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Ben Horowitz tells the story of Slack’s pivot from a failed gaming app into a $28 billion company
Ben recalls investing in Stewart Butterfield’s new company Tiny Speck.
In 2001, Stewart began building an online game, pivoted into Flickr, and the company was acquired by Yahoo in 2005 for $25 million. In early 2009, Stewart decided he wanted to try building the online game again. This time, it would be called Glitch.
Ben tells the story:
“And so he builds Glitch. I love Glitch - it was a marvelous game. But it had two major problems. One, he started it in 2006 and built on Flash before Steve Jobs declared war on Flash. So it wasn’t going to work on the iPhone. And then the other problem was people would finish the game in two days, and so that’s not very good for retention.”
After raising more than $15 million to build Glitch, Stewart called Ben to tell his investor that they only had $6 million left:
“Ben, I’ve got $6 million left. I have no way to raise money because I’ve made really no progress because of these issues. It’s going to cost me more than $6 million to finish the game. So I’ve got three choices. I can pray for rain and try and finish it. I can shut down the company and give you your $6 million back. Or we build this tool that we use in our engineering team to communicate with each other and make engineering work a little better, and I could just put that out as a product.”
Ben replies:
“What? You just like built some tool to talk to each other and you want to put that out as a product? And you’re a consumer guy and you want to become an enterprise software guy?”
Stewart says, “Yeah, I think it’d be a pretty good idea.” And so Ben said, “$6 million isn’t going to make a big difference in my life. If you really think it’s a good idea and you want to do that, go ahead.”
Stewart decided to call the new product Slack, and it soon became the fastest growing enterprise software company of all time before SalesForce acquired it for $27.7 billion in July 2021.
Ben points out an important lesson here:
“A lot of the process is do you have a secret? Do you know something that nobody else knows? And because [Stewart] was pulling his hair out, literally smoking 8 packs of cigarettes a day, trying to get Glitch out the door, he was doing everything to optimize that development, and so he learned where software development was suboptimal… And that’s a really big key. You have to do something really hard if you want to learn something about the world that nobody else knows or is acting on. That’s when you have a breakthrough. But it starts with hard work.”
Full video: SCET Berkeley “Berkeley Method of Entrepreneurship Fundamentals: Ben Horowitz“ (Dec 2020)
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