Having cycled from failed video game maker to the $2.8 billion valuation as king of corporate chat rooms, Slack Technologies now wants to get into the corporate venture capital game.
Slack is the ultimate Silicon Valley “failing forward” story. Having designed a video game called ‘Glitch’ that failed miserably in 2012, the company reinvented itself to become one of the most valuable private market “unicorns” with a value of $2.8 billion valuation and lots of positive free cash flow.
Having vacuumed up $323 million of venture capital pixie dust over the last twenty months, Slack has perfected the art of raising cash. But rather than following the traditional route of rapidly buying up a gaggle of competitors in hopes of acquiring ideas and engineering talent, Slack just announced that they will set up an $80 million corporate venture capital fund to help micro companies build apps to work with 2 million users on Slack’s messaging service.
Slack CEO Stewart Butterfield told TechCrunch that his company will put up about half of the $100,000 to $250,000 needed to fund smaller startups that are building applications to work with Slack’s messaging service.
The Slack platform went viral because it let businesses create chat rooms, share files, and send animated GIFs. Butterfield has bragged to the New York Times that it had been easy for the 3-year-old company to raise huge amount of VC top-drawer cash.
Corporate venture has only been about 11 percent of venture financing and was heavily dominated by behemoths like Google, Intel, Salesforce.com, and Qualcomm that often invest as a segue into acquisition.
The hottest place to be in the stock market from 2010 to 2014 was tech. But the number of tech initial public offerings (IPOs) plummeted this year. TechCrunch called 2015 the “worst year for tech IPOs since 2009.”
The U.S. IPO market remained strong with a total of 169 companies raising $29.9 billion from new public offerings, according to Renaissance Capital’s data base. But unlike the 55 new tech IPOs in 2014 that raised over $35 billion, there have only been 23 new tech issues, that raised a paltry $4.2 billion in 2015.
About half of the tech companies that were fortunate enough to successfully go public and raise money in 2015 are now tracking for negative returns on their stock price–including Etsy, which slumped by 41 percent.
Butterfield claims the purpose of Slack’s venture fund is to show that a series of viable start-up businesses can be built on Slack’s platform to perform common corporate tasks. Slack believes that these new apps will be an important complement to the 150 services Slack says they already integrate into their chat rooms
Partnering with their own VC investors, such as Accel Partners, Andreessen Horowitz, Index Ventures, and Kleiner Perkins Caufield & Byers, the Slack fund has made three investments: 1) Awesome, which makes a tool that organizes Slack activity; 2) Small Wins, a productivity software maker; and 3) Howdy, which develops a toolkit for building chat bots.