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>>> More than 88,000 Paid Customers, including more than 65 companies in the Fortune 100; and >>> We had 575 Paid Customers >$100,000 of ARR as of January 31,
by fasteo 7y ago
>>> More than 88,000 Paid Customers, including more than 65 companies in the Fortune 100; and
>>> We had 575 Paid Customers >$100,000 of ARR as of January 31, 2019, which accounted for approximately 40% of our revenue in fiscal year 2019.
If my math is right, 40% of their revenue is concentrated in <1% of their paid customers. Is this normal in the corporate SaaS market ? I can only think of this as a huge risk.
I also saw that this is a direct listing and not an IPO. Again, I can only see this as a risk, basically because no underwriter will push the stock to investors. Is this so ?
- tpetry 7y agoThink about thousands very small customers you simply take the money from and have no effort but they are not the target of your sales team. The numbers sound good to me.
- vishnugupta 7y ago> 40% of their revenue is concentrated in <1% of their paid customers. Is this normal in the corporate SaaS market ? Speaking from my experience of 6 months at a SaaS company this is about the norm. Besides the usual 80/20 rule it gets more skewed at the top. And so even the product development was optimised to keep the top 1% happy. A ton of custom built features with hundreds of feature flags..
- doomjunky 7y agoThe 80/20 rule is basically the power law which is one of my favorite laws. https://en.wikipedia.org/wiki/Power_law https://en.wikipedia.org/wiki/Power_law
- notSupplied 7y agoIt is also one of the most abused rules, often used to justify extremely sloppy "big picture thinking".
- yosito 7y agoYeah, but 80% of the time, the sloppy thinking is right.
- jgalt212 7y agoI would say this is only normal/healthy if you have a freemium business model--otherwise the revenues to me seem way to skewed (i.e. very/very far away from 80/20).
- sureaboutthis 7y agoI predict that, one year from now, few people will be talking about Slack and, two years from now, Slack will be teetering on insolvency.
- ebiester 7y agoThose 50 largest customers are unlikely to move away within the next two years, and neither are most businesses. I can see someone worry about growth, but they're not going away in 2 years.
- sureaboutthis 7y agoTwo years ago, those 50 customers weren't using Slack at all. It will be just as easy for them to leave.
- 0xEFF 7y agoWhy would they?
- ninkendo 7y agoA free alternative?
- jasongill 7y agoYou guys really think that enterprise-tier Fortune 500's are going to switch from Slack to a free alternative? Why would they? The money they spend on Slack isn't even a rounding error in their budgets, there's no way that they would want to cut that out and instead have their internal staff try to support some free service instead
- bytematic 7y agoDiscord has essentially the same app but better voice/call support and other various features. But they seem focused on the gamer market.
- squaresmile 7y ago> Again, I can only see this as a risk, basically because no underwriter will push the stock to investors. They don't need the cash but want to make it easier for stockholders to sell. Now also seems to be the time for tech IPO.
- notjustanymike 7y agoMost of the places I worked had 2 or 3 whales. 55 whales is actually pretty good.
- djsumdog 7y agoI've noticed this too. I worked for companies that had one big customer; possibly branching out with two or three others. But if that one big customer ever went away, the company would probably collapse. They really should have just been bought and made a subsidiarity: https://penguindreams.org/blog/tech-culture-shock-from-america-to-the-south-pacific-and-seattle-to-chicago#chicago-illinois https://penguindreams.org/blog/tech-culture-shock-from-ameri...
- yfiapo 7y agoI've worked for a company with a whale client like that (maybe not total shutdown bad but pretty close). The argument for why they never bothered to just acquire the startup was their fear of ruining the agility of the startup. That seemed like a reasonable concern as they were a massive, heavily regulated company.
- moneil971 7y agoSometimes that is the strategy: create something cool and hope to get purchased. Having worked at a company that was likely one of Slack’s “whales”, it is a bonus to have feature requests weighted more heavily, but if a tool doesn’t keep everyone else using it happy - you run the risk of some other tool becoming the shiny new thing.
- osrec 7y agoInteresting... I guess you could see a lot of SaaS companies as outsourced software development teams for the whales.
- adwww 7y agoThat is exactly how my current employer feels half the time.
- bkrishnan 7y agoCan someone please explain how a valuation of $16B is arrived at? I mean, from the math above, they have approximately 250K ARR?
- tomnipotent 7y ago> I also saw that this is a direct listing and not an IPO. A direct listing is an IPO. Underwriter's are not a requirement, as Spotify profitably demonstrated.
- fasteo 7y agoThanks for clarifying. My understanding was that an IPO creates new shares, while a direct listing just sells the existing ones. In the same sense, I thought that underwriters were responsible for pushing the stock through the distributions channels (funds, investors, etc) so that they make sure that an IPO is successful in its opening.
- tomnipotent 7y agoAfter some more searching on "direct listing vs. IPO", there definitely seems to be a lot of "DPO is not an IPO" so I'm going to enjoy having my foot in my mouth.
- pdovy 7y agoRegarding the direct listing, I wouldn't view that as a negative - sounds like they had no need to raise additional capital, but wanted to provide liquidity to their investors and employees. They've raised a _lot_ privately, and some of those rounds IIRC were described as just "opportunistic" by the founder - i.e., raise money while it's cheap. Also given that they have a VC arm it sounds like they have more capital than they can actually deploy in their core business.