How Stewart Butterfield built a billion-dollar company in eight months

He just wanted to make a video game. He ended up creating the world’s hottest enterprise startup

Slack founder Stewart Butterfield sitting cross legged in a white tuxedo jacket, jeans and bow tie

Slack founder Stewart Butterfield. “In San Francisco, there’s a gold-rush mentality. But in Vancouver, they don’t give a shit about a lot of that.” (Portrait by Trevor Brady)

Stewart Butterfield loves a Gershwin tune. For someone born in the early 1970s, growing up as folk-rock gave way to disco to punk to electronica, this preference for jazz standards is rare enough. But what’s rarer still is that Butterfield, the Canadian head of a tech company recently valued at over a billion dollars, does more than listen to Gershwin. He plays it, during many workdays, on a ukulele. At three o’clock in the afternoon, Butterfield or one of his colleagues bangs a gong, and a group of workers at the San Francisco offices of his company, Slack Technologies, gathers in a conference room to jam.

There is so much that is anomalous about this ukulele-strumming CEO. The burly man of middling height who co-founded and built two of the greatest hits in Silicon Valley’s short history holds a master’s degree, not in business administration but in philosophy, from Cambridge. He’s a guy whose hippie parents christened him Dharma—the son renamed himself Stewart a few years after the family moved off the northern B.C. commune where he was born.

Working out of offices in Vancouver and the San Francisco Bay Area, Butterfield has invested years and millions in other people’s money—mainly other people’s money, with a bit of his own—creating fantastical, immersive online games. Twice he’s failed to draw enough players to make a go of it. But each time, this energetic man, as thoughtful as he is foul-mouthed, has regrouped, salvaging a big win from an apparent loss: The photo-sharing site Flickr (with 92 million monthly users) came out of the first failed game; from the second has emerged Slack, a company promoting a new multi-modal way of communicating within offices.

“Not once, but twice, he’s found something lateral in the making of a game that scores a big success. It’s unheard of.” So says tech investor Rob Solomon, Groupon’s former president and a friend of Butterfield’s from the time they worked together at Yahoo. “In the Valley, there’s a lot of talk of pivoting…but what’s less talked about is how seldom that works. The second thought, the pivot, usually doesn’t take at all—let alone to this extent.”

“Lucky,” Butterfield says, during an interview at his San Francisco office. I’m wondering if he really believes that, when he repeats it. “I’ve been lucky so far.”

Within months of launching the Slack software in February, his company was valued at more than US$1 billion, with more than $180 million in venture capital pouring in. The estimate is based on the software’s early adoption by many influential companies and on tech insiders who say it dramatically improves the way companies work. Certainly, whether through luck or through skill, this has been Butterfield’s year.

“If someone I worked with emailed me, I’d probably fire them.” This is something Butterfield has said from time to time, only half in jest. Slack’s suite of messaging software aims to consolidate the miscellaneous ways workmates currently communicate. It replaces the electronic cacophony of messages sent through email, text, phone, video- and voice-conferencing, by Dropbox, group calendars, Facebook, LinkedIn and Twitter.

“With email, there’s a constant tension between, ‘Please copy me, I want to be in the loop’ and ‘Don’t, because I get too much damn email,’” Butterfield says during our sit-down. Slack’s communications are arranged in “channels,” by groups collaborating on a project or by topics, and they’re all searchable, no matter how the message was originally conveyed.

“If you join a company,” he continues, “and you’re asked to take on a certain task, the whole history of it is there, the institutional expertise, the debate. It’s not lost or dispersed in different places.”

Slack’s billion-dollar valuation depends on it continuing to grow at the high rates it has so far: at least 5% a week. By a recent count, Slack has 340,000 daily active users (including the staff at Canadian Business), and 95,000 have so far made the decision to pay for it. Their clients range from the hip—Gawker Media, Blue Bottle Coffee, Pandora—to the square—Dow Jones, Expedia, the London Times.

“So far, we’ve built all by word of mouth,” Butterfield brags, citing media, tech and creative industries as the main spheres where it’s found takers. Slack is not alone in offering a range of intra-office communication software—competitors include Campfire, Yammer and HipChat—but the tech press has singled out Slack’s design sensibility and ease of use as early competitive advantages. Google’s vice-president of product management, Bradley Horowitz, comments: “It’s a staid, boring space, intra-office communication. But Stewart has somehow made it seem sexy.”

Slack has also amassed considerable cash, none of it from Canadian investors. “It wasn’t as hard to raise funds this time around [as it was with Flickr],” Butterfield says. “Once you have a track record, in this climate…. A few hours of meetings, and we got to choose who we wanted to work with. But one concern we have with raising all this money is making sure we don’t feel we’ve accomplished something already. We’re not valued for our present earnings but for the trajectory we’re on.”

Butterfield knows something of the upward trajectory—of the prizes and the perils in this ride—from his first time around, with Flickr.

He didn’t go into tech with the aim of building the first major photo-sharing site. Instead, just after the turn of the millennium, he put a team together to make Game Neverending—a team that included his then wife, Caterina Fake. It was innovative, non-violent in a field where the body count was at that time everything, one of the first multi-player fantasy games where users created complicated characters for themselves. And the game, as its name suggests, went ever on with no winners (or losers) declared.

“I came across an early version of it when I lived in London and ran a fan site for the game,” says Slack’s chief technology officer, Cal Henderson. “I was so keen on it that I eventually moved halfway around the world, to Vancouver, to join his team.” Henderson has been with Butterfield professionally ever since—and has become something of a company mascot. (On his birthday, affectionately known as Calmas, staff dress in his signature programmer outfit of Bermuda shorts, flip-flops and a loud shirt.)

As part of the game, the team embedded the ability to share images. In 2004, it became clear the game was failing. The day before a big San Diego tech conference, Butterfield decided to play up the photo-sharing capacity as the basis for an independent web-based service. The team stayed up all night to create a presentation; at five in the morning, Henderson added a way to upload images via email, so that pictures could be shared from a mobile phone.

The demo became the talk of the industry, and Flickr was born. “There was no eureka moment, honestly,” Butterfield says. “It just sort of happened.”

Flickr was social before social became the thing: It helped pioneer the possibility of separating online contacts into friends, family, acquaintances, frenemies and followers. Its open-source programming allowed users to tweak the product to suit their needs. “So many of the established players didn’t believe in that flexibility,” one frequent Flickr user explained to me. “They wanted you only to use their proprietary software in the approved ways. They didn’t understand that you could convert your so-called audience into something more active. Flickr did.” Flickr was also partly responsible for popularizing the concept behind hashtagging, in the ubiquitous way we use it now—and the sign formerly known as the pound sign is the principal part of Slack’s logo. (#ThanksSoMuchForThatReally.)

Because of its speedy growth in an otherwise depressed period, established tech companies soon came calling, and Butterfield and his co-founders made the decision to sell Flickr to Yahoo in 2005, for between US$22 million and US$25 million. Horowitz, then at Yahoo, was one of the executives responsible for the acquisition. “Yahoo had lost its way, and we wanted Stewart to help it find it again. We wanted him to be a thorn in Yahoo’s side…the leader of a rebel force within.”

The purchase price is pocket change now, in what is, arguably, another tech bubble; certainly, the sale allowed Yahoo to reap most of the benefits from Flickr’s subsequent growth. “I don’t regret it,’ Butterfield says. “It was a different time, and no one was investing in anything. But yes, it makes me think about [Slack] differently.”

Canadian-born Silicon Valley venture capitalist Chris Albinson comments: “It’s sadly not so rare for strong Canadian entrepreneurs to sell out early. Many don’t have the backing that enables them to hold out longer.”

“There was so much we wanted to do,” Butterfield recalls, “and joining Yahoo was one way to get it done.” After a time, though, it became clear to Butterfield and the members of the Flickr team who came with him that, while Flickr was growing, they weren’t going to succeed in turning Yahoo’s ship in a new direction. One by one they left: first Fake, then Butterfield in 2008, followed by Henderson.

On his way out the door, Butterfield penned a bizarre exit letter that became something of a legend. It claimed he’d come to the company to make tin, “this most useful of metals,” and had tried to adjust as the firm moved into “real estate, brewing, consumer finance, grain processing, lighting and salty snacks.”

“It doesn’t have a deep metaphorical meaning,” he says now. “I was in love with The Onion at that point.”

The second time around didn’t go so very differently. The four founders of Tiny Speck, the company that worked on Butterfield’s second multiplayer Internet game, Glitch, lived in different cities. In order to help them communicate better, his team created what would become Slack. This time there was no late-night transformation of a game into something else. Work began on Glitch in 2009; its failure to thrive had become clear to Butterfield by late 2012. He had to lay off most of the team. “That was so hard. Some of these people had moved cities with their families to do this. We tried to do it elegantly, finding other jobs for them. We even set up a site that promoted their talents.”

There was money left in Glitch’s coffers at this point, and Butterfield offered to return it to the investors. But they mainly decided to let their investments ride. “It wasn’t the game they were investing in,” Horowitz says, “but Stewart.”

This time there was a eureka moment of sorts. “We realized none of us would ever work without a system [like Slack] again,” Butterfield says. “That made it seem likely that it’d be valuable for others as well.”

It didn’t take long to retool this internal platform for the market. His former Yahoo colleague Solomon says it was typical of Butterfield to obsess over getting the platform right, even when it had only been meant for internal use. “He couldn’t let it just be OK.”

For a former philosophy student—at the University of Victoria, then Cambridge—Butterfield talks a pretty good business talk. He gives rapid-fire answers to questions about optimal pricing for Slack (it’s currently US$7 per user a month), strategic acquisitions, and the negotiation of major commercial leases in one of the world’s most competitive real estate markets.

A part of him is engaged by all that hurly-burly, but another part of him is not. “I don’t miss the career of teaching philosophy, but the chance to contemplate something in a sustained way, that would be nice.”

Sui generis is the Latin term lawyers use for entities like him: of its own type. Butterfield tends to dress his moods, often in pastels or all in white—a bit floaty for business attire, even in the über-casual Bay Area. He’ll ask potential hires simple math questions and to name three countries in Africa. “The math—it’s OK if you can’t do it, just don’t panic. But if they can’t name the countries, I don’t really want to work with them.”

Albinson is a founding member of The C100, a non-profit group of top Canadian tech executives in the Valley, and a longtime, plainspoken observer of the expat scene. “Dharma,” he says, with a throaty chuckle. “The time as Dharma, the family background—that’s something I bet is relevant when you talk about Stewart.”

The butterfield family portrait in 1975

From top: David and Norma Butterfield with Dharma—later Stewart—in 1975. (Photo by Frank Siteman, courtesy Stewart Butterfield)

Certainly, Stewart’s reinventions look low-risk compared to those made by his old man. Rather than go to Vietnam, David Butterfield drove all night from the North Carolina army base where he was serving to the Quebec border and beyond. He met a woman, Norma, settled down and married, and the pair joined a commune in the fishing village of Lund, B.C., way up the Pacific coast. David built their first family home, a log cabin—and after their move to Victoria, Butterfield senior started a successful construction business. The couple sent their boy Dharma, by then Stewart, to the private St. Michael’s University School.

Despite their radically different eras, son and father seem to share a similar mix of savvy and idealism. And a willingness to give a child an unorthodox name: When Fake and Butterfield’s daughter was born in 2007, they named her Sonnet Beatrice. They separated shortly after.

Butterfield splits his weeks between a Vancouver office, where most of the creative and design staff work, and the one in San Francisco, where we meet. “Down here, it’s meetings, meetings, meetings, mainly on the business side. In Vancouver, I get to work more on the product side, the design stuff that interests me.”

He laughs at the difference between the tech scenes in San Francisco and Vancouver. “In San Francisco, there’s a gold-rush mentality. It’s a bit mercenary, but there’s a lot of hustle. I get unsolicited emails from people, saying, ‘I’m going to be your first salesperson.’ But in Vancouver, they don’t give a shit about a lot of that: Is it going to be a rocket ship company? Whatever, as long as I get salary, benefits, health care. They don’t know a bunch of people who’ve made money on equity, and so they don’t negotiate as hard for it. We give it to them anyway, because we’re good employers.”

From the outside, it looks like Butterfield has already made it. There aren’t huge financial incentives for him to work. But from the inside, it clearly doesn’t look that way. He does not want to lose control of the show this time around. He’s just hired a well-known marketing executive, who helped Zendesk as it went public in May. It’s early days, but does he plan an IPO for Slack? “I don’t have any interest, at least at this point, in running a public company,” he says.

Solomon says the real thrill for Butterfield is in finding the product-market fit—he even puts Butterfield in the mix with the likes of Mark Zuckerberg and Jeff Bezos. Henderson agrees: “He’s good on the product, but he understands what the engineering requirements are too. We both can speak enough of each other’s language to collaborate well.”

With a viable suite of software on offer, the main challenge of the next phase, managing its growth, isn’t as squarely within Butterfield’s comfort zone. “We’re going to be careful about our acquisitions, about our hires. If things go to shit in the market, as they sometimes do, at least we have some money. When it can be effective, we’ll spend that—if acquiring new customers takes $1,000 per, we’ll spend $1 million to get a thousand of them. And we’ll start marketing it more.”

The old adage goes, “If at first you don’t succeed, try, try again.” I’ve been wondering what the motivation is for Butterfield, and so many others, when he’s succeeded pretty well the first time around. “A psychoanalyst could answer that. Maybe it’s a quest for the love they once felt from their mothers?” he suggests. “People like to be useful. I’ve ended up doing things I’m good at—mostly, but not always. There is a lot of ego, and no one wants to feel they were lucky the first time. Everyone wants to feel they were successful because of some innate property.”

We’ve circled back to luck, and I press him a bit. He’s still not comfortable applying to himself his observations about others who feel compelled to make a second charge. “That’s not the way for me. I definitely think I’m lucky.” But then he makes a concession. “Well, 90% of it is luck.”

Should Slack’s run end—either with global domination or something short of that—will he try once more to create a great game? “I don’t think so,” he says. “At least, not as a commercial venture. The kind of thing we wanted to build was too strange and unfamiliar to be a successful business.”

Before I leave, I’m given a pair of Slack socks, woven in Butterfield’s beloved pastels, with a hashtag on its packaging. He looks a bit sour—perhaps at being asked to talk about how big a role luck and skill have played so far, perhaps at being reminded of the failures that ultimately gave birth to his successes. Maybe it’s time for a ukulele break.