far from typical, Stewart would get undergraduate and graduate degrees in Philosophy.
He first got access to the internet while in college in 1992 and he designed websites to make some additional money.
In 1998 he made the decision to “work on the internet” after a professor advised him to do so:
In hindsight, what amazing advice, right?!
Like, can you imagine if Stewart became an academic, how different that would have been?
It’s always wild to me how little decisions like that can completely change the course of our lives.
Remember how I mentioned Stewart’s fascination with the idea of using technology to connect people?
Here’s how he explains it:
Stewart would later describe this idea as the connection between all of his future projects:
We’ll get to these soon.
First, let’s talk about the 5k contest.
The 5k Contest
In 1999, Stewart came up with an idea that blew up:
I mention this to highlight a point - constraints breed creativity.
This is something every entrepreneur should understand and one of the earliest constraints is often limited capital.
As we’ve seen with the previous 12 Just Go Grind founder deep dives, it’s amazing how resourceful the best founders can be. Sara Blakely is a great example of this, starting a $1.2 billion company with only $5,000 in personal savings.
Stewart, as you’ll soon find out, would need this resourcefulness throughout his career.
From 1996 - 2002, Stewart worked as a software and internet product design consultant.
This was during college and also while he was working on a company, Gradfinder, with Jason Classon which was acquired for a small amount in 2000.
In the summer of 2002, Stewart co-founded Ludicorp with Caterina Fake and Jason Classon, raising a small angel round.
They created a game called Game Neverending, starting from, as Stewart describes, “The realization that you could create dynamic webpages.”
But, while they were able to get some users, they didn’t have significant traction and, given the macro environment of the time, no one was interested in investing in consumer companies.
Here’s why Game Neverending failed:
Stewart further explained the failure in a 2017 interview:
This was Stewart’s first major pivot and it highlights some of that resourcefulness I mentioned earlier.
The story behind the pivot is crazy too.
It started when Stewart was flying to a law and virtual worlds conference.
He got sick with food poisoning, couldn’t sleep, and was thinking about an important question at 3 am:
“What could we possibly do with the code we’ve already written?”
The initial idea for Flickr was born from that work session.
But it still wasn’t clear to the team that this was the idea they should pivot to.
The team voted on what whether they should pursue the Flickr idea.
It was a tie.
So Stewart lobbied behind the scenes to get one team member to change his vote so they could go ahead with Flickr.
On February 10, 2004, at the O’Reilly Emerging Tech conference, they launched Flickr publicly.
They had started coding it 3 months before and at the conference they had 600-900 people sign up.
But the next day it was 300 people.
Then 70 people.
The number kept going down.
However, as time went on, they slowly turned it around.
Here’s why Flickr was successful and how Slack would leverage the same concept:
In March 2005, Flickr was acquired by Yahoo! for a reported $35 million.
Stewart stayed on to work at Yahoo! for more than 3 years.
But, as Stewart described, it was hard to get anything done at an organization with 12,000 people that wasn’t growing.
The mentality of the executives at Yahoo! at the time, because of the lack of growth, was zero-sum.
In the summer of 2008, Stewart left Yahoo! and his resignation memo was amazing, with his explanation of it below:
After leaving Yahoo!, Stewart would go on to create his biggest success to date, but it would take years of struggling first.
In January 2009, Stewart co-founded Tiny Speck, an online game company, and raised a $1.5 million seed round from Accel Partners, with notable angel investors like Marc Andreessen, Ben Horowitz, and Jeff Weiner also participating.
It was a much different fundraising experience than the one he had for Ludicorp.
By July, with the power of Twitter, Stewart announces they’re hiring:
Maybe I make a terrible boss, but at least I know it. Work with me: http://tinyspeck.com/jobs/cptl/
— Stewart Butterfield (@stewart)
Jul 10, 2009
It’s amazing how you can basically hire through social media platforms and in my own experience during the last two years it’s clear Twitter is great for this. Stewart was doing it more than a decade prior.
The first project for Tiny Speck was a game called Glitch, another massively multiplayer game that was first revealed publicly in February 2010, with alpha testing beginning shortly after, and an expected full beta launch later that year.
Stewart raised a $5 million Series A in April of that year and in November they release this demo video after extensive user testing, but are still working on the alpha version of the game.
In April 2011, they announce a $10.7 million Series B.
At the time they have a waitlist of tens of thousands of users and expect the beta to launch the following week.
By the time Glitch goes live for everyone on September 27, 2011, they have 27k users and hundreds of thousands of requests.
But by November 2012, they announce they’re shutting down the game:
To be clear: Tiny Speck is not closing, just Glitch. There will be more to say about that in the future, but: you will know it well. Well.
— Stewart Butterfield (@stewart)
Nov 15, 2012
This failure was different:
And it was a struggle, deciding between shutting down Glitch and persisting, trying to push through to bring it to life:
It’s not like they weren’t trying to make it work.
They exhausted all the ideas they had to try and fix the problems:
When Stewart shut down Glitch, they still had $5 million left of the money they raised, so they made a portfolio site that had everyone’s resume, offered career coaching, and made sure everyone got a new job.
But from another failed product came his biggest success, one that he’d start with a few team members still left at Tiny Speck.
Stewart shut down Glitch a few months back and laid off dozens of employees, some of which he convinced to move to a new city to join his company.
It’s a stressful time, to say the least.
But, prior to Glitch’s shutdown, the precursor of Slack is built:
But they had to name this new project.
Here was how they came up with Slack:
Yes. November 14th, 2012 (previous codename was "linefeed"):
— Stewart Butterfield (@stewart)
Sep 27, 2016
They paid $60k for the domain name which seems ridiculously cheap given how expensive some of them can be.
In August 2013, they announce Slack.
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