Slack’s CEO Is Back in The Passenger Seat After Salesforce Deal

(Bloomberg) -- With a sale to Salesforce, Slack’s co-founder and Chief Executive Officer Stewart Butterfield is back in a familiar position: running the startup he created while inside a corporate behemoth.

In 2005, Butterfield sold his photo-sharing site Flickr to Yahoo! Inc., but resigned a few years later, after chafing at the web company’s corporate culture and bureaucracy. He created another hit product — workplace chat software — and after a decade of building, took Slack Technologies Inc. public last year. But instead of continuing on his own path, he and Salesforce.com Inc. CEO Marc Benioff shook hands. “This is the most strategic combination in the history of software,” Butterfield wrote in the news release about the acquisition. “I can’t wait to get going.”

This time, there’s plenty for 47-year-old Butterfield and his executives to feel triumphant about. The $27.7 billion deal announced Tuesday is Salesforce’s biggest acquisition, almost twice its splurge on Tableau Software Inc. last year. Butterfield’s net worth jumped by $400 million even before the deal happened, as Slack’s stock price shot up after news reports of the plan.

Still, for those who remember how Butterfield felt about his last time working under someone else, the decision might seem surprising. The Flickr sale was 15 years ago, but his displeasure at Yahoo is a small part of Silicon Valley lore. He wrote a sly and playful resignation memo, which captured his philosophical tendencies. In the letter, he cast himself as a simple tin smither toiling away at an industrial conglomerate, but saw that things had shifted to a point where he felt “adrift” and wanted to step aside.

Those who knew him also caught glimpses of his unhappiness at Yahoo. He felt it was “a difficult place and a difficult corporate environment,” said Jason Shellen, who worked as Slack’s head of platform product in 2016 and knew Butterfield previously. Years ago, Shellen, who previously worked at Google, tried to have the search giant buy Flickr instead of Yahoo. One time, Shellen said, Butterfield called him while driving to Yahoo’s campus in Sunnyvale, California, and said he wished he were in Mountain View at Google instead.

Either way, Shellen said, “I don’t think he’s cut out to be at anyone else’s place for super long.” The only exception, he thought, was if the new company really matched Butterfield’s ethos, and he saw Benioff, who’s known for his insistence on heartfelt corporate values, as potentially compatible. 

For years, Slack seemed like Butterfield’s chance to run his own show. In some ways, it felt like fate. He and his team had created Flickr almost inadvertently. They’d wanted to build a video game, and when that didn’t pan out, the game’s photo-storing technology ended up being both useful and popular. Then it happened all over again: Butterfield and his team built an online game called Glitch, but it didn't take off. What did? Slack, the tool the team built to message each other and collaborate online.

Slack’s workplace chat software was an instant hit before it even launched to the public. It changed how co-workers talked with each other. In countless offices, it wiped out internal emails and replaced them with topic-specific channels. It didn’t have mere users, it had superfans who convinced their employers to pay for the software. In 2014, Butterfield told Wired that his ambition was “to be the next Microsoft.”

Then Microsoft Corp. took notice. In 2016, the software giant announced it was developing Teams, its own version of workplace chat. Slack bought a full-page ad in the New York Times to send Microsoft a letter reminding people the San Francisco-based startup was first. “Dear Microsoft,” it read. “Wow. Big news! … We’re genuinely excited to have some competition.”

Inside Slack, this was a moment when things got serious, Shellen said. Microsoft couldn’t be ignored. “They really just copied Slack, and they were using every trick in the book to boost their user numbers,” Shellen said. Microsoft made Teams free for its enormous constituency of Office365 customers. “It becomes harder to convince people that they should pay for a better version of the same thing they already have,” Shellen said. 

When the pandemic came and bulldozed through 2020, Slack suddenly became vital to companies frantically trying to adjust to a fully remote workplace. It hit record user numbers, and its sales grew 39% in the quarter that ended in October, but investors were underwhelmed. Its stock price didn’t soar to the same quarantine-driven heights as Zoom Video Communications Inc.’s, as video became the de facto way for people to hold meetings, celebrate birthdays and catch up with friends. In a Bloomberg Businessweek interview in April, Butterfield spoke candidly about running a public company under intense pressure during Covid. “I find everything more challenging right now, like making time to cook and eat and shower,” he said. “I feel much more exhausted at the end of the day.”

Then, at some point, Butterfield started to have conversations with Bret Taylor, Salesforce’s chief operating officer, someone who also built a corporate product, Quip, and sold it to Salesforce. Butterfield and Taylor began pondering a way the companies could join forces, Benioff said Tuesday in a conference call with analysts. They then pitched the Salesforce boss on the idea, and he was amazed, calling it “a wow.”

Butterfield wasn’t pushed by his board or shareholders to pursue the sale, which was his decision, a person close to the executive said. Taylor, a veteran of Alphabet Inc.’s Google and Facebook Inc., was a key reason why Butterfield found the deal appealing, the person said. People familiar with Butterfield’s thinking said another reason he would be interested in the transaction would be to gain thousands more salespeople to distribute Slack’s software.

Butterfield has sold $135 million worth of shares since the direct listing — daily at first, and then every few weeks more recently, according to data compiled by Bloomberg. His net worth, including proceeds from share sales, stands at about $1.8 billion.

Observers are divided on what the sale signifies for Slack’s hunger to take over the enterprise world. One person familiar with Butterfield’s thinking said that the takeover represents a concession to Slack’s fierce competition with Microsoft.

Others disagreed. Butterfield “is much more competitive than people would give him credit for,” said Andrew Braccia, an investor with Accel and a Slack board member. “A lot of people look at Stewart and they imagine him being this thoughtful, smart, compassionate, empathetic leader. Any decision that Stewart is making, at any point in his life, he's taking from the perspective of being competitive and wanting to win. He wants to put Slack in absolutely the best possible position.”

Butterfield plans to stay at Salesforce and run Slack as its own division, the companies said this week. Given Butterfield’s past accidental hits, it’s tempting for people to imagine him rolling the dice again. But that’s not likely.

“When are you going to start your third online gaming company?” one user tweeted at him last month. Butterfield’s reply made it clear: “Never! I’m done now :)”

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