Slack will officially be going public in the 20th of June. Among all the cloud software companies that went public, Slack may be Silicon Valley’s favorite.
According to Beth Technology, Slack is a cloud-based messaging and delivery platform to boost productivity and team work operations. It eliminates collaboration friction and saves users from the inconvenience of long email threads and lost files.
Advantage: The Product Is Great
Firstly, Slack is an outstanding product in a high-growth classification and has a devoted user base. Slack presently possess the title of fastest-growing Saas startup in history.
Advantage: Net Dollar Retention Rate
Net dollar retention rate portrays the percentage of income from current customers is preserved from the previous year, after the expenses. If the net dollar retention is above 100%, then the progress from the existing customer base outweigh the losses. If the number is below 100%, then losses exceed growth, which isn’t a good thing.
Slack’s Net Retention Rate at 143% is excellent and outperforms the majority of cloud software IPOs.
Disadvantage: Direct Listing
Slack is not aiming to generate funds and has opted for direct listing rather than a traditional public offering. This means there are no supporting banks involved in the process and insiders will initially sell their stock without a lock-up period. Eradicating a lock-up period typically comes with more risk compared to traditional IPOs that has six months lock-up period.
The issue is Slack is in a position where it should be raising money especially with the tight competition the company is dealing with.
Disadvantage: No Improvement In Net Losses
Despite considerable financials that looks good from an investor’s perspective, net losses remained flat and predictable.
Revenue increased from $105 million in 2017 to $220 million in 2018 to $400 million in 2019 portraying growth of 110% and 82%. The net losses, however, remained disturbingly stable ranging from $138 million to $146 million in three years.