Slack & Flickr: Stewart Butterfield

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But um we went back to our investors, so including Andreessen Horowitz. And we went in there and told them our plan and you know We could one day get to a hundred million dollars in revenue with this business and thereby be a billion dollar business. And like they were just like, You guys have no idea what you're doing. You don't understand what it is to sell into companies. Um, you're gonna need all of this expertise. And they were they were like

Good luck with your stupid little thing. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements. Go

Guy Roz, and on today's show, how Stuart Butterfield perfected the art of the pivot. by turning a failed online game company into Slack. A messaging program now valued at over five billion dollars. So you might remember a story we did a while back about Kevin Sistrom and Mike Krieger. When they joined forces to build a tech company, they came up with something they called Bourbon. It was a check-in app that was gonna take the world by storm. You'd take out your smartphone and declare, hey, I'm on Bourbon and it's Starbucks. Anyone there?

Well the problem is there was no one. No one used Bourbon. At least not in the way it was intended. But what Mike and Kevin discovered was their small user base really loved the photo sharing feature. That was special. Bourbon was a failure, but that cool photo sharing feature? Well, they decided to make that their business, and that business. Is better known today. is Instagram.

So now Imagine you're working to build a massive multiplayer online game. a weird utopian fantasy world like Burning Man but in cyberspace. Well that was Stuart Butterfield's big idea. This was gonna be his life's pursuit, his great achievement. So he tried it. Not once.

But twice and both times. He failed. But something else happened both times, too. Entirely different, entirely unintended products were born from those failures. The first one was called Flicker.

It was an early image hosting website where you could store and share photos. The second one? Well, if you work in an office I'm Pretty sure you've heard of it or use it. It's called Slack, and if you don't know what it is, it's a messaging app designed for team collaboration. Slack is one of the fastest growing business apps ever and it was

kind of an accident, but We'll get to that story. What you need to know about Stuart Butterfield is that he had kind of an unconventional childhood, like off the grid, back to the land unconventional. because his parents were counterculture hippies who decided to live in the remote backwoods of British Columbia. in Canada. Yeah, they had restored an old log cabin that was built um

Around the turn of the last century. Didn't have running water until I was um Three didn't have electricity till I was four. There's actually a funny story of my mother's father. Who came from Poland to Montreal in between World War One and World War Two.

And they had a bathtub in the front yard and you know just like Try to eat. f the food that they were growing and didn't have many possessions and he was like I can't believe I escaped the Stedtel in Poland and sent all of you to university.

And then now you're back living in this stump. Oh my God. So they were like real live off the land hippies. Wow. Uh m my name was uh Dharma when I was born. Your birth name was Dharma. Yeah, the d Hindu and then later Buddhist concept of like the path, the way Wow and when I was twelve, like most twelve year olds, really wanted to be normal. So

I changed it to Stuart because for some reason I had the impression that Stuart was the most normal name you could have. You didn't want to be Dharma? No. I I regret it now because Dharma Butterfield. Totally amazing. Stuart eventually went to study philosophy in college. But while he was in school, he also got really interested in computers, and on the side, he taught himself to code in HTML. And so during the summers, he started to make websites for local businesses. But his master plan, his main goal was actually to become a philosophy professor. Until he realized that working in tech might be a more stable job.

So he moved to Vancouver and he got a job at a tech startup called communicate.com. The guy who founded it had bought in nineteen ninety-three all of these domains like Vietnam.com and Brazil.com and makeup.com and perfume.com. Who Who was this guy? His name was Brian Liu, he's unfortunately passed away since then. But um so this is like ninety eight And owned Brazil.com and Vietnam.com. Wow. Yeah, but but also like dance.com and electronic.com. Like he had hundreds of them, really, really valuable. So that was the guy who was buying them all up. And bought them up I didn't even know you could buy

Dot com domains in in ninety three. Like that was really, really early. So he's sitting on this what at that time was like a a gold mine. And the way that we thought back then was We would um Develop one universal e-commerce backend and then have all these domain names be the front end? And they and was the idea was that they were going to have a bunch of websites and they would all basically direct users to this one e commerce site where you could get anything, makeup or whatever it was. Trevor Burrus Or tickets to Brazil or um boxing paraphernalia or whatever they had.

Hm. No one had anything really to do. Like no one knew exactly what we were doing. Um it was really early.com. It seemed like this was incredibly valuable. We're gonna have a contest giveaway at BMW Z three, which is a like a net James Bond movie, so it was like the hot car at that time. Um, so that we got people to sign up. What are they signing up for? I don't know. It got worse and worse and worse, like day by day. because no one knew exactly what they were supposed to be doing, and the management meetings turned into screaming matches. And so uh around the end of February, of the year two thousand, I quit. I walked away. I thought I was walking away from like ten million dollars in equity.

And I got bought out for for thirty five thousand dollars on my way up. And of course, like ten days later, two weeks later, was the first dot com crash. And so in the end I got thirty five thousand dollars more than I would have had I stayed. So so w what did you decide to do next? Um well

I convinced one of the guys who happened to sit next to me, uh, Jason Classen, who was running a website on the side called Gradfinder, which was a competitor to classmates. So this is you know many years before Facebook existed. Yeah. Then I convinced him to to leave when I had my thirty five thousand dollars and We went out and raised a whole fifty thousand dollars of money from other people and started it up as a real business. This is gradfinder.com. Yeah. And this is a way to find other people who graduate from your college, basically. Yeah, so it's a like a giant directory of high schools. And in each high school you could have a a graduation year and people would just sign up and message each other and and stuff like that. We worked on it for m like six or eight months and it got acquired uh by

Yeah. So we were lucky by one of like these dot coms that had raised a ton of money, like I don't know,$150 million. I don't even remember what it was called now. In this is like the last gasp, this is the end of the year uh two thousand. And they ended up going bankrupt a year later. So when you guys sold Gradfinder when it was acquired, Did you walk away with a bunch of cash yourself? Yeah. Yeah, I mean a bunch of cash. Yeah.

More tens of thousands. I don't even remember exactly what it was, but it wasn't like, you know, millions of dollars. But it was it was probably a a a decent amount of cash for, you know, a guy in his mid twenties. Yeah, no definitely. Yeah. You know, I took a lot of the next year off. I did consulting work, but relatively little. Um, I guess it was around this time, like two thousand, where you met someone and you got married.

I did. Yeah. Um In like ninety nine. I started a a weblog. And there was a couple hundred people or so around the world who had blogs and we all knew each other. And um one of the bloggers whose blogs I admired was a woman named Katerina Fake, and she had a a website called Katerina.net, and it still exists now twenty plus years later. So

Yeah, around that time, um We met and A year ish later, um We got married. And

It was an interesting time because you know'cause a all of The dot com era hype had completely dissipated. A lot of companies had imploded. But There's a lot of creativity. So in in late ninety nine I started this competition called the five K, which was to build the smallest

Yeah. Any website or web page that could And one of the people who entered the competition was a guy named Eric Costello, who lived in at the time in St. Louis. And uh sparked up a friendship with him.

And By this time Jason had come back from the Grad Finder acquisition and we all started working together on a project called Game Never Ending, which was an attempt to build a web based, massively multiplayer game. And it was a never ending game, presumably? Yep. You never never ended. Okay. This was you and Katerina, your now wife, and Jason Clausen, who you did Gridefinder with. Yep. And with this guy, Eric Costello. You decide that you want to create A game. A massive multiplayer online game. Yeah. So there's a there's a whole type of came that existed before graphical games took off, and they were the precursor for everything that came after.

World of Warcraft being the example that most people would know. But we weren't interested in fighting games. We were interested in creativity and play as kind of a pretext for social interaction. So this idea still has a lot of appeal to me. It's a horrible idea commercially. Like it's just there's not enough people who are interested in it. But You know, there was a a group who who use the prototype and were very enthusiastic and the seeds of this incredible community. And we thought, hey, you know, we built this prototype, people liked it, we can make this into a real project. And what the what would the game look like would you be in front of a screen looking at like a Minecraft type interface or Yeah, so it was it was two thousand two, two thousand three, so the graphics weren't even Minecraft quality. Um it was more like there was a map you could there's like different objects and you could click on them to pick them up or click on them to do stuff with them. But really rudimentary.

So We tried everything to raise some money for this. And uh there was zero interest in investing in this'cause that now it's it's like the middle of uh two thousand two. Yeah. And um No one wanted to invest in anything that had anything to do with the internet. Yeah, well, how are you even gonna make money off of this? What was the business model?

People would pay a monthly subscription. So I put my money into it. Um some of us working on it put our money into it. We hired a couple of people. We raised a couple hundred thousand dollars of friends and family money. And when I say friends and family, I mean like literally friends and family. And by the middle of two thousand and three, we know we've now been working on it in a year, it was clear how complex this was going to be and um

And we were desperate for something else that um That we could complete in a shorter amount of time. And that thing ended up being Flickr. And I think when we started it, the intention was we'll build this and someone will buy it for like a million dollars and then we can use that million dollars to finish the game.

Yeah. Um and of course that's not what happened at all. Wait, wait, let me let me go back for a sec, because so you've got this idea Uh to build this game very expensive. Uh, you just you just don't have enough money to do it, right? So then you decide I mean th it leads you to starting up Flickr. Which is like a photo sharing website. H how did that ha even happen?

Well, we had uh at that time developed a whole bunch of really interesting and relatively novel technologies. So we had a game that you could play in a web browser. Mm. And despite the fact that it was pretty rudimentary graphics, it was still, from a technological perspective, totally fascinating and new. Yeah. And this story sounds like too good to be true and kind of ridiculous, but A group of lawyers had organized a conference called Law and Virtual Worlds in New York, and they invited all these people and and I went.

Waterina. And on the plane on the way there, I got food poisoning. So when we got to JFK, Just throwing up and get in the the taxi pull over on the Van Wick to throw up and then get to the hotel and like open the cab door and throw up all over the carpet. So like really sick. I couldn't keep anything down, kinda like fever dreams. And the part that sounds apocryphal, but it's I swear it's true, is the whole idea for Flicker came to me that night. I literally wrote it out on like scraps of paper in the hotel room while I couldn't sleep five in the morning. You wrote out w you wrote out what? Um

A way to take the interface that we had developed for the game, which let people chat, which let people change locations, which let people manipulate these objects, like the pull them into their inventory and do stuff with them. And instead of the objects, we'll just have photos. So you can upload a photo. And then you could do stuff with it. So when I say do stuff, I mean people could draw a little rectangle on the photo and then make an annotation of that part of the photo. They could chat about them, they could send them to other people, they could change the title and everything happened dynamically. So like when I did something, you would see what was happening on your computer. So Again, technologically for the time, amazing, like just mind blowing people were incredibly effusive, um Then let me just pause for a second to say

This was the first version to Flicker, which was n which was not good. And which we quickly changed. And the reason we were successful is because we changed it. And this is I think a good point to introduce another character. I've got we've got so many threads going here, but uh so one of the players of the game was uh like early twenties hardcore just nerd, um who lived in a tiny village in England and had a job in London. He commuted to London every day on the train for a couple of hours. And he had developed a bunch of stuff to illustrate the social networks inside the game. Kind of we didn't have any APIs for him to use, but It turned out had hacked into our internal m mailing list when we were working on the game and had been reading all of our messages, which is why he was able to develop all the stuff.

Game never ending. And um His name was Cal Henderson. Cal was such a Geek, like one of the nerdiest people I'd ever met in my life.

He was also a like a prodigy programmer. And so when I convinced him to start Um to work with us on on making flicker, he was you know really into it and On the train to London every day, two hours in, two hours out, he wrote almost all of the guts of Flicker.

Um for the way to upload the photos and to process them, to store them, display them. The original payment he got was me buying stuff off his Amazon wish list. So it was like radio had EPs and like you know rare vinyl and stuff like that. So here's what I don't get. Everyone's like focused on this game, but everyone kinda knows that it's the money's running out. How did you then convince everybody to pivot Did you say, hey guys, you know what, let's just dump this gaming thing? Let's go all in on a photo sharing site. Like did anybody say, What are you talking about? Oh yeah. So I I actually forgot about this until a couple years ago when when I was reminded of it. I kinda laid out everything and said, This is the situation. We're just not gonna be able to finish the game and I let everyone vote.

You said to them you let them vote on whether to actually go through with this plan. Yeah, whether to to um switch our efforts to to Flicker to really pursue that instead of the game. And then I lost. What was the argument you made? How did I mean why did you even think that was a good idea? Because it was something that we could complete faster. Like we could actually get it out. We wouldn't and we were At this point, Eric was the one person in the team who had kids, so he was the one person who got paid. Like we just weren't able to pay anyone anymore. So we had this vote, I lost, um, or or Flicker lost in the game one.

So then I had to call Eric on the side and like You know, do some what I imagine happens in the Senate, some kinda like horse trading to convince him to change his vote. And that worked, and um You know, w that decision was December two thousand and three, and in February two thousand and four, we launched Flickr. We all flew to San Diego for this conference. Uh and and were people like ex super excited about it when you launched? It was uh it was a pretty big deal when it launched. I mean, in that closed community, no nearly as many people online. You know, this is like

Probably a decade before the majority of people got smartphones. The internet wasn't was still perceived as this kind of like weird, creepy place. Like if you saw um a popular image of an internet user, it would be like a really overweight guy in the basement. Yeah, like that guy in the Simpsons. Yeah. Exactly. Yeah. So you guys uh so it's like two thousand four, you put Flickr out there and and People who were on the internet were like, Cool, a place to To put our photos up online?

Yeah. So around that time Google had bought Blogger. Um which was one of the early blogging programs. And uh they didn't have a way to host photos, so they put you know in their help

materials online. When people said, How do I upload photos? They said, use Flickr. You know, it was like the one Stand out of that. time where the the world had kind of soured on the internet. They kind of rose from the The ashes of all that. destruction and became like a c a cool, interesting thing that people could get involved in that was fun about the internet again. Trevor Burrus And and how how is Flickr gonna make money?

Because g if all these people are coming onto it, presumably you had to buy like server space, which was a lot more expensive than before like cloud computing. Um how how how did you deal with that? Um we sold what we call the pro accounts, which let you um I believe it was you could see the whole history of your photos, whereas if you didn't By a pro count you can only see two hundred and

And um that actually went pretty well. But you're right, the hardware at that time was just you know, astronomically expensive. And memory storage. You were storing all these people's photos. Absolutely. So every week we would put in an order to to Dell. You know, UPFs would deliver boxes from Dell. And then every Friday night Jason and I would go down to the where the servers were and screwdrivers and put servers onto the racks and to Set everything up and But Um because Flickr was, you know, really taking off in in the public imagination, we actually got some people who are interested in investing. So so we we actually raised a little bit of money, so we're able to buy the servers and we were growing really quickly and we actually had people buying pro accounts, you know, not very many, but we also didn't pay ourselves very much. Um so we're we're covering a bit of the cost through actual usage.

And suddenly. Companies. Uh wanted to buy us. Like uh like Which companies?

Um we were talking to Google, um to Yahoo, to um I don't know if people remember this anymore, but to ask Jeeves. Oh yes, of course. And to some of the other existing photo sharing sites. Um Yeah, fast forward another six months or so, now it's Christmas of 2004, so it's about to turn into 2005. And we also had a bunch of venture capitalists who were interested. At the same time, Yahoo is getting really, really serious. So the search part of Yahoo made an offer to buy us. And then over that Christmas, New Year's period, 2004, 2005, we had to choose do we want to take this money from the investors and build this into something bigger?

Or do we want to take the money now from Yahoo? Um and you know, we got a great pitch from them. Um And the promise was, you know, we come work at Yahoo, we'll buy the company, we'll give you this money, but we'll also give you all of these resources. And we have all of Yahoo's hundreds of millions of users and all of our technology and all of our servers, and you can build this into this great and wonderful thing. So um that's in the end what we decided to do. W what do they offer? It was around twenty million bucks.

So twenty million bucks, wow, you were uh you were a rich guy overnight. Yeah. So suddenly all the friends and family who invested in the dumb game couple years prior, um were in a good position and and everyone who worked there who had deferred their salaries and kind of sacrificed along the way um was in a good position. And the feedback that we got from our investors was, Hey, look, you know, this is uh gonna be a a life changing amount of money. You'll be able to do what you wanna do after, and who knows if this opportunity will stay around. So you should just take the acquisition. So smart move.

Smart move for sure. I mean like a hundred percent of the time they would give the opposite advice today. Yeah, right. But it it was really s yeah, Flicker was like a really singular thing um in the internet at that time. I mean you you guys, you and Carina were c like kind of internet and more than internet famous. You were famous like b after that acquisition. You you you landed on the cover of Newsweek. Yeah, so I would say still a little bit internet famous,'cause uh I was in New York and I was flying back to the West Coast when that News big. um issue came out.

Well I'll tell ya, um I grabbed a stack of them at the newsstand inside a JFK and I slapped them down. It's like you know, I have like a dozen copies or something like that. And the woman um who was checking me out didn't she didn't look up and she scanned one magazine and she flipped it over and scanned the other one and she said, Honey, you know all these are the same. And I said, Yep. And then she looked up at me And then she looked down at the magazine, she looked up at me again, and she was like really like her eyes lit up. She was so excited. And then she read the cover of it and said something like Web two point oh from Flickr to MySpace Something, something. And she was just crestfallen. She was just like, Oh my God. I thought you were gonna be someone important. Like you were gonna be a movie star or like American Idol contestant or something like I cared about. And then she'd just scan the rest of the magazines and check me out, and that was it.

So Yahoo gets a pretty good deal now that we we know now in hindsight on this this product. You walk away with um probably a good amount of cash, probably not set for life, though, right? Aaron Powell No, not set for life. And and part of that acquisition um what's called earn out. So It's conditional on the employees staying with Yahoo for a time. How long did you have to stay with Yahoo to fully vest, get all your your your money? Uh, three years. And you lasted how long? Three and a half. Oh so you like you ba basically you made it.

So how were those three years of Yahoo? I was never in the army, but I look back at that time the way I would imagine some people look back at boot camp, which was it was horrible at the time, but like very rewarding and enriching. And I and I learned a lot of and developed character and stuff like that. Well We at the time we were quite it was nine people. So um Nine people being acquired by what at the time I think was like an eleven or twelve thousand person company. And suddenly everything that was just

easy. Like we would just decide something and then it would be decided became this massive process. Um now when we wanted to get more servers, we had to go to the hardware review committee and you had to make an appointment and you couldn't get an appointment for like five weeks. Meanwhile, the site's gonna fall over and when we wanted to blog something you know, like make an announcement publicly or add a feature, we would just do it. before we were acquired and then after we were acquired there was like a whole teams team. Yeah. Um It just took a lot of getting used to. So it's just like you know almost all my energy went into things other than making Flicker a a great product. It sounds like you were j were just just t counting down the days. You wanted to you really want to get out.

Yeah, I say that and there's also there's good parts as well. And I I gotta say, you know, I use the boot camp analogy. In a deliberate way, I learned Amazing amount. Some of it was negative lessons, like, you know, don't do this, but a lot of it was positive lessons. And also it's just really eye-opening, you know, it's like I certainly

I learned a lot more than I ever would have learned in any MBA program. Yeah. Just being exposed to Um because Flickr was pretty high profile, I had access to all of the executives and I could see all these decisions that I was involved in all these things that I never would have been involved in otherwise. So when you left um Yahoo, was it was it with a feeling of joy and possibility or was it a feeling of like okay Uh I don't know what I would do now. Um

I I'd say halfway in between. There wasn't it wasn't overwhelmingly positive or negative. 'Cause you I guess and this is a kind of a personal thing, but you your marriage was breaking up at that time. Yep, it was. Um We

had o only recently had a kid and Yeah. We didn't work together that closely, I hope. But it it's um Pretty challenging to

to work with your spouse, especially in the early days of a startup. So this is going back many years now, when we first started working with Liber, like out of money, And it's not just the business is out of money. It's like we're out of money. You're out of money. Um and that that stress isn't like okay, I can leave it at the office and go home to my family, which is totally independent. It's the you know, they're really um Interwoven. So I think that was it was just it was a difficult time and um By the time that um we left Yahoo, like a pretty soon after that, it was just over.

And I guess you s you still have to work, you still have to figure something out. So w what did you do when when you walked out of out of Yahoo? What was your plan? Um there wasn't a pl an immediate short term plan. It was definitely to take some time off,'cause that had been a real whirlwind. But it didn't take long for a lot of the same people who had worked on Flickr and had worked on the previous game To decide that we wanted to work on the game again. So you want to go back to gaming. Yeah. You didn't learn your lesson the first time around.

Yeah, we apparently didn't. I mean so the world looked pretty different at that point, so now it's the beginning of two thousand and nine. There was at least an order of magnitude more people online. Whereas in 2002, the majority of people didn't have internet access at home. Now the majority did. Computers are way faster, all the hardware was way cheaper, online games, um were something that were we were really popular. And so we figured like oh this time we can't fail. Like there's you know all of the conditions are perfect. So um we should do this. When you say when you say we, you're talking about the people who worked on the previous game with you, all those guys? Yeah, so there was me and three of the engineers, um, including Cal Henderson and Eric Costello, and another one. Um

Name Sergey Morchov, who's uh in Vancouver. And what we Decided to do, which was called Glitch, was completely different than anything that anyone had ever seen before. The game was called Glitch? Yes. So in this game It was a bizarre, fantastical world, really tried to encourage individual creativity and people could create stuff inside the world. But in the world you would like milk butterflies in in order to get butterfly milk and you could like eggs grew on trees and it the look was kind of like Doctor Seuss meets Monty Python, meets like modern day grafic novels.

So as you moved around the world, it it the look changed dramatically. So you had a track record with Flickr, like you already had a reputation, you'd been on the cover of Newsweek, you'd worked for Yahoo. So when it came time to raise money. Was it pretty easy? Yeah, absolutely. Um it was very easy for us to raise money. Um so we started off with like a you know, a million and a half dollars. We were able to hire someone, we were able to afford all the technology we wanted. And as we started developing the game, we had a bunch of really positive early indications. So we charge people money and they were they paid a lot. You know, like the average person who paid was paying seventy dollars uh a year.

And this is like what, two thousand ten, two thousand eleven, something like that? Yeah. And people are already paying for it. It was that good. Well, it was that good for a very small population. So in fact it was really hard for us to get people even to go through the first few minutes of the game because it was just so different and so weird. Most people who tried it were like, What the hell is this? And just

Piec out in the first three minutes of gameplay. All right, so you guys um launch this thing, there's some early success, you raise lots of cash And then November of twenty twelve You shut it down. Wha what happened? Well um

Being in business and and I think especially being a CEO requires a lot of Unnatural optimism and at some point It's just that optimism is exhausted. So we had what's called a leaky bucket. So People would come in the the top of the funnel.

Um and the funnel is kinda describing like First people hear about your thing, then they go to the website, then they sign up. Then they in our in our case play the game a little bit, then they end up paying you. And each of those stages you kind of some people fall out of the process, so that's why it's called the the funnel. The leaky bucket is you get people in the top, but they just fall out. Like they fall out the process too early. Not enough of them make it all the way through. Stick with it. Yeah, they didn't stick with it. And It was always the next thing that was gonna fix it. Like the next game dynamic we added.

The next bit of customization, the next, the next thing, the next thing, the next thing. Um But as we continue to try those things. We just never found that magic formula um that would make it work economically. It would have been a a fine what people call lifestyle business.

But Um, it was never gonna become the kind of business that would justify seventeen and a half million dollars of venture capital investment. So at what point did you come to to the decision to shut it down? Well, so I was I was losing a lot of sleep in those days. And I was I I was up really late one night. And I d it was like two or three in the morning and I I was in bed and I had hadn't been sleeping for hours. And I just realized like

I don't believe this can work. But I don't believe it anymore. And I realized Right in that moment. Like There's a saying if you're thinking about firing someone A lot.

You should just fire them. meaning that like that intuition if that keeps coming up, it's almost certainly correct. And you wouldn't be thinking that all the time if there was a real shot at making the relationship work. Um I think it's exactly the same thing with the business. Once I began not to have little doubts, um but once at a fundamental level, I was just like, I don't think this is gonna work. It's not gonna work. So, you know, first thing that morning I wrote to all the co founders, um and then to our board of directors and just said

It's over. And That definitely was not a unanimous point of view and there's a lot of kind of contention and argument and uh bet.'Cause we had developed a enormous amount of kinda equity. Like a really content. You had content. Tons of content. Yeah. millions of frames of animation, hundreds of hours of original music. So how did you break the news to the team? I mean they must have been it must have been excruciating. Yeah, it was it was um a horrible experience. And I I say we're gonna have an all hands meeting And everyone, you know, files in and gets together, people have their coffee in the morning and they're chit chatting and and finally like I stand up and the meeting starts and I start to tell them that we're gonna shut down the game. And before I could even get the like the first half of the sentence out, I was crying.

And you know, almost everyone in the room I had personally convinced that they should come work in this company, that they should accept our stock options, that they should believe in the project, that they should believe in me. And so it's um It's like it's humiliating, is a real sense that I had failed all these people, um, that that I had an obligation to them. And I was I had locked eyes with this one software engineer. Just three months before moved.

He had a an infant daughter, like I don't know, like maybe six months or a year old. He was moving away from his in laws who were helping take care of the kid, moving to a new city with his whole family. And now I was telling him he didn't have a job anymore. And we come back. Have Stewart's second failure to build an online game? had a silver lining, and how the idea for Slack.

Was hiding in plain sight. Stay with us, I'm Guy Roz and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. So in November of 2012, Stuart Butterfield decided to shut down development of his multiplayer online game called Glitch. And he laid off almost all of the employees. Now, at the time, he really didn't know what his next move was gonna be, but he decided to do something kind of unusual, which is to

Help out the people he just fired. This is where um I feel Glad that we made the decision when we did because we still we had raised all this money. We still had like over five million dollars in the bank. Um it was late in the year, you know, we're gonna give keep paying everyone for several months so they had a chance to find another job. We built a website called Hire a Genius and we had everyone's like, you know, uh portfolio, their name and endorsements. We wrote reference letters, we helped people with their resumes, we made introductions. Um By the end of that process, we had gotten, you know, every single person who worked there who was getting laid off, and there was um like thirty seven of them, I believe. Uh every single one of them got another job. And in most cases they got a better job than the one that they had.

And I think that making sure everyone got hired generated an enormous amount of goodwill, like in the community at large, and um I think that was very helpful for us down the road, um when we started Slack and people were more willing to give us a chance. Okay, so you were left at the helm of this now rump of a company or non company and what what was your next move? Well, so the interesting thing about Clitch was while it wasn't successful as a business We were extraordinarily productive and There was a system for internal communication that we had developed.

think about as a thing. Like it didn't have a name. We never talked about it. It was just how we happened to communicate. And it was all built around the concept of a channel. And you can have a channel that create it for anything, for a project, for a a functional group, for um a topic of conversation. And the channel exists whether you're a member or not. And it can continue to exist after you leave. And it's kind of an inversion of the typical interoffice communication, which is entirely based on email now. And email, if you join a company um that has been around for thirty years and has been using email since its inception, you get an empty inbox. You're completely cut off from the whole history of what's happened before you got there.

Right. Um and almost all of the email, like ninety nine point nine nine percent of it, is going In boxes and is not visible to anyone else. And you can be CC'd into something that was already going on, or someone can forward you a conversation, but it's not accessible. you know, someone else has to give it to you. Whereas while we were working on the game glitch We would hire someone new in customer support.

And they would have the whole history of all of the conversations the customer support team had had before they got there. They would have the whole history of um the topics that the designers were working on. Everything else that was going on was visible to them. But my assumption is that like you weren't sitting around going, Oh my God, this internal chat system that we've created is is revolutionary. Like you were focused on glitch and this thing was kinda cool and it just made things kind of it greased the skids, but r or am I wrong? Were you did you actually wake up in the morning like every day and say, Oh my God, this thing is amazing? No, uh the you were right in in the first place. We didn't even think about it. Like I I think if someone asked me what do you do for internal education, I would have shrugged my shoulders and say, I don't know. Like whatever everyone does. Yeah. We didn't think about it at all. And it was only

Once we had decided to shut down the game. Um That We realized like hey, this system's actually pretty good. Uh we would never work without a system like this again. Like this it's so much better than anything else we had used before. Maybe other people would like it. So

At what point do you decide Let's see if we can take this like chat thing that we built and turn that into a business. It's it's funny. Um We have these conversations and we have them in our internal communication that predated Slack. Um and so there's timestamps. My

Memory is very different than the reality. My memory is is it took us months to decide this, and there's a lot of debate. In fact, it took us like less than a week. The core was there like almost instantly. And so who was left? Who who how many people stayed to to see if you could make this new thing work? So it was um Myself and the other three co founders, so that's four of us. And then there's four employees that we kept um one of whom we had worked with back in the Flicker days, who's a backend programmer.

IOS mobile engineer uh our head of QA and one designer. So you decide, hey, let's see if we can take this this side thing that we've built. and see if we can turn that into our business. Um Were they passionate about this? Cause everybody went into this thing to make a game, a video game. Were they like, yeah, woo woo, let's make an instant communication tool.

I think we were. Um Y you go through a trauma with a group of people and you you really get bound to them. Yeah. Like it's really it's a makes you very close. And so I think we all wanted to continue working together. And in fact we wanted to work with many more of the people that we, you know, didn't have the opportunity to to keep. You know, the happy story is we ended up hiring back quite a few of the people who worked on the game, um, including that one software engineer I mentioned who I had just convinced to move. Like he you know, he's been a early Stock employee for a long time. Um

They might sound completely different. You know, one's enterprise software that has all these Fortune one hundred customers, and the other one's a online game. But to me, they're fundamentally similar for two reasons. One is I just like making software. And I like doing it with these other people. They all like making the software as well. And then on the other hand Whereas there were two massively multiplayer games and there's a massively multiplayer photo sharing, Slack is multi- massively multiplayer communications at work. So what did you tell your investors? Did you just like say Hey, you know, we're just gonna shift. Uh we're no longer gonna do games. We're gonna focus on this communication tool. Is i is that what you said? Yeah, that's pretty much it. And um you know none of them wanted their money back.

And not for altruistic reasons, but we had already spent two thirds of it. So their options were like we can get back a third of what we gave you. Or they can buy one more lottery ticket and say, Keep the money. Um we'll keep our ownership of the company and see what you can do. And that turned out to be You know, yeah, the best decision an any of them had ever made in investing.

Alright, so you s so at this point, at the end of twenty twelve, was Slack uh would would you did you guys call it Slack this this internal communication thing? Yeah, I was really wedded to the name and it was not really popular, um, internally. And uh where does it come from? There was a bunch of criteria we had. We wanted to be a regular English word. We wanted people to be able to spell it if we said it. Um, we had to be able to get the trademark and we had to be able to get the domain. Um There's the negative connotations, the you know the slack. Slacker, slack, slacking off. But there's also these positive connotations to pick up the slack or to cut me some slack. Yeah. Right. Um and I think that the negative connotations I felt like because they would be this would be an unexpected and unusual name, it would be more likely to stick with people. Having said that, we spent like the next four months arguing about different names, like dozens of different names, and uh all of them in the end either ran into like we couldn't get the trademark or we couldn't get the domain name. And Slack, speaking of dot com

um registrations was registered by this guy in nineteen ninety three, lives in um somewhere in the Midwest, I think Wisconsin, who is an electrical engineer and there's no more iconic internet thing than this. He had it as a website with pictures of his cats. So it's just like the the domain was just sitting there. Slack.com and you can go in the internet archive and look at his old website with pictures of his cats. And he sold you the domain name? He sold us the domain name, yeah. So when you um when you pivot from glitch to Slack at the end of twenty twelve, early twenty thirteen, was it fully formed? Was it was it essentially ready to go? No, we there was two things. So one was the internal communication system that we had built. That was just really dreary wrecked.

But what was as a bluprint for what we wanted to build, it was more or less perfect. So we had that. We started development completely from scratch. In uh like December two thousand twelve, January two thousand thirteen, couple of months later, we had enough done that we could start using it. Couple months after that, we had enough done that we could invite some friends to try it. And then suddenly we realized, look, oh, here's a challenge. We had been working like this for years, and it just felt perfectly natural for us and the advantages of it were just obvious. In fact, so obvious that they were hard to articulate. And we tried to convince our our friends at other um companies to use it, and they were like, Why would we do that? Exactly.

And the really hard part of it was unlike most software, now you can't unilaterally decide to use Slack with your colleagues. Everyone has to buy it. Yeah. Yeah. Yeah, y I can't send you a message unless you're also using it. So it it has this real Challenge at the beginning.

Especially when no one's heard of it. N no one knows anyone else who uses anything like this. It's brand new software from this flaky company that just fail to make it a massively multiplayer game, so who knows how long they're gonna be doing this. Why am I gonna trust them? And what we imagine would be a really easy sell. We would go and say, Hey, you should try this. It's great. It worked amazing for us um was just received with cold star. We go back to the same company like five, six, seven times, and we would show them demos and we would try to explain

Um it was great practice though. We got much better at kind of refining the pitch and explaining what the value of everything was. You say this to me in 2013, I'm your friend, I'm saying Stuart, I've got emails coming in, phone calls and texts, and like Facebook that I don't need this other thing. And then you say And then I would say Oh, this will be like a huge boon because you'll start to consolidate all the communication that's happening in all these other channels. Um and critically you'll build this archive. And the archive increases in value over time. So the the longer you use it, the more you get out of it. Because you can find the answers to questions that people had had before. It's as resourced, it's shared across everyone, you have to spend a lot less energy. And then of course you would object again and I would tell you. Stuart, more stuff to read. Yeah, so we would go back and forth with this for a while. There's like always a million objections. So it took us a lot like to get the first three or four external teams using it took us forever. And then finally we convinced um

A company called Ardio to try it. And they were they were much bigger than us. They were like a hundred and twenty people. Um you guys were at this point how many? We were still the same eight people. So you guys are just working like dogs on this thing. Yeah. Um but the you know the the more we work, the more we realized like hey, this is actually This totally makes sense. Like you know, we probably from the practice of trying to convince people, we had definitely convinced ourselves. Like we were sure that this was gonna be something that was big. What's funny is we went back to our um investors, so including Andreessen Horowitz, which is now like a really big successful venture capital firm.

And this group had a lot of experience in enterprise software, which suddenly we were an enterprise software company instead of a game company. And we went in there and told them our plan and you know, um our grand ambition which was, hey, we believe that there's you know we could one day get to a hundred million dollars in revenue with this business and thereby be a billion dollar business. And Like they were just like you guys have no idea what you're doing. You don't understand what it is to sell into companies. You're gonna need all of this expertise. You're up against X, Y, Z, different you know, different companies, different technologies. And they were they were like, Good luck with your stupid little thing. But did you think those investors?

were wrong. I mean it it's it sounds like they made some good points, right? Well, so by the time we officially launched It was evident that this was gonna be something. The leaky bucket problem that I talked about in the context of the game was completely eliminated. Like we found that Once people started using it, as hard as it was to get people to start, once they started

They almost never stop, and um You know, at that point people weren't paying us, they were just using it for free. Yeah. But we could see that they were getting utility. They were They were logging out at the end of the day and first thing in the morning they were right back in there. So you launch it in in February of twenty fourteen officially. It goes out into the app store or whatever and out into the world. Yep.

Um, and we also told all the people who had been using it for free, like, hey, the grace you know, this this is now you're gonna have to start paying. We'll give you a nice healthy credit to thank you for being one of our early testers. Yeah. And we found the conversion was excellent. You know, like w within um maybe two weeks or three weeks of of launching that officially, we had sold a million bucks worth of slack. A million dollars how does it work, by the way? What does it cost? It cost um eighty dollars per person per year. So you would pay You would only pay for the people who are actually using it. So if you have a fifty person company and there's twenty people using it, then you just pay for twenty people. But in the beginning it was like six, seven bucks per user per month, something like that. Exactly. So you launch it and within weeks you have a million dollars in revenue. Yeah. To be fair, it took us many, many more weeks to get the second million because that was all the pent up demand. But yeah, we were off to the races. Unlike

almost any enterprise software ever, people would talk about it. Like they would be in line at the coffee shop and they would say, Oh my God, you gotta starting Slack. It's amazing. It changed my life. And they would they would post to Twitter and say like, I I recommend and then you know, no one ever says that about the software that they have to use at work. No so it was a completely different experience. Um this was like It's it's amazing. By October of 2014, so this is just two years after you shut down Glitch and like have to break the news to all these people, you raise 120 million bucks. It's it has a 1.2 billion dollar valuation. I mean that's that's nuts. That's totally insane. Yeah, it was completely insane. And you know, at that same period we're still growing like somewhere between five and ten percent a week. How are you dealing with that growth? How are you hiring enough people? I mean how are you getting how are you getting through the day? It was a it was a pretty mad scramble, you know, and that year um We went from maybe ten or eleven, I can't remember. We've hired a couple of people. At most twelve employees, up to about forty, fifty. We might have ended that year at eighty people. And it was breakneck. We had to move offices and um

We don't have enough desks, people are sharing desks. Um gradually we put some systems into place. You know, we started hiring professionals to manage different parts of the business. And now it's you know, it's there's a thousand people. It's amazing. Yeah. So this has been called the fastest growing business app. It it went from From launch in February twenty fourteen to The latest valuation is like five point one

billion dollars. That was in September of twenty seventeen. It might probably is higher now. Th the those numbers are just staggering. I mean for something that was just a side project that was never intended to be the business. Yeah. You know, it it feels like all of the years of like

Sweat and toil and sacrifice. All of the years. pressing on with a game, you know, like kind of failure after failure. have been a very good thing. You know, more than rewarded. Like rewarded dozens of times over. Um'cause we thought like

all of the other eight person software development teams in the world would use this. And um that happened like Not that long after we launched. And now there's like three star Michelin restaurants using it. And there's like the Norwegian department of um Labor and welfare administration. There's like uh the Hartford, Connecticut Police Department, there's like um NASA's Jet Propulsion Laboratory, there's all these enormous companies, um, there's all these small companies. We never thought it would become this big. Like even in our grandest ambitions, it was like A tenth of what it is today.

Do you think there was a possibility that you would not have discovered Slack, that that this thing hiding right under your nose, you just w wouldn't have thought this should be our business? Was there a possibility that could have happened? Yeah, absolutely. Um Or that uh You know, I I mentioned the difficulty in tallying the team and and kinda what that felt like. It was hard not to let that just like Crush me'cause it is so embarrassing. Like it's so humiliating. Um and it's such a

Um It was such a hard decision to make, I think partly because What you hear is the never give up in your dreams, you know, resilience, grit. You gotta keep going. It's all about the fight. It's the slog and I think that's generally true and I think you it's really important to persevere through things that are that are difficult. But there's also a point beyond which you're just

Making a mistake. What what keeps you up at night now? Anything? I mean are there potential um competitors, um or are are you like I'm set now? I mean you are. You've got there are many reasons for you to to kinda chill out and Relax, right? No, I I lose all kinds of sleep. And this is where it gets really interesting. And this is like to me the m most fascinating part of the journey. So through a combination of inexperience and probably arrogance, when we were smaller, I thought like my job is to be smarter than everyone. And to make all of the important decisions. And if I make all the right decisions, um and I'm smart enough, then we'll we'll be successful. Um that it was like a series of strategic decisions that that made all the difference.

But what I found is What matters is performance at the level of the organization. Because the to the degree that everyone's pushing in the same direction, you're able to achieve something. If people are pushing in opposite directions, then you know, you can put as much energy as you want in and and nothing happens. Yeah. So you know when we were eight people It's

trivially easy for everyone to understand what's going on. You get to a hundred people and that's Suddenly it's hard. In two thousand sixteen we went from eighty people to three twenty. So we doubled twice. And that meant, you know, we haven't all hands. I say, Hey, put up your hands. If you've been here for less than a year, and like seventy five percent of the company puts up their hands. It's like it's really difficult when the average tenure is so low. Um and and not only that, but like there's two people or whatever on the Android engineering team. And then they're you know, they're working their butts off developing the app, but they're also trying to hire the third person. And then the third person starts and they have all these questions and they don't know what they're doing. And then meanwhile you're trying to hire the fourth person and if the in that

That chaos, um it can be really difficult to kind of to hold it together and A lot of this has just kind of dawned on me over the last year, and I think I was probably um I feel like I'm as a CEO eighteen months behind where I I should be and Those challenges are starting to become clearer and clearer. Let me ask you about

Uh one final question about your personal life. So you you mentioned that um when your marriage broke up it was sort of it been building you to financial stress and you know you were worried about this and that. You are now A billionaire. I mean at least on paper. Does that eliminate stress in your life? Does that mean that Everything's set, everything's taken care of.

Um We've been around for a long time as a company and I have four co-founders, so not even I'm not even a billionaire on paper. Okay, I sure I got a channel on paper. Okay, sorry. There's all that research and I don't remember where we're at with the latest version of this, but like beyond a certain amount of money, it doesn't make your life any better. I really feel like there's kind of there's three levels of wealth in the world. The first level is I'm not stressed out about debt.

Like people who no longer worry about their credit card bills or their student loans. That's like level one of wealth. Level two is I don't care what stuff costs in restaurants. You know, you're like, oh I really want this thing, but it's eighteen dollars and but the other thing's twelve dollars, so I'll get the twelve dollar one. There's there's a level where like suddenly it doesn't really matter which how much you spend on a particular meal. And then the ultimate level of wealth is I don't care what vacation costs like I don't care how expensive the hotel is or or which flight we go on.

Beyond that, I really don't think it makes any difference, so uh um I'm feel incredibly fortunate and it's great to have all these resources. But I'm just gonna give um almost all of it away because I there's no I don't get any additional happiness in spending it and uh And there's a lot of uh suffering in the world and uh there's a lot of inequality and I think that's a place where n not just me, but I the whole company can make a difference. Both of your companies you know, you're well known companies.

were the product of pivots. Like you we're working on something completely different. Both happened to be games. And then when you realized it wasn't gonna work, you shifted First to Flicker and then to Slack. How do you think you were able to see that? 'Cause it's easy to look back on it with hindsight and say, Oh my gosh, Stuart Butterfield, what a genius. What foresight he had. Is that uh do you would do you think that's a a fair assessment?

Well Um I'm trying to remember where I read this, but there's a there's a nice visual And that's there's A billion blades of grass.

on this massive field. Um and people are playing golf and every blade of grass says, like, I believe the golf ball is gonna fall on me. And someone hits a golf ball and sure enough, it falls on some blades of grass and they say C, it was me all along. And like the ball was gonna fall somewhere. This is the kind of like the Um I was on the cover of Forbes magazine when Flack was really successful. If I

didn't do this, if Slack wasn't successful, if it wasn't me, it's not like Forbes is just like, Okay, well we won't publish a March next year. Yeah. Someone was always gonna be on the cover. Someone was always gonna be successful. And I try to remain very conscious of that fact. Like there's um We did work hard and were clever and you know the the we were able to call a lot of experience and I think we lot did a lot of things right but There's a real increasing returns dynamics, like once you start to have some success, the rest of the success becomes easier and easier. And you look at Slack is like the ultimate example of this. We were growing really, really quickly, even before we launched. And because of that, the press would write about us. And because the press wrote about us, investors were interested. And because investors were interested and wanted to invest, we were able to raise all this money. And that got us more headlines. And that got us more interest from great applicants who wanted to come work at the company. And the opposite is absolutely true as well, you know? One stumble. and you lose a couple of good employees and now investors are kinda skeptical. You have to scale back your ambitions. Now you're not doing anything interesting. No one writes about you. No one wants to come work at your company. Investors are really not interested and you and you go to business. So um

You know, while I I am proud of all that we accomplished and you know there's been an enormous amount of hard work by a lot of people, there is this real um Tailwind that we have that really just It makes it all of that stuff a lot easier. Stuart Butterfield. Co founder and C

of Slack. By the way, in the early days when Stuart was interviewing job candidates for the company, He would always ask three questions. First one. What's three times seventeen? The second one, name three countries in Africa.

And the third question, in which century was the French Revolution? Now it wasn't like you were disqualified if you got the answers wrong. But it was just a way to start a conversation. Stuart Wanted to make sure that people working for Slack? Or curious.

And please do stick around because in just a moment, we're gonna hear from you about the things you're building. Hey, thanks so much for sticking around because it's time now for how you built that. And today's story starts in Charlotte, North Carolina. Where about three years ago, Ebbie Kircher was a teenager With a food obsession. I've always loved peanut butter flavored anything. Peanut butter um cups, peanut butter ice cream. I loved peanut butter and jelly sandwiches, heavy on the peanut butter. But one day Abby did something that you probably shouldn't do with a food you eat every day. She looked at the label and I was just like, Oh my gosh, this is so much sugar.

Tons of additives and preservatives And so it just doesn't feel like it's almost peanut butter in anymore, you know? It just feels kind of like a sugar spread. So Abby decided to go cold turkey on peanut butter, but of course she missed eating it. So I was like, I might as well make my own. You know, there's no reason why I couldn't make my own, so that's why I just whipped out a food processor and just tried it out. This was, by the way, her mom's food processor into which she put some nuts and coconut oil and salt. And eventually took forever, it turned into a creamy texture. I was like, wow, this is so cool. I got very excited. Um, then I was like, okay, how do I want to flavor this or sweeten it? So I threw in some dates.

processed that a little bit and it was so good. So good in fact that Abby started spreading the nut butter on everything. Apples, sandwiches, pancakes, even salad. And she began sharing it with her family and friends, and then One night? I went into my room and it was quite literally an aha moment and I just ran back into the kitchen and said Mom. I could start a business and she just kind of was like Oh right. Yeah, absolutely.

Now, it's a good thing Ebbie's mom and dad were on board because remember, Ebbie was like 15 at the time, so she needed her parents' help to track down jars and labels and a commercial kitchen to make the nut butter. But Abby was still making a lot of the big decisions. Like early on, she actually decided to forget about peanuts and to branch out into other types of nuts. I wanted something a little different and I I realized there weren't a lot of pecan and cashew butters out there. At the time So Abby came up with five recipes, each with just a handful of ingredients. Flavors like date pecan or strawberry cashew and coffee almond. And she and her mom Anna set up a stand at a big farmer's market just outside Charlotte.

And we would just, you know, call people over. They were all incredibly intrigued by the story and how young I was. They would always look at my mom and be like, so You started this and she'd be like nope. Anyway, they kept selling out at the farmers market, and people kept asking for more. That was getting hard because they were still packing the jars of nut butter themselves, and How are they doing that? Spoons, believe it or not. Many spoons, many, many hands.

That was the worst part for sure. It just took so long. So a few months later they got a machine to do the jarring for them, and soon they were pitching their nut butter at local grocery stores. For a a young girl and and her mom to walk in there excited about a product and it made them excited. And I think that was a huge factor in our growth. Less than two years after Abby started making nut butters, They were selling in like 300 grocery stores in the Charlotte area. And over time, it wasn't just Abby and her mom doing this. Her older brother joined the business and her dad actually quit his job to join them as well. Technically I'm the boss of my parents and brother, yes.

Which is Definitely a learning experience trying to figure out okay what are our positions in the business regardless of our You know, positions in the family. Heavy's now been at this for three years. And her nut butters have spread to nearly 1,000 stores across the East Coast and Midwest, including some pretty big chains like Wegmans and Lowe's. Now we're set to hit a million dollars in revenue by the end of uh this year. Which is pretty crazy because Eby Kircher is still just 18.

Her business is called Abby's Better as in BETTER. And if you want to find out more about it or hear previous episodes of our show, head to our podcast page, howibuilthis.npr.org. And of course, if you want to tell us what you're building, go to build.npr.org. And thanks so much for listening to the show this week. You can subscribe to it at Apple Podcasts or wherever you get your podcasts, and while you're there, please do give us a review. You can also write us at hibt at npr.org, and if you want to send a tweet, it's at how I built this. Our show is produced this week by Casey Herman with music composed by Ramteen Arablui. Thanks also to Nur Kutsi, Neva Grant, Sanas Meshkinpur, and Jeff Rogers. Our intern is JC Howard. I'm Guy Raz and you've been listening to How I Built This.

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