Slack S-1 - bardworx
https://www.sec.gov/Archives/edgar/data/1764925/000162828019004786/slacks-1.htm
======
neom
"Our revenue was $105.2 million, $220.5 million, and $400.6 million in fiscal
years 2017, 2018, and 2019, respectively, representing annual growth of 110%
and 82%, respectively.

Our growth is global with international revenue representing 34%, 34%, and 36%
of total revenue in fiscal years 2017, 2018, and 2019, respectively.

We continue to invest in growing our business to capitalize on our market
opportunity. As a result, we incurred net losses of $146.9 million, $140.1
million, and $138.9 million in fiscal years 2017, 2018, and 2019,
respectively.

Our net losses have been decreasing as a percentage of revenue over time as
revenue growth has outpaced the growth in operating expenses."

Nice work!

~~~
will_brown
Is there any other industry where a company can go public having lost
$500,000,000 over the last 3 years?

I get it their “market share” is increasing every year and the loses are
staying the same...and even that is not the full picture of a path to profit.

But if the company could turn a profit, then why not do it privately, show
that and then go public? My guess like Uber and Lyft...they can’t turn a
profit, and for any hope to turn profit they need this continual growth at a
loss, and at some point the investors dump the bag on the public getting a
return in a bubble they created and let the public fund the losses.

I think to balance the playing field with VC and private investment, companies
shouldn’t be able to IPO with loses.

~~~
toasterlovin
Slack has a huge opportunity in front of them (become the messaging platform
for every business that exists). They’re investing a lot of money to acquire
all of that business (salespeople, travel, etc.). That is literally one of the
main purposes of capital and access to capital is why you would take a company
public.

And, specifically re: Slack. Unlike, say, Uber or Lyft, Slack has customers
who have demonstrated that they are willing to pay what the service actually
costs. The ride-sharing companies have not. The entire investment thesis for
them is that they will somehow be able to increase prices at some point in the
future, but they don’t actually have any indication that this is true. And I
agree that they are most likely a bad investment. Slack, on the other hand,
has a huge and rapidly growing book of extremely sticky business. To turn on
profitability, they turn off their expenditure on sales people. They’re very
different models.

~~~
lispm
> Slack has a huge opportunity in front of them (become the messaging platform
> for every business that exists).

How about: being bought by Microsoft.

~~~
dylanmclark
I don't think Microsoft would buy Slack given the money they've dumped into
developing and promoting Teams. Seems they're too far gone at this point.

Disclosure: Work at MSFT, not on Teams.

~~~
dredmorbius
WhatsApp.

Microsoft would buy to prevent someone else from doing so.

Though its hold has weakened greatly, the Outlook, Exchange, and AD behemoth
still own enterprise communications.

~~~
irishcoffee
I was under the impression Facebook owned WhatsApp...?

~~~
dredmorbius
Why they own it, and what they paid to do so, is the point.

------
robhunter
I think historical accounting practices and standards are not great at
evaluating SaaS businesses.

We came up with the concept of depreciation/amortization as a way to better
match up expenses with revenues in a given time frame.

I think we need a similar mechanism for allocating sales & marketing costs.

My company spends about $1,000/year on Slack. We likely will in perpetuity, as
long as we/Slack exists.

Slack spent marketing/CAC dollars on us all the way back in 2014 to acquire
our LTV stream of cash flows.

If you "depreciated" Slack's sales and marketing costs ($104M, $140M, $223M)
over the LTV of the average customer, they would show massive profitability
already, and even greater profitability in the future.

We do this already with depreciation - why not with sales and marketing for
recurring revenue software companies?

~~~
floatrock
> If you "depreciated" Slack's sales and marketing costs over the LTV of the
> average customer...

This is starting to sound very similar to mark-to-market accounting, and the
one word associated with "mark-to-market" is "Enron".

From [http://www.creditpulse.com/accountingfinance/lessons-
enron/e...](http://www.creditpulse.com/accountingfinance/lessons-enron/enron-
lesson-no-1-mark-market-fair-value-accounting)

> Basically, mark-to-market is a type of accounting that enables a company to
> book the value of an asset or a liability, not based on the cost of that
> asset, but based on current market valuations or perceived changes in market
> valuations.

What got Enron started down the path to ruin is the SEC granted them a waiver
where they could start pricing their projects by their perceived value.
Problem was, the perceived value was anything that Enron said it was. So that
let Enron inflate their holdings, which gave them access to more capital,
which let them keep on inflating their holdings until the whole thing came
crashing down.

Of course, the asset values weren't _just_ what Enron said they were. They had
auditors backing up their claims. One of the Big 5 financial auditors. And as
a result, Arthur Anderson also went down in flames along with Enron.

So, in your case, who decides what the LTV of customer cash flows is? The
Enron lesson is let speculators use their hunches to guess the future, but
keep that speculation out of the official accounting documents.

~~~
robhunter
Well, just like there are objective levels of depreciation for certain classes
of assets (property vs. equipment), perhaps there could be similar levels of
depreciation allowable for sales & marketing costs based on historic customer
churn?

~~~
fjp
The property and equipment depreciation rates are codified in US tax law.

------
douglasfshearer
Slack has a 5-year, $50M/year minimum commitment with AWS.

From the document:

> In April 2018, the Company executed an amendment to its existing agreement
> with Amazon Web Services (“AWS”). The amended agreement was effective as of
> May 1, 2018 and continues through July 31, 2023. The Company has minimum
> annual commitments of $50.0 million each year of the agreement term for a
> total minimum commitment of $250.0 million. As of January 31, 2019, the
> Company had a remaining minimum payment obligation of $212.5 million to AWS
> through July 31, 2023.

~~~
moreira
Perhaps I'm just not aware how things work in companies of Slack's size,
but... what do you think $4M/mo is spent on, for what essentially amounts to a
chat app?

I realise there a lot of extras in Slack (attachments cost S3 storage, video
calls take bandwidth, webhooks take some processing), but as of January 2019,
they had 10M daily active users. $50M/365 gives us $137K per day. $137K per
day just to serve 10M active users? That's nearly $14 per day (over $400 per
month!), for just 1000 users using a simple chat app.

This is not including any staff, development, nothing. Literally just hosting
costs, which should already be deeply discounted given the amounts and
agreements involved. That seems... excessive?

Edit: It's worth noting that $50M is the -minimum- commitment they have to
AWS. One can assume the actual bill is higher.

~~~
raldi
You say "chat app" like that means it's easy.

How is running a chat app any easier than, say, running Facebook?

~~~
puranjay
My pet peeve with HN. People here boil everything down to a trivial
engineering problem. That Slack is "just a chat app" is grossly underselling
all the other parts of the business - sales, marketing, design, product - that
makes it tick.

~~~
raldi
The app itself is non-trivial, too. The scale is astounding.

------
jscheel
• We have a limited operating history, which makes it difficult to forecast
our revenue and evaluate our business and future prospects.

• We have a history of net losses, we anticipate increasing operating expenses
in the future, and we may not be able to achieve and, if achieved, maintain
profitability.

• We have experienced rapid growth in recent periods and our recent growth
rates may not be indicative of our future growth.

\---

Feel like this is essentially copypasta for tech IPOs now. Still, congrats to
them, their revenue growth is pretty dang impressive.

~~~
chimeracoder
> Feel like this is essentially copypasta for tech IPOs now.

It literally is; the SEC requires companies to state that unless they have an
established track record of profitability (which most tech IPOs do not).

------
amrrs
Lyft, Uber, Zoom, Beyond Meat and now, Slack

Is there any benefit of Public at this point of time? or Just a trend to grab
as much as Wallet share from the average investor?

~~~
fratlas
I've been seeing a lot of calls about this incoming downturn (especially HN),
does anyone have any articles/analysis they can point me to? Would love to
read up on the state of it.

~~~
raldi
Sure, here's a 2009 HN thread all about the impending market crash:

[https://news.ycombinator.com/item?id=712198](https://news.ycombinator.com/item?id=712198)

And one from 2011:

[https://news.ycombinator.com/item?id=2868728](https://news.ycombinator.com/item?id=2868728)

And here's one from 2012:

[https://news.ycombinator.com/item?id=3947923](https://news.ycombinator.com/item?id=3947923)

Here's one from 2014:

[https://news.ycombinator.com/item?id=8338411](https://news.ycombinator.com/item?id=8338411)

And here's one from 2016:

[https://news.ycombinator.com/item?id=12218583](https://news.ycombinator.com/item?id=12218583)

~~~
Andrex
The boy who cried wolf did end up being right about the wolf, just not the
timing. :(

------
cozzyd
Memory usage seems to mirror their revenue as well!

I like slack, we use it on all the experiments I work on, but I'm seriously
considering upgrading my workstation for the privilege of not restarting my
slack tabs every day or so...

~~~
your-nanny
you might consider Mattermost instead, if in research setting. It has better
support, imo, for researcher use cases, and you can host yourself.

~~~
cozzyd
and herein lies Slack's moat... it's just too much of a hassle to switch!

------
jasongill
Congratulations to the Slack team; a great product that has generally become
better over time. Let's hope that going public doesn't change them too much
(although things like the new logo debacle don't inspire confidence at times)

~~~
arkitaip
I think we're already seeing a backlash against the always multitasking, loss
of focus culture that Slack has become the poster child for in the SASS space.
Just like Facebook or Twitter, Slack is engineered for constant dopamine-
fueled engagement, which quickly turns it into a bad and ultimately
unproductive habit for companies that use it. I am already seeing competitors
like Level use Slack as a warning example and I think this is just the start
of Slack's problems.

~~~
snypox
Weird opinion. I only know 1 colleague of mine who gets distracted by chat.
For me, and for most people an efficient team collaboration tool (Slack) is a
game changer though.

~~~
arkitaip
Maybe you haven't been following the news but this is a real concerns and
there have been several tech companies that have even moves away from Slack.

------
LandR
I'm staggered that there are 575 companies paying slack $100k / year.

I don't even have anything against slack but what is possibly worth $100k a
year from a comms software?

~~~
LeonM
If you run a company with 1000 employees, that just $100 per seat, that's not
that bad. Telephony is usually quite a lot more expensive than that.

~~~
mritchie712
And you can make phone calls in Slack. The call quality and experience is
pretty solid too.

~~~
jzymbaluk
Better than Skype for Business in my experience. It can even do video calls
and screen sharing with the pro version

------
sinatra
Great product! Still don’t know why they don’t give the user the option of
disabling threaded conversations for self or for entire organization. People
have been asking for it for years. Ref:
[https://twitter.com/slackhq/status/822064778269102080?lang=e...](https://twitter.com/slackhq/status/822064778269102080?lang=en)

At least allow me as an individual user to see all messages sequentially
without any threads. I am willing to do mental context switches. I prefer
doing that to losing messages in old threads.

~~~
jfoster
I think threaded conversations become more important as an organisation's
channels become increasingly noisy. Threaded conversations can partly
alleviate that.

They probably want to prevent organisations from disabling a feature that may
assist with their scaling on slack.

~~~
sinatra
The problem is that threads lead to missed messages. That’s a bigger problem
than potential of noise. At least allow a user to decide if they want to see
messages in threads or not.

~~~
np_tedious
Threaded messages arguably allow for less fragmentation into other channels /
DMs, and they have the checkbox for a particularly important message to be
sent to both the thread and main convo.

I'm a thread fan from the start, and I've observed many who were initially
skeptical start using them heavily

------
pengstrom
I've been thinking about venture funding and how companies do not turn a
profit while growing.

Wouldn't using funding to sell a service/product under the market value be
considered anti-competitive? I mean the businesses without funding would have
to price their services high enough to turn a profit, while venture-backed
businesses do not.

Are there not chat services that would have thrived if Slack did not offer one
for free/relatively cheaply? What happens when Slack wants to increase prices,
but the market competitors have diminished in the meantime?

~~~
kortilla
No, being competitive and pushing down prices for consumers is not viewed as
being anti-competitive.

Whether a company makes money or not is its own problem. VC vs bank loan vs
bootstrap is the same. Build a working product that brings in enough money to
profit before you run out of cash. It’s basically how every business started.

~~~
vlovich123
Predatory pricing is generally considered illegal. The US happens to hold a
pretty skeptical view on the matter. The better truth is that startups/new
businesses are just too small & by the time they get big their prices
typically have adjusted to not be flooding the market (i.e. too late).

------
bluetidepro
I don't understand a ton about these documents, but I do always enjoy reading
the "RISK FACTORS" that they have to include. Here is the link to them on
here:
[https://www.sec.gov/Archives/edgar/data/1764925/000162828019...](https://www.sec.gov/Archives/edgar/data/1764925/000162828019004786/slacks-1.htm#sB72CD04E04ECEA6B3EA2567D8ACADBFF)

~~~
cocochanel
> We have a history of net losses, we anticipate increasing operating expenses
> in the future, and we may not be able to achieve and, if achieved, maintain
> profitability.

Well, that doesn't sound too good.

~~~
rwc
Obligatory “this is literally boilerplate language used in every S-1 filing”
comment.

~~~
btown
Obligatory “this may be boilerplate nowadays, but there is nothing traditional
about unprofitable companies making public offerings” comment.

Edit: I stand corrected. [https://www.wsj.com/articles/red-ink-floods-ipo-
market-15383...](https://www.wsj.com/articles/red-ink-floods-ipo-
market-1538388000) provides historical context that this is not a new
phenomenon, though it is more common than ever.

~~~
icebraining
They are already profitable. They're just warning it's possible they might
become unprofitable. Just like any other company.

~~~
pwinnski
No, they're not already profitable. From the document on which we're
commenting:

"...we incurred net losses of $146.9 million, $140.1 million, and $138.9
million in fiscal years 2017, 2018, and 2019, respectively."

~~~
icebraining
My bad, I misread another post.

------
hendzen
the most interesting thing in this S1 is that Slack has a dual-class
supervoting share structure but has a sunset provision after which the class B
shares convert to class A and all have the same voting power.

------
vital101
Zero to IPO in five years. Well done team Slack!

~~~
harryh
Slack was founded in 2009. That was 10 years ago not five.

~~~
omarchowdhury
Slack the product was launched in 2013. The company, formally known as Tiny
Speck, was founded in 2009. Their business and available products before 2013
had nothing with what Slack is today. So not absolutely farfetched to say
launch to IPO in 5-6 years, if we're defining it by the relevant incarnation.

------
bparsons
The wave of IPOs this month is incredible.

It could either drive the bull market for another 18 months, or create the
appearance of a panic by private investors looking to finally pull the chute
before they hit the ground.

------
us0r
Another whale for Amazon:

>In April 2018, the Company executed an amendment to its existing agreement
with Amazon Web Services (“AWS”). The amended agreement was effective as of
May 1, 2018 and continues through July 31, 2023. The Company has minimum
annual commitments of $50.0 million each year of the agreement term for a
total minimum commitment of $250.0 million. As of January 31, 2019, the
Company had a remaining minimum payment obligation of $212.5 million to AWS
through July 31, 2023.

------
pcprincipal
> In September 2018, the Company completed its acquisition of all issued and
> outstanding shares of Astro Technology Inc. (“Astro”), a pre-revenue start-
> up company that provides artificial-intelligence (AI) enhanced
> communications solutions, for a total purchase price of $43.3 million in
> cash.

Anyone care to explain how a pre-revenue company can be valued at $43mm? I
know the argument can be made Google paid much more for Deepmind, but Google's
market cap is 51x more than Slack's on the secondary market right now.

------
olivermarks
The cynical perspective is that direct listing rather than an IPO lets large
holders get out faster after the stock begins trading, which suggests a lyft
style pop and deflation

------
econner
> None of our stockholders are party to any contractual lock-up agreement or
> other contractual restrictions on transfer. Following our listing, sales of
> substantial amounts of our Class A common stock in the public markets or the
> perception that sales might occur, could cause the market price of our Class
> A common stock to decline.

Direct listing!

------
dzonga
What I don't understand is how, a messaging service losses 100mil. Their
competitor's like DHH's Basecamp are printing money, so how would they lose
money. Cutthroat competition overall with offering like MS Teams, FB Workplace
n Whatever Google has or will kill.

------
adamw2k
Surprised at Sales and Marketing expense given the low number of Enterprise
(>$100k) contracts. Wonder what's baked in there beyond AE compensation? I
don't see a whole lot of traditional advertising, but maybe it's out there?

~~~
cosmie
They're doing quite a bit of TV advertising[1]. Production and flighting costs
on commercials, at a global scale, isn't going to come cheaply.

[1]
[https://www.ispot.tv/brands/Zyh/slack/](https://www.ispot.tv/brands/Zyh/slack/)

~~~
GordonS
I wonder how effective TV advertising would really be for something relevant
to such a small proportion of the population.

~~~
cosmie
Based on the commercial contents, they're targeting pretty much any white-
collar employees. So the target population isn't as small as it appears at
first glance.

Their operating model also leads to a pretty unique way of internal adoption.
At my last company (a smaller one), we had a paid Slack account and it was our
official means of internal communication.

At my current company, a large Fortune 100 company, email is still the
predominant form of internal communications. With Skype and Teams available,
but with a frustrating enough user experience that everyone falls back to
email. But there are a lot of pockets that unofficially use Slack, with some
using the paid form (and expensing it under their budget) and others using
free ones. Our central IT is finally giving in looking at getting an official
subscription to centralize usage under a single Slack account (for
auditability, information security, employee attrition concerns, and ease of
user support).

By targeting end users directly in those commercials and enabling internal
adoption without interfacing with IT (i.e. free accounts, web app for those
that can't install desktop apps, etc), they're able to gain adoption and
momentum in a guerrilla fashion that snowballs into eventual enterprise
contracts.

------
mrnobody_67
Chamath personally owns more of Slack than the founder/CEO....

~~~
omarchowdhury
Not personally. According to the attached footnote (15): _consists of shares
held by the entities affiliated with Social Capital,_ it seems the principal's
name is identified in lieu of the firm as they are the custodian in charge.

------
codedokode
Their app has compicated and clumsy UI that looks like it was made by
programmers rather than by a designer and very high memory usage. Here is an
example of memory usage from a small team with little volume of messages,
reported by smem on Linux:

\- 5 processes

\- over 850M in swap

\- over 310M PSS (Proportional set size which is the only indicator showing
true memory usage)

This is over 1 Gb total. Despite high memory usage, they don't provide 32-bit
version for Linux. It is surprising how such product can become profitable.

~~~
Kovah
Probably because those people who use the app most do not care about memory
usage. Everytime somebody complains about how resource-hungry Slack is, it
usually comes from a developer. I rarely see project managers or designers or
even clients complain. And, looking at the company I work for, the developers
channel is the one with the lowest usage. This is why Slack became successful:
it works for the people who need it most, not because it is very resource-
efficient or well coded.

------
idlewords
I understand why "VC subsidized taxi rides" runs at a loss, but how on earth
does Slack lose money?

~~~
rockostrich
Trying to grow as fast as possible. As others have pointed out, they could
stop spending as much as they do right now to grow the company (employees as
well as customers) and probably be profitable. That's not to say that this IPO
isn't a cash grab by investors though.

------
jonnycomputer
Could someone briefly explain the significance of this filing.?

~~~
McDev
[https://en.wikipedia.org/wiki/Form_S-1](https://en.wikipedia.org/wiki/Form_S-1)

------
arnklint
Are they even true to their mission statement?

------
fxfan
Do traders track RAM firms using electron-primary-app-firms? Or use one to
hedge against the other ;). Perhaps add Intel too in the mix somewhere!

------
Halluxfboy009
too much to read, really

------
robinaero
Does anyone else find the SEC disclosures format ugly? Might be time for them
to adopt markdown

~~~
flazzarino
Trump is on it, he has them working in shifts

------
wsdfsayy
I remember at Uber we had tried Slack for a few months and it could not scale
to that number of employees (at the time around 5000 worldwide)...

~~~
kemenaran
Doesn’t Uber use Mattermost these days?

[https://mattermost.com/blog/how-uber-uses-mattermost-to-
enha...](https://mattermost.com/blog/how-uber-uses-mattermost-to-enhance-
enterprise-wide-communications/)

~~~
wsdfsayy
yes they have their own internal chat app now this was a few years ago

------
shereadsthenews
All that R&D but it’s still unreachable over IPv6.

------
yalogin
Slack is a much better investment than Uber, lyft and Pinterest. Not sure why
google is not compettwith them yet. It’s proven that google cannot do consumer
very well but services they do very well. May be the corporation focused
service like slack is what they will excel at. Couple that with their other
offerings it could work very well for them. Then again point being slack
doesn’t have the kind of red flags the other recent IPOs

~~~
paxys
Google is competing (or at least trying to) -
[https://gsuite.google.com/products/chat/](https://gsuite.google.com/products/chat/)


Ask HN: Does anyone actually use /newcomments? - kaishiro
Just curious - I've been banging around HN for a while and have never really understood /newcomments. Was there orignally a driving idea around this? I've never really seen the concept of a contextless stream of comments before. I don't even dislike it - just a curiosity.
======
niftich
I use it very often.

To me, it's especially useful at lower-traffic times to gauge which threads
are getting attention. At high-traffic times, it's utility is somewhat
diminished by presenting an almost-entirely new set of comments every time you
click it.

------
DanBC
I mostly use /newcomments.

You get to see which articles have interesting discussion.


Ask HN: Do you stretch before coding? - nerdfiles

Following http://www.ted.com/talks/amy_cuddy_your_body_language_shapes_who_you_are.html I have always wondered by there exists stigma/myth/folk-theory surrounding "popping" one's knuckles, or more generally, engaging in Asperger-esque self-stimulatory behavior (stressed finger-flipping, simply stretching fingers, rhythmic finger counting, talking out loud to one's self ((vocal stimming)), toe-walking). At the same time, I find that I cannot apprehend my hands and the rest of my body for use of vim/bash/coding/etc. unless I stretch well. (Coding, for me, is a full body experience, where music is also by and large essential.)<p>Holding a proper posture seems to, as a "low-cost body hack" strengthen the fluidity of thought. At various points throughout the day I notice that when I accidentally in engage in self-stimulatory behavior, either for need to reach a raised item on a shelf, before playing an instrument, even curiouser listening to noise music, and on, "sharpening my tongue" (guided vocal stimming: re-enacting preferred comedians), I find that various modes of thought are more  readily accessible.
======
xackpot
I don't stretch before coding per se, because I am usually standing while
coding, so I am already alert. but I do stretches in between coding sessions,
like may be every 20-30 minutes. My wife is a physical therapist and I usually
follow most of her advise to keep myself energized throughout a marathon of
coding.

------
codeonfire
Usually if its something I'm not excited about coding I warm up with a sudoku.
Other than that I sit down and immediately start working without a thought.

------
project23
Nope.

------
mansigandhi
No.