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As Uber and Lyft continue to melt, the 2019 unicorn class loses its shine
You’d be excused for feeling that mid-2019 was in a different decade as far as venture-backed IPOs go.
Last year saw a number of successful flotations of venture-backed technology and technology-enabled companies, and most performed well after they began trading. But despite some early success, a number of the most famous 2019 IPOs have seen their valuations decline rapidly in ensuing quarters.
In some cases, once richly valued public unicorns are off more than twice the market’s recent declines, have given up all their gains earned as public companies, or fallen under their final private market valuations. It’s a stunning reversal for several of the most-lauded companies to come out of the venture capital machine in a decade.
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Slack introduces simplified interface as usage moves deeper into companies
When Slack first launched in 2013, the product was quickly embraced by developers, and the early product reflected that. To get at advanced tools, you used a slash (/) command, but the company recognizes that as it moves deeper into the enterprise, it needed to simplify the interface.
Today, the company introduced a newly designed interface aimed at easing the user experience, making Slack more of an accessible enterprise communications hub.
Jaime DeLanghe, director of product management at Slack, says that the messaging application has become a central place for people to communicate about work, which has grown even more important as many of us have begun working from home as a result of COVID-19.
But DeLanghe says usage was up even before the recent work from home trend began taking off. “People are connected to Slack, on average, about nine hours a day and they’re using Slack actively for almost 90 minutes,” she told TechCrunch.
To that end, she says her team has been working hard to update the interface.
“From my team’s perspective, we want to make sure that the experience is as simple to understand and get on-boarded as possible,” she said. That also means surfacing more advanced tooling, which has been hidden behind those slash commands in previous versions of the tool.
She said that the company has been trying to address the needs of the changing audience over the years by adding many new features, but admits that has resulted in some interface clutter. Today’s redesign is meant to address that.
New Slack interface. Screenshot: Slack
Among the new features, besides the overall cleaner look, many people will welcome the new ability to nest channels to organize them better in the Channel sidebar. As your channels proliferate, it becomes harder to navigate them all. Starting today, users can organize their channels into logical groupings with labels.
New nested channel labels in Slack. Screenshot: Slack
DeLanghe is careful to point out that this channel organization is personal, and cannot be done at an administrative level. “The channels don’t actually live inside of another channel. You’re creating a label for them, so that you can organize them in the sidebar for just yourself, not for everybody,” she explained.
Other new features include an improved navigation bar at the top of the window, a centralized search and help tool also located at the top of the window and a universal compose button in the Sidebar.
All of these new features are designed to help make Slack more accessible to users, as more employees start using it across an organization.
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What to consider when employees need to start working remotely
The COVID-19 crisis is touching all aspects of society, including how we work. In response, many companies are considering asking some percentage of their workforce to work remotely until the crisis abates.
If your organization doesn’t have a great deal of experience with remote work, there are a number of key things to think about as you set up a program. You are going to be under time constraints when it comes to enacting an action plan, so think about ways to leverage the tools, procedures and technologies you already have in place. You won’t have the luxury of conducting a six-month study.
We spoke to a few people who have been looking at the remote working space for more than a decade and asked about the issues companies should bear in mind when a large number of employees suddenly need to work from home.
The lay of the land
Alan Lepofsky, currently VP of Salesforce Quip, has studied the remote work market for more than a decade. He says there are three main pieces to building a remote working strategy. First, managers need to evaluate which tools they’ll be using to allow employees to continue collaborating when they aren’t together.
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Stack Overflow expands its Teams service with new integrations
Most developers think of Stack Overflow as a question and answer site for their programming questions. But over the last few years, the company has also built a successful business in its Stack Overflow for Teams product, which essentially offers companies a private version of its Q&A product. Indeed, the Teams product now brings in a significant amount of revenue for the company and the new executive team at Stack Overflow is betting that it can help the company grow rapidly in the years to come.
To make Teams even more attractive to businesses, the company today launched a number of new integrations with Jira (Enterprise and Business), GitHub (Enterprise and Business) and Microsoft Teams (Enterprise). These join existing integrations with Slack, Okta and the Business tier of Microsoft Teams.
“I think the integrations that we have been building are reflective of that developer workflow and all of the number of tools that someone who is building and leveraging technology has to interact with,” Stack Overflow Chief Product Officer Teresa Dietrich told me. “When we think about integrations, we think about the vertical right, and I think that ‘developer workflow’ is one of those industry verticals that we’re thinking about. ChatOps is obviously another one, as you can see from our Slack and Teams integration. And the JIRA and GitHub [integrations] that we’re building are really at the core of a developer workflow.”
Current Stack Overflow for Teams customers include the likes of Microsoft, Expensify and Wix. As the company noted, 65 percent of its existing Teams customers use GitHub, so it’s no surprise that it is building out this integration.
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What happened to Slack today
You’ve been busy. I’ve been busy. But people are talking about Slack all over Twitter, so let me catch us both up.
All the ruckus concerning Slack and its publicly traded stock appeared to kick off with a Business Insider story, which had the following headline:
Slack just scored its biggest customer deal ever, as IBM moves all 350,000 of its employees to the chat app
Given the context of the simmering Slack versus Teams battle, having Slack win what appeared to be a huge, new contract was big news. Slack’s shares shot higher, and the news engendered all sorts of headlines that now look a bit silly.
Slack may survive after all, after IBM choose [sic] them as exclusive supplier for 350,000 employees
Slack shares traded up sharply all day. They were worth 15.4% more than yesterday, and then, all of a sudden this fine afternoon, trading of Slack’s equity was halted, pending news.
This led to general chaos, with everyone trying to figure out what had happened. Had Google bought Slack? Had Slack bought a small poodle? Was IBM not a Slack customer? It wasn’t clear.
Halting a stock, to be clear, is a big deal, and instantly brings attention to the company in question. Public firms don’t hold for news much, as it’s no good and no fun. It’s also why earnings come after hours.
Later, Slack released an SEC filing, which included the fact that IBM was already one of its customers. This meant that IBM was not a new customer, and that the headline 350,000 employee figure would not manifest itself in that many novel seats of Slack sold.
The company itself put a final bit of ironmongery in the human plasticware, saying the following in the filing to tamp down the market’s enthusiasm:
IBM has been Slack’s largest customer for several years and has expanded its usage of Slack over that time. Slack is not updating its financial guidance for the fourth quarter of the fiscal year ended January 31, 2020 or for the fiscal year ended January 31, 2020.
Womp womp, I believe is the phrase.
Also this happened, but the day’s events appear to be mostly a lot of whatnot that wound up being not what we thought.
When Slack finally did begin to float in after-hours trading, it quickly gave back about half of its gains. Slack shares are currently worth $24.56 in after-hours trading. They started the day worth around $23, and traded as high as the mid $27s.
Now you know.
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Microsoft Teams has been down this morning
Microsoft Teams, the collaboration platform that competes with Slack, has been down since about 8:30 am ET. Microsoft reports the outage was due to an expired certificate.
Microsoft first posted on its Office 365 Status Twitter feed about 9:00 am ET that an outage was in progress, stating the company was looking into the problem.
We’re investigating an issue where users may be unable to access Microsoft Teams. We’re reviewing systems data to determine the cause of the issue. More information can be found in the Admin center under TM202916
— Microsoft 365 Status (@MSFT365Status) February 3, 2020
At approximately 10:00 am ET, the company posted the reason for the problem, an expired certificate, which frankly, has to be pretty embarrassing for the group responsible for keeping the Teams service running.
We’ve determined that an authentication certificate has expired causing, users to have issues using the service. We’re developing a fix to apply a new certificate to the service which will remediate impact. Further updates can be found under TM202916 in the admin center.
— Microsoft 365 Status (@MSFT365Status) February 3, 2020
About an hour ago, the company updated the status again, indicating it had begun deploying the updated certificate.
We’ve initiated the deployment of the updated certificate and are monitoring service health as the fix progresses. Additional information can be found under TM202916 in the admin center.
— Microsoft 365 Status (@MSFT365Status) February 3, 2020
Some customers have begun reporting on Twitter that service has been restored.
Microsoft has kept the status updates pretty business like, but has not apologized to its 20 million users as of publication. The company is in the midst of a battle with Slack for hearts and minds in the enterprise collaboration space, and a preventable outage has to be awkward for them.
The company will no doubt do a post-mortem to figure out how this mistake happened and how to prevent this kind of issue from taking down the site again. While every service is going to experience an outage from time to time, it’s up to the organization to understand why it happened and put systems in place to keep a preventable incident like this one from happening again in the future.
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Microsoft announces global Teams ad push as it combats Slack for the heart of enterprise comms
The long-running contest between Microsoft and its Teams service and Slack’s eponymous application continued this morning, with Redmond announcing what it describes as its first “global” advertising push for its enterprise communication service.
Slack, a recent technology IPO, exploded in the back half of last decade, accreting huge revenues while burrowing into the tech stacks of the startup world. The former startup’s success continued as it increasingly targeted larger companies; it’s easier to stack revenue in enterprise-scale chunks than it is by onboarding upstarts.
Enterprise productivity software, of course, is a large percentage of Microsoft’s bread and butter. And as Slack rose — and Microsoft decided against buying the then-nascent rival — the larger company invested in its competing Teams service. Notably, today’s ad push is not the first advertising salvo between the two companies. Slack owns that record, having welcomed Microsoft to its niche in a print ad that isn’t aging particularly well.
Slack and Teams are competing through public usage announcements. Most recently, Teams announced that it has 20 million daily active users (DAUs); Slack’s most recent number is 12 million. Slack, however, has touted how active its DAUs are, implying that it isn’t entirely sure that Microsoft’s figures line up to its own. Still, the rising gap between their numbers is notable.
Microsoft’s new ad campaign is yet another chapter in the ongoing Slack vs. Teams. The ad push itself is only so important. What matters more is that Microsoft is choosing to expend some of its limited public attention bandwidth on Teams over other options.
Stock
While Teams is merely part of the greater Office 365 world that Microsoft has been building for some time, Slack’s product is its business. And since its direct listing, some air has come out of its shares.
Slack’s share price has fallen from the mid-$30s after it debuted to the low-$20s today. I’ve explored that repricing and found that, far from the public markets repudiating Slack’s equity, the company was merely mispriced in its early trading life. The company’s revenue multiple has come down since its first days as a public entity, but remains rich; investors are still pricing Slack like an outstanding company.
Ahead, Slack and Microsoft will continue to trade competing DAU figures. The question becomes how far Slack’s brand can carry it against Microsoft’s enterprise heft.
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Is a direct listing the right choice for your company?
Ran Ben-Tzur is a corporate partner at Fenwick & West. Ran’s issuer-side initial public offerings include Facebook, Fitbit, Upwork, Zuora and Peloton Interactive.
Jamie Evans is the co-chair of Fenwick & West’s Capital Markets & Public Companies group. Jamie’s representative initial public offerings include Smartsheet, Redfin, Fitbit and Facebook.
Spotify did it. Slack did it. Many other late-stage private technology companies are reported to be seriously considering it. Should yours?
If you are a board member of a late-stage, venture-backed company or part of its management team, you likely have heard of the term “direct listing.” Or you may have attended one or all of the slew of recent conferences being hosted by big-name investment banks and others, including tech investor guru Bill Gurley, who recently debated the pros and cons of choosing a direct listing over a traditional IPO.
Before you decide what’s right for your company, here are a few things you need to know about direct listings.
Direct listings vs. IPOs
For people not familiar with the term, a direct listing is an alternative way for a private company to “go public,” but without selling its shares directly to the public and without the traditional underwriting assistance of investment bankers.
In a traditional IPO, a company raises money and creates a public market for its shares by selling newly created stock to investors. In some instances, a select number of pre-IPO investors, usually very large stockholders or management, may also sell a portion of their holdings in the IPO. In an IPO, the company engages investment bankers to help promote, price and sell the stock to investors. The investment bankers are paid a commission for their work that is based on the size of the IPO—usually seven percent for a traditional technology company IPO.
In a direct listing, a company does not sell stock directly to investors and does not receive any new capital. Instead, it facilitates the re-sale of shares held by company insiders such as employees, executives and pre-IPO investors. Investors in a direct listing buy shares directly from these company insiders.
Does this mean that a company doing a direct listing doesn’t need investment banks? Not quite. Companies still engage investment banks to assist with a direct listing and those banks still get paid quite well (to the tune of $35 million in Spotify and $22 million in Slack).
However, the investment banks play a very different role in a direct listing. Unlike a traditional IPO, in a direct listing, investment banks are prohibited under current law from organizing or attending investor meetings and they do not sell stock to investors. Instead, they act purely in an advisory capacity helping a company to position its story to investors, draft its IPO disclosures, educate a company’s insiders on process and strategize on investor outreach and liquidity.
Understanding the current direct listings trend
The concept of a direct listing is actually not a new one. Companies in a variety of industries have used similar structures for years. However, the structure has only recently received a lot of investor and media attention because high-profile technology companies have started to use it to go public. But why have technology companies only recently started to consider direct listings?
The rise of massive pre-IPO fundraising rounds
With an abundance of investor capital, especially from institutional investors that historically hadn’t invested in private technology companies, massive pre-IPO fundraising rounds have become the norm. Slack raised over $400 million in August 2018—just over a year prior to its direct listing. Because of this widespread availability of capital, some technology companies are now able to raise sufficient capital before their actual IPO to either become profitable or put them on a path to profitability.
Criticism of current IPO process
There has been increasing negative sentiment, especially amongst well-known venture capitalists, about certain aspects of the traditional IPO process—namely IPO lock-up agreements and the pricing and allocation process.
IPO lock-up agreements. In a traditional IPO, investment bankers require pre-IPO investors, employees and the company to sign a “lock-up agreement” restricting them from selling or distributing shares for a specified period of time following the IPO—usually 180 days. The bankers put these agreements in place in order to stabilize the stock immediately after the IPO. While the merits of a lock-up agreement can certainly be debated, by the time VCs (and other insiders) are allowed to sell following an IPO, oftentimes the stock price has fallen significantly from its highs (sometimes to below the IPO price) or the post lock-up flood of selling can have an immediate negative impact on the trading price.
In a direct listing, there is no lock-up agreement, which allows for equal access to the offering to all of the company’s pre-IPO investors, including rank-and-file employees and smaller pre-IPO stockholders.
IPO pricing and allocation: In a traditional IPO, shares are often allocated directly by a company (with the assistance of its underwriters) to a small number of large, institutional investors. Traditional IPOs are often underpriced by design to provide large institutional investors the benefit of an immediate 10-15% “pop” in the stock price. Over the last few years, some of these “pops” have become more pronounced. For example, Beyond Meat’s stock soared from $25 to $73 on its first day of trading, a 163% gain. This has fueled a concern, particularly shared amongst the VC community, that investment banks improperly price and allocate shares in an IPO in order to benefit these institutional investors, which are also clients of the same investment banks that are underwriting the IPO. While the merits of this concern can also be debated, in instances where there is a large price discrepancy between the trading price of the stock following the IPO and the price of the IPO, there is often a sense that companies have left money on the table and that pre-IPO investors have suffered unnecessary dilution. If the IPO had been priced “correctly,” the company would have had to sell fewer shares to raise the same amount of proceeds.
Because a company is not selling stock in a direct listing, the trading price after listing is purely market driven and is not “set” by the company and its investment bankers. Moreover, since no new shares are issued in a direct listing, insiders do not suffer any dilution.
The Spotify effect
Before Spotify’s direct listing, technology companies hadn’t used the direct listing structure to go public. Spotify was, in many ways, the perfect test case for a direct listing. It was well known, didn’t need any additional capital and was cash flow positive. In addition, prior to its direct listing, Spotify had entered into a debt instrument that penalized the company so long as it remained private. As a result, it just needed to go public. After clearing some regulatory hurdles, Spotify successfully executed its direct listing in April 2018. After Spotify’s direct listing, Slack (relatively) quickly followed suit. Slack’s direct listing was notable because it represented the first traditional Silicon Valley-based VC-backed company to use the structure. It was also an enterprise software company, albeit one with a consumer cult following.
Is a direct listing right for my company?
While a direct listing offers many benefits, the structure does not make sense for every company. Below is a list of key benefits and drawbacks:
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Instagram founders join $30M raise for Loom work video messenger
Why are we all trapped in enterprise chat apps if we talk 6X faster than we type, and our brain processes visual info 60,000X faster than text? Thanks to Instagram, we’re not as camera-shy anymore. And everyone’s trying to remain in flow instead of being distracted by multi-tasking.
That’s why now is the time for Loom. It’s an enterprise collaboration video messaging service that lets you send quick clips of yourself so you can get your point across and get back to work. Talk through a problem, explain your solution, or narrate a screenshare. Some engineering hocus pocus sees videos start uploading before you finish recording so you can share instantly viewable links as soon as you’re done.
Loom video messaging on mobile
“What we felt was that more visual communication could be translated into the workplace and deliver disproportionate value” co-founder and CEO Joe Thomas tells me. He actually conducted our whole interview over Loom, responding to emailed questions with video clips.
Launched in 2016, Loom is finally hitting its growth spurt. It’s up from 1.1 million users and 18,000 companies in February to 1.8 million people at 50,000 businesses sharing 15 million minutes of Loom videos per month. Remote workers are especially keen on Loom since it gives them face-to-face time with colleagues without the annoyance of scheduling synchronous video calls. “80% of our professional power users had primarily said that they were communicating with people that they didn’t share office space with” Thomas notes.
A smart product, swift traction, and a shot at riding the consumerization of enterprise trend has secured Loom a $30 million Series B. The round that’s being announced later today was led by prestigious SAAS investor Sequoia and joined by Kleiner Perkins, Figma CEO Dylan Field, Front CEO Mathilde Collin, and Instagram co-founders Kevin Systrom and Mike Krieger.
“At Instagram, one of the biggest things we did was focus on extreme performance and extreme ease of use and that meant optimizing every screen, doing really creative things about when we started uploading, optimizing everything from video codec to networking” Krieger says. “Since then I feel like some products have managed to try to capture some of that but few as much as Loom did. When I first used Loom I turned to Kevin who was my Instagram co-founder and said, ‘oh my god, how did they do that? This feels impossibly fast.’”
Systrom concurs about the similarities, saying “I’m most excited because I see how they’re tackling the problem of visual communication in the same way that we tried to tackle that at Instagram.” Loom is looking to double-down there, potentially adding the ability to Like and follow videos from your favorite productivity gurus or sharpest co-workers.
Loom is also prepping some of its most requested features. The startup is launching an iOS app next month with Android coming the first half of 2020, improving its video editor with blurring for hiding your bad hair day and stitching to connect multiple takes. New branding options will help external sales pitches and presentations look right. What I’m most excited for is transcription, which is also slated for the first half of next year through a partnership with another provider, so you can skim or search a Loom. Sometimes even watching at 2X speed is too slow.
But the point of raising a massive $30 million Series B just a year after Loom’s $11 million Kleiner-led Series A is to nail the enterprise product and sales process. To date, Loom has focused on a bottom-up distribution strategy similar to Dropbox. It tries to get so many individual employees to use Loom that it becomes a team’s default collaboration software. Now it needs to grow up so it can offer the security and permissions features IT managers demand. Loom for teams is rolling out in beta access this year before officially launching in early 2020.
Loom’s bid to become essential to the enterprise, though, is its team video library. This will let employees organize their Looms into folders of a knowledge base so they can explain something once on camera, and everyone else can watch whenever they need to learn that skill. No more redundant one-off messages begging for a team’s best employees to stop and re-teach something. The Loom dashboard offers analytics on who’s actually watching your videos. And integration directly into popular enterprise software suites will let recipients watch without stopping what they’re doing.
To build out these features Loom has already grown to a headcount of 45, though co-founder Shahed Khan is stepping back from company. For new leadership, it’s hired away former head of web growth at Dropbox Nicole Obst, head of design for Slack Joshua Goldenberg, and VP of commercial product strategy for Intercom Matt Hodges.
Still, the elephants in the room remain Slack and Microsoft Teams. Right now, they’re mainly focused on text messaging with some additional screensharing and video chat integrations. They’re not building Loom-style asynchronous video messaging…yet. “We want to be clear about the fact that we don’t think we’re in competition with Slack or Microsoft Teams at all. We are a complementary tool to chat” Thomas insists. But given the similar productivity and communication ethos, those incumbents could certainly opt to compete. Slack already has 12 million daily users it could provide with video tools.
Loom co-founder and CEO Joe Thomas
Hodges, Loom’s head of marketing, tells me “I agree Slack and Microsoft could choose to get into this territory, but what’s the opportunity cost for them in doing so? It’s the classic build vs. buy vs. integrate argument.” Slack bought screensharing tool Screenhero, but partners with Zoom and Google for video chat. Loom will focus on being easily integratable so it can plug into would-be competitors. And Hodges notes that “Delivering asynchronous video recording and sharing at scale is non-trivial. Loom holds a patent on its streaming, transcoding, and storage technology, which has proven to provide a competitive advantage to this day.”
The tea leaves point to video invading more and more of our communication, so I expect rival startups and features to Loom will crop up. Vidyard and Wistia’s Soapbox are already pushing into the space. As long as it has the head start, Loom needs to move as fast as it can. “It’s really hard to maintain focus to deliver on the core product experience that we set out to deliver versus spreading ourselves too thin. And this is absolutely critical” Thomas tells me.
One thing that could set Loom apart? A commitment to financial fundamentals. “When you grow really fast, you can sometimes lose sight of what is the core reason for a business entity to exist, which is to become profitable. . . Even in a really bold market where cash can be cheap, we’re trying to keep profitability at the top of our minds.”
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Microsoft Teams gets Yammer integration, secure private channels and more
You’re forgiven if you thought Yammer — Microsoft’s proto-Slack, not quite real-time chat application — was dead. It’s actually still alive (and well) — and still serves a purpose as a slower-moving social network-like channel for company and team-wide announcements. Today, Microsoft announced that, among other updates, it will offer a Yammer integration in Teams, its Slack competitor. Yammer in Teams will live in the left-hand sidebar.
With this, Microsoft’s two main enterprise communications platforms are finally growing together and will give users the option to use Teams for fast-moving chats and Yammer as their enterprise social network in the same way Facebook messenger and its news feed complement each other.
Oh, and Yammer itself has been redesigned, too, using Microsoft’s Fluent Design System across all platforms. And Microsoft is also building it into Outlook, too, to let you respond to messages right from your inbox. This new Yammer will roll out as a private preview in December.
With this update, Teams is getting a number of other new features, too. These include secure private channels, multi-window chats and meetings, pinned channels and task integration with Microsoft To Do and Planner (because having one to-do app is never enough). Microsoft is also making a number of enhancements to Teams Rooms, with upcoming support for Cisco WebEx and Zoom meetings, the Teams Phone System, which is getting emergency calling, and the IT management features that help admins keep Teams secure.
A Teams client for Linux is also in the works and will be available in public preview later this year.
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