This post is by Jason Lemkin from SaaStr
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With Slack’s IPO data and financials finally public, what is left to know about the app we all use and been reading about for years? What’s interesting to know about Slack … that we didn’t already know? ? Slack is obviously a rocketship going from $0 to $600m+ ARR (!) in 5 years (OMG), growing 80%+ Year-over-Year, and more than 1 billion messages sent a week (!). As part of our new 5 Interesting Learnings series, here are a few:
- Freemium continues to scale for Slack, and not slow down. Many folks think that Freemium has a natural ceiling, and perhaps sometimes it does. But not yet for Slack. Slack has 88,000 Paid Customers now … but also 500,000 organizations on their Free plan.
- But also — Slack has gone Enterprise. Way Enterprise. It took a little while. You can see our fun video Stewart Butterfield from SaaStr Annual 2015 where he said they’d never have a direct sales force. That has changed. Today, Slack has 575+ customers paying more than $100k a year, which important now accounts for 40%+ of its revenue.
- The big deals also take time, even for Slack. You can’t eliminate sales cycles, even for the top brands with freemium apps. “The sales cycle for Enterprise Grid typically extends for multiple months, [which] may also cause us to experience a delay between increasing operating expenses and the generation of corresponding revenue, if any”. Sales is still sales, and with bigger deals, there are human-led processes to go through. Even for Slack.
- Revenue Retention / Net Negative Churn of 143%. A continued them of our 5 Interesting Learnings Series. All the great SaaS companies IPO’ing now have strong revenue retention, whether SMB or enterprise focused.
- Not burning that much cash. Yes, Slack has not been as efficient as Zoom. But at $600m+ in ARR it’s only burning $97m a year. Again, having a viral app helps a lot here.