In all of 2018, 233 companies went public, according to research company IPOScoop.com. They raised a collective $54 billion. This year was meant to eclipse that, with unicorns—startups valued north of a billion dollars—expected to steal the show.
Of all these initial public offerings (IPOs), ride-hailing app Uber was supposed to be the definitive IPO listing of our time. With valuation targets ranging from $120 billion to $200 billion, Uber’s market capitalisation numbers were touted to be as large as its influence in pioneering the “gig economy” model.
Instead, Uber’s IPO turned out to be one of the worst-performing IPOs of all time. Uber had priced its stock to reflect a market capitalisation of $82 billion when it listed, a far cry from the original $200 billion target. But even this lower level was deemed high by the public markets and the stock has sharply declined since then to an implied valuation of $65 billion or thereabouts.
Now, the world needs a new IPO hero. And it may get that in the unlikely form of enterprise messaging startup Slack. Through the ages, there have been several seminal IPOs that have shaped and influenced every aspect of technology and society at large—the likes of Microsoft, Apple, Google and Facebook. Stacked against these names, Slack may seem like an extreme outlier—it is likely to be valued in the $12-15 billion range. And this becomes stranger still when one considers its unconventional origins.
Slack was originally conceived in 2010 as a video game company called TinySpeck. Its creator was Stewart Butterfield, the erstwhile co-founder of popular photo-sharing site Flickr. But TinySpeck’s flagship video game, Glitch, an MMO (Massively multiplayer online) game modelled after the likes of Farmville and Zynga, flopped. Rather than shutting down the company, Butterfield and his team decided to take a communication platform they had built for internal use and packaged it as a product that other customers could use.
In 2013, Slack launched.
Powered by a smart mix of a clever pricing model and a quirky user interface that customers loved, Slack became the fastest growing business application of all time, growing from zero to ten million daily active users and hundreds of millions of dollars in revenue in less than five years.
But as the company now stands at the doorstep of a public listing, its upcoming IPO represents something far more than just a single startup’s journey from founding to exit. Slack’s success, or failure, could reshape the fundamentals of VC economics and startup playbooks. In India, which has seen the mushrooming of SaaS startups looking to recreate Slack’s success in recent years, this is a moment that will be keenly watched.
The IPO imperative
In startup lore, an IPO represents the ultimate ambition of every company.