Secrets of a Billion-Dollar Pivot

How Canadian tech entrepreneur Stewart Butterfield turned a failed passion project into a productivity-boosting workplace tool.

Written by PROFIT Staff

Photo: Trevor Brady

All Stewart Butterfield wanted was to create the perfect online video game, but his efforts—first with Game Neverending in 2002 and later Glitch in 2009—never attracted enough players to achieve commercial success. The byproducts of those failures have proved plenty lucrative for Butterfield, though. Case in point: The photo-sharing functionality built into Game Neverending turned into Flickr, which the Canadian entrepreneur sold to Yahoo in 2005 for upwards of US$20 million.

But it’s the communications system that Butterfield’s team built to help them work on Glitch that may prove to be his greatest accomplishment. It’s a web-based corporate collaboration tool called Slack, and if your business isn’t using it to chat amongst yourselves and share information, it should be. Users aren’t the only ones who love the product—a $120-million funding round in October valued the company at $1.12 billion.

MORE SLACK: Are You Using Today’s Hottest Productivity Tool? »

In the January issue of Canadian Business, contributor Alec Scott explored how Butterfield pivoted his failed passion projects into game-changing technology companies. Here are three smart things that helped Butterfield build a billion-dollar business that may just change the way we all work:

Take something boring, and make it better

Slack has experienced astounding user growth, with 340,000 daily active users according to one recent estimate and a week-over-week growth rate of at least five percent. And the company is doing something many tech startups find difficult—monetizing its customers. Some 95,000 users pay for the service, including major companies like Gawker Media, Dow Jones and Expedia. What’s driving this popularity? Here’s what Scott has to say:

“So far, we’ve built all by word of mouth,” Butterfield brags, citing media, tech and creative industries as the main spheres where it’s found takers. Slack is not alone in offering a range of intra-office communication software—competitors include Campfire, Yammer and HipChat—but the tech press has singled out Slack’s design sensibility and ease of use as early competitive advantages. Google’s vice-president of product management, Bradley Horowitz, comments: “It’s a staid, boring space, intra-office communication. But Stewart has somehow made it seem sexy.”

Give up graciously
Having left Yahoo a few years after Flickr was acquired, Butterfield set up a company called Tiny Speck to work on Glitch. The four founders lived in different cities, so Slack was a way for them to work together on the project. But before Slack could become Butterfield’s main focus, one major obstacle had to be removed. Scott explains:

Work began on Glitch in 2009; its failure to thrive had become clear to Butterfield by late 2012. He had to lay off most of the team. “That was so hard. Some of these people had moved cities with their families to do this. We tried to do it elegantly, finding other jobs for them. We even set up a site that promoted their talents.”

Beware geographical differences

Slack has offices in Vancouver and San Francisco, and Butterfield divides his time between them. While the B.C. capital is increasingly seen as a sort of Silicon Valley North, there are still cultural differences that come into play when managing employees on opposite ends of the western seaboard. Here’s what Butterfield told Scott about the two towns:

He laughs at the difference between the tech scenes in San Francisco and Vancouver. “In San Francisco, there’s a gold-rush mentality. It’s a bit mercenary, but there’s a lot of hustle. I get unsolicited emails from people, saying, €˜I’m going to be your first salesperson.’ But in Vancouver, they don’t give a shit about a lot of that: Is it going to be a rocket ship company? Whatever, as long as I get salary, benefits, health care. They don’t know a bunch of people who’ve made money on equity, and so they don’t negotiate as hard for it. We give it to them anyway, because we’re good employers.”

What have you learned from a successful or failed pivot? Let us know using the comments section below.

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