UPDATED 23:27 EDT / SEPTEMBER 17 2017

APPS

Slack lands $250M funding round led by Japan’s Softbank Group

Slack Technologies Inc., maker of the popular team messaging application of the same name, has become the latest beneficiary of Softbank Group Corp.’s $1 billion Vision Fund.

The company said on Sunday it has just closed on a $250 million funding round led by the Japanese telecommunications and Internet giant, which saw the participation of Accel Partners and other investors. The announcement confirms a rumor that first surfaced in July that said Softbank was looking to invest in the company.

The new round means that Slack is now valued at $5.1 billion, up from its previous $3.8 billion valuation, Bloomberg reported. However, that figure remains well below the reported $9 billion takeover price that was bandied about when rumors emerged that cloud computing giant Amazon Web Services Inc. was interested in acquiring the company.

It’s unclear what the future holds for Slack following this latest round, but Slack Chief Executive Officer Stewart Butterfield said last October that “it would be years” before the company goes public. That statement probably made Slack a less appealing investment for traditional venture capital firms, which generally want to make a profitable exit as soon as they can.

However, Softbank seems to have a much grander vision than just making a quick buck, having publicly stated its goal of becoming the world’s most valuable company. In order to do so, Softbank is betting on a wide range of next-generation technologies it reckons has the potential to transform the world as we know it, including the Internet of Things, artificial intelligence, robotics, infrastructure, telecoms, biotech and financial tech. Slack, it would seem, is just one small piece of a much larger puzzle as far as Softbank is concerned.

For the immediate future, Slack said it will use the latest funding to improve its “operational flexibility,” a statement that is vague at best. The company also said it still has much of the $591 million it previously raised in the bank, which should at least give it lots of room for maneuvering in the months and years to come.

Slack may well need that extra wiggle room, because team messaging is becoming increasingly competitive. One of the most recent new entrants into the space is Microsoft Corp. with its new Teams application, a direct rival to Slack that has the significant advantage of being able to integrate with the Redmond-based companies vast array of enterprise tools.

“The market for chat applications is changing the way people work, getting for the first time attention beyond email,” said Holger Mueller, principal analyst and vide president at Constellation Research Inc. “It’s good to see Slack getting funding as they are the David in the fight with a Goliath (Microsoft) for winning a chat/collaboration market that is entering Round Two. Slack has won Round One, but Microsoft is playing strong in Round Two leveraging its scale, customer base and ecosystem. It’s too early to call the outcome just yet.”

Slack also faces competition from Atlassian Corp. plc, which recently introduced a unified messaging service called Stride. Facebook Inc. is also making a run with its Workplace, Cisco Systems Inc. with Spark, and Google LLC with Hangouts, among other competitors.

Mueller’s colleague, vice president and principal analyst Alan Lepofsky, added that Slack will need to focus marketing efforts on “highlighting their value proposition over and above Microsoft and Google, since the cost of their messaging products is included in their suites.”

 

Image: Slack/Facebook

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