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"Our revenue was $105.2 million, $220.5 million, and $400.6 million in fiscal years 2017, 2018, and 2019, respectively, representing annual growth of 110% and 8

• maxxxxx 8y ago
  It’s still mind boggling that all these unicorns haven’t found a way to make money even after being in business for years and having a mature product. It’s a strange world.
  • paulddraper 8y ago
    It's still mind boggling that all these unicorns haven't stopped growing after being in business for years and having a mature product. It's a strange world.
    • nicolashahn 8y ago
      It's a testament to how much spare money is just floating around in the upper VC class.
    • est31 8y ago
      Don't forget that products like Slack, Uber, Airbnb, etc. all could have basically everyone as their customer. These companies influence the daily lives of millions of people, with comparatively few employees, thanks to the scaling skills of technology. That's why they are valued so high and are still growing. Sure, they might be overvalued and one day the bubble can burst, but neither is it just a ponzi scheme, there is definitely a business behind it.
      • maxxxxx 8y ago
        They also don’t have very high barriers to entry for competitors. Replacing SAP is really hard after it has been established in a company. On the other hand replacing Slack is really easy. Same for Uber. Customers and drivers can jump ship anytime.
        • mooreds 8y ago
          It depends on how you use slack. (I agree that Uber is pretty easy.) If slack becomes an email replacement (instead of an ephemeral IM client), and a repository for historical knowledge, then it becomes very difficult to replace. In the workplaces where I have used slack, it definitely starts to take on that role (links to discussions are placed in tickets and documents, for example).
          • deleted 8y ago
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          • maxxxxx 8y ago
            From what I have seen Slack may have a strong a foothold in some teams but overall it’s not hard to use something else when new teams are formed. I’m my company everybody is slowly moving to Teams. This can be done gradually. Definitely much easier to replace than SAP.
        • pmohun 8y ago
          I'm not sure replacing Slack is as easy as you may think. If you have used their product, then you understand the amount of integrations and dependencies that become built into a team's workflow. When your entire history of communications, way of tracking tickets, and document repository is stored in a desktop application, replacing Slack may not be as simple as switching to another messaging program. Could you "replace Outlook" -- it's just an email client after all.
          • maxxxxx 8y ago
            “Could you "replace Outlook" -- it's just an email client after all.” Absolutely. There is always pain in transitions but some are easier than others.
  • cupofjoakim 8y ago
    Well, these guys do have a good way to make money. Enterprise contracts are worth their weight in gold. As you could see from the quote, their revenue has increased more than their losses - which mean that they are on their way to become profitable. Arguably they could be now, if they didn't invest in growth as much.
    • derwiki 8y ago
      > Arguably they could be now, if they didn't invest in growth as much. Bingo bango https://qz.com/1196256/it-took-amazon-amzn-14-years-to-make-as-much-net-profit-as-it-did-in-the-fourth-quarter-of-2017/ https://qz.com/1196256/it-took-amazon-amzn-14-years-to-make-... > Keep in mind that Amazon consistently lost money for its first several years as a public company. It first reported a quarterly profit in the fourth quarter of 2001 [...]
      • mises 8y ago
        Amazon massive economies of scale due to operating a highly efficient worldwide supply chain. I don't see Slack's average variable cost per unit going down in that same way. Amazon also made a lot of money on things like AWS by reinvesting, which is why they weren't profitable. They were burning that money by reinvesting it, not for operating expenses.
    • Radim 8y ago
      > their revenue has increased more than their losses But "net loss" already takes revenue into account! "Loss" is not the same thing as "expenses". The revenue increased substantially, but so did expenses, resulting in a slight decrease in loss over the past 3 years. At the current rate, the company would reach break-even profitability around the year 2070.
      • canes123456 8y ago
        That is not how SAAS economics works. You spend a lot money upfront and revenue is earned over years. They can stop investing in sales/marketing tomorrow and be profitable.
  • tonyedgecombe 8y ago
    I think it's more mind boggling that people will continue to invest in them on the basis of a vague promise of profitability in the distant future. Turning a profit is much harder than buying market share.
    • ed312 8y ago
      Conversely it takes so much money and time to create a profitable company vs history.
    • mises 8y ago
      The market is hot, and people would stuff money in a hole in the ground right now if you promised a possible 5x return. That will change soon enough. I think these unicorns may know this and may have decided their time to raise money publicly is now, before a market crash. Not saying the market is about to crash, but it's certainly volatile.
      • lotsofpulp 8y ago
        Software having basically zero marginal cost is a game changer. There's a reason why the big tech companies are the belle of the ball right now, they all print money, and they're still growing. Some things are worth the risk for that kind of payout.
        • idlewords 8y ago
          Software had zero marginal cost before everyone started hosting it on cloud services.
        • mises 8y ago
          > basically zero marginal cost If only. Their COGS may be low, but marketing expenses and R&D are 2/3 of slack's expenses. Also, cloud gets very pricey at scale.
  • freewilly1040 8y ago
    Expansion costs money. They’ve doubled revenue three years in a row while keeping losses steady. Solid international growth means they aren’t running out of addressable market any time soon. The implication is that they could invest less in growth and get to profitability, but then they’d be leaving addressable market on the table.
  • cbhl 8y ago
    Their operating expenses are likely dominated by the three types of people: software engineers (listed as R&D), sales/marketing, and administrators. Profitability will probably come post-IPO in some form of a hiring freeze (or quotas), and cuts in perks/food per capita. If 80%ile studio rents in San Francisco were closer to $800/month than $3400/month then maybe salaries could be 70% of what they are, and Slack would be almost break-even. It's worth noting that profitability isn't the only useful way to run a publicly-traded business. Telecoms are typically swimming in debt, but they're (mostly) fine because they have cash flow (monthly payments; making it impossible to quit).
    • wongarsu 8y ago
      > Telecoms are typically swimming in debt In general many profitable businesses swim in debt. If you finance each project to 1/3 with your own capital and 2/3 dept you can do three times as many projects, and for established companies with lots of assets (production facilities etc) banks will happily lend that money. On the other hand there are companies like Nintendo and Apple with huge cash reserves and nowhere to spend them.
  • charlesju 8y ago
    Let me let you in on a little secret. Slack makes TONS of money. Take that as a truth and then think about why they're still reporting they're losing money..
    • gpickett00 8y ago
      What is this hidden truth you're alluding to?
    • refurb 8y ago
      Are you inferring that the financials in the S-1 are being misrepresented? If so, that's quite the accusation!
    • charlesju 8y ago
      No. Let me put it this way. Strategically from a bunch of directions. Even if they were making 10x the money. They would still be reporting the same steady losses.
  • fulldecent2 8y ago
    They haven't found a way to be profitable because they are not seeking a way to be profitable.
• will_brown 8y ago
  Is there any other industry where a company can go public having lost $500,000,000 over the last 3 years? I get it their “market share” is increasing every year and the loses are staying the same...and even that is not the full picture of a path to profit. But if the company could turn a profit, then why not do it privately, show that and then go public? My guess like Uber and Lyft...they can’t turn a profit, and for any hope to turn profit they need this continual growth at a loss, and at some point the investors dump the bag on the public getting a return in a bubble they created and let the public fund the losses. I think to balance the playing field with VC and private investment, companies shouldn’t be able to IPO with loses.
  • wbl 8y ago
    The SEC fundamentally believes it's ok to lose money investing. It's up to you to assess the investments and decide where to put your money.
    • will_brown 8y ago
      That’s not the point/issue though. The markets are regulated to protect consumers/investors...private companies can’t just have unregistered public offerings to non accredited investors...so it’s not just “up to you to assess the investments” there are rules and nothing is stopping additional rules to not permit registration of a public offering when the company is operating at a $150,000,000.00 annual loss or more to the point any loss. Obviously not a popular idea here where everyone is trying to get in early and dump the bag on someone else, but that’s kinda the point of protections, some people won’t like them.
      • blantonl 8y ago
        It's not a popular idea here because: Capital is extremely cheap Markets are at record highs FOMO in tech right now is extremely strong I can't wait to see the sentiment in two years.
        • icedchai 8y ago
• IanCal 8y ago
  I either wildly underestimate the cost or the scale of building slack, am I reading that right that they've spent well in excess of a billion dollars in the last few years?
  • ttul 8y ago
    You aren’t wrong. But keep in mind that these are all recurring revenue deals. The $400M is highly likely to recur next year or even increase - even if they don’t close a single additional customer. SaaS companies talk about “lifetime value” which is a fancy name for the net present value of future cash flow from each customer. What if today’s $400M will recur for ten years? That warrants a value of $4B just on today’s customers. But if the growth can be sustained for a few more years, maybe by 2022 they’ll hit $1.5B/yr... that’s the gamble investors seem ready to take.
    • IanCal 8y ago
      I can see them making money, I'm more shocked at the cost of running or building it up. I try to assume that if I think something is odd but it's not my field, I'm wrong and don't understand it properly. It's just at a scale I find hard to understand. A billion dollars is a lot. I'd love to know what it is they're pumping the money into that they make per user, because I can't see what massive upcoming things there are to build. What are they ploughing hundreds of millions into? Again, with all of this, I assume it's me that doesn't understand.
      • ttul 8y ago
        When you start selling into very large enterprise, there are enormous behind-the-scenes requirements that are very expensive to develop. Compliance features, for instance.
• not_a_moth 8y ago
  I see the counterargument, but we are still pushing companies onto the public that are losing copious amounts of money. Part of me wonders if we aren't witnessing the irrational exuberance before the (cyclical) fall.
  • ttul 8y ago
    This is not irrational exuberance. Slack makes a very sticky enterprise product with tremendous network effects. It’s hard to get rid of because it integrates with all sorts of other things within the enterprise. The value of chat is unlikely to diminish anytime soon. Losing money today to acquire customers who will stick around for years is a great idea. In fact, to move for profits today at the expense of growth would be foolish.
    • not_a_moth 8y ago
      Really? I know an org of > 2,000 people who recently switched away from Slack to the open-sourced Mattermost. I don't think Slack is untouchable. Overall point is considering other companies too with massive losses being pushed on the public feels like a trend, and maybe ominously represents a certain phase in a cycle.
      • it33 8y ago
        Mattermost CEO here, Thanks for the mention. Increasingly we see mention of "Slack or Mattermost" as part of DevOps stacks. In my mind, the space is growing quickly and there's room for multiple winners. I'm excited about having more and more functionality people love available in an open source alternative.
• deevolution 8y ago
  What could they possibly be spending so much money on?
• m0zg 8y ago
  How the heck does one spend $539.5M per year running something like Slack, that's what I'd like to know. It just doesn't seem that complicated of a service.
  • DanielRibeiro 8y ago
    That's a great question. They expanded it a bit on their "SUMMARY CONSOLIDATED FINANCIAL DATA AND OTHER DATA" section. Their operating expenses are divided in 3: Research and development, Sales and marketing and General and administrative. They also describe a bit the evolution of these under the Risk Section, beneath "We have a history of net losses, we anticipate increasing operating expenses in the future, and we may not be able to achieve and, if achieved, maintain profitability."
• ttul 8y ago
  Holy Jesus these are amazing SaaS growth metrics. Rule of 40 be damned.