Workplace messaging app Slack has been valued at $5.1bn in its latest fundraising, which drew $250m from investors as the weight of cash in private markets continues to push up the valuations of the fastest-growing tech companies.
The latest investment, much of which came from SoftBank’s giant Vision Fund, has lifted Slack’s total fundraising to $841m, making it one of the best-financed business software start-ups.
SoftBank has been under pressure to find homes big enough for its $100bn fund. Stewart Butterfield, chief executive of Slack, said the fund had wanted to invest more and was likely to remain an investor well beyond an eventual initial public offering.
The investment has pushed Slack’s valuation to $5.1bn, including the cash raised, compared with $3.8bn at the time of its last funding in April last year.
Slack is growing at an annual rate of more than 100 per cent, Mr Butterfield said, and last week it reported it had hit $200m in annual recurring revenue, the most widely used measure for cloud-based software companies. That is double the revenue threshold at which tech companies have traditionally tapped the stock market.
“It’s a strange world. If it was 10 years ago we’d be public by now,” Mr Butterfield said.
Slack has added to its cash holdings even though it still has not tapped any of the money raised in its two previous rounds, which totalled $360m, he added.
Besides building its reserves in case the markets turn down, Slack took the latest investment in part with an eye to its business in Japan, already its third biggest market. SoftBank has “a lot of credibility” there as Slack prepares to launch a local language version of its service early next year, Mr Butterfield said.
Slack is destined for an IPO eventually, he said, though he predicted “with almost perfect certainty” that it would not happen until after 2018.
In one sign of the stock market’s hunger for more tech IPOs, venture capital investor Social Capital raised $600m last week for a so-called “blank check” company — vehicles that raise funds and then work out where to invest. The vehicle is designed to ease the path of start-ups to Wall Street. But some observers questioned whether it would make the transition any easier because companies would still face the same pressures once they are public.
A big reason for not going public is the risk that as a young company, Slack would not meet its business targets over the next year, said Mr Butterfield. That would “make it a rocky ride in the public market”.
The funding round comes as Slack races to stay ahead of Microsoft, which launched its “Slack killer” last year. Microsoft last week added an important feature to its service, called Teams, with a way for people other than employees to join in a company’s group chats.
Slack, which has had a similar feature for some time, went a step further last week with the first group chats designed to reach across company boundaries. This would tap inter-company “network effects” for the first time and will go down as one of the company’s biggest steps, according to Mr Butterfield.
“I think we probably have a year or, at the outside a year and a half, before it’s really competitive,” he said of Microsoft’s attack on Slack’s market. “It’s early in their evolution but I would never discount Microsoft’s ability to put resources behind it.”
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