Used Daily By 750K Workers, Slack Raises $160M, Valuing Collaboration Startup At $2.8B

TECHCRUNCH: Slack, the popular workplace communication and collaboration startup from Flickr co-founder Stewart Butterfield — is today confirming that it has raised its latest round of funding: a Series E of $160 million at a post-money valuation of $2.8 billion. This follows on from reports from us and others that it was raising funding at upwards of a $2 billion valuation — a massive premium on its $1.12 billion valuation in October 2014.

Asked where Slack would be putting the new funding, Butterfield answered simply, “Into the bank account.” He said that Slack had not even starting spending the $120 million that it raised in October.

So why raise the money now? Because they can. “It’s more of a long term thing,” said Butterfield. “I’ve been in this industry for 20 years and this is the best time in the whole period I’ve worked to raise money. It would be irresponsible for us not to take $160 million right now at that valuation.”

This latest round includes new investment from Horizons Ventures, Digital Sky Technologies (DST Global), Index Ventures, Spark Capital, and Institutional Venture Partners (IVP). Past investors Accel Partners, Andreessen Horowitz, The Social+Capital Partnership, Google Ventures, and Kleiner Perkins Caufield & Byers all participated. The company has now raised $340 million.

Slack is attracting a huge amount of attention from investors and the wider public for several reasons, but two big ones are that it’s been growing and picking up users of its communication platform very quickly. And it’s sticky: those who use it to share notes, documents and other things with each other and others using Slack, are doing it a lot. The company now has 200,000 paying users of the service (“paid seats”, not businesses). Customers include Adobe, New York Times, Blue Bottle Coffee, BuzzFeed, Live Nation, Expedia, HBO, PayPal and the State Department.

Butterfield doesn’t believe that the playbook is the same for all startups and more mature but still private tech companies. Raising at a high valuation, he believes, can be risky if you don’t know what you are doing. “It’s much more of a concern FOR those who don’t have a good sense of a business model or converstion rates,” he said. “We’re not raising money to get 16 months of runway to make sure this works. We have lots of capital as a hedge against the conditions of the future.”

Those conditions, he added, could be acquisitions or a wave of spending towards customer retention, and so on. “It’s nice to be in a position where there is capital in the bank.” This is not to say that there is any specific acquisition in its sights now, or that retention is showing any signs of wavering. In fact, 98% those who have taken up paying Slack subscriptions are still paying.

And the moment the proportion of free users who switch over to paid — which they do to pick up extra feature like more storage of their messages — has remained very consistent since the pricing tiers were introduced.

Slack currently employs 125 people.