Special: Slack + Salesforce Emergency Pod with Packy McCormick of Not Boring

Acquired is live on the scene covering Salesforce's blockbuster $27.7B acquisition of Slack, with the help of the internet's #1 Slack bull (and top internet analyst in his own right), Packy McCormick of Not Boring. We dissect the deal itself, Slack's relatively short life as a public company, the impact of Microsoft and Teams, and most importantly what this means for enterprise SaaS startups broadly. And oh yeah — we have a ton of fun too. :) Note: you can find our full June 2019 episode on Slack's history and their DPO here: https://www.acquired.fm/episodes/the-slack-dpo Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Playbook Themes from this episode are available on our website at https://www.acquired.fm/episodes/slack-salesforce-emergency-pod-with-packy-mccormick-of-not-boring Links: Not Boring: https://notboring.substack.com https://notboring.substack.com/Packy on Twitter: https://twitter.com/packyMPacky's bull thesis on Slack from November 2020: https://notboring.substack.com/p/slack-the-bulls-are-typing

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

  Since I think I'm editing this one, trying to make it as easy as possible.

• 0:03David Rosenthal?

  Yeah, we didn't actually talk about that. Thanks, Ben.

• 0:08David Rosenthal?

  Hopefully, we can just one take this.

• 0:20Ben Gilbert?

  Welcome to this emergency pod of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder of Pioneer Square Labs, a startup studio and venture firm in Seattle.

• 0:33David Rosenthal?

  And I'm David Rosenthal, and I am an angel investor and independent advisor to startups based in San Francisco.

• 0:40Ben Gilbert?

  And we are your hosts. Well, David, here we are live on the scene. We've got a special guest. What are we talking about today?

• 0:49David Rosenthal?

  We are talking about Slack being acquired, and we have the best in the business, the number one internet and Twitter Slack bull out there, and probably, probably, we're going to, we're going to discuss how happy, but probably a very happy man here today, Packy McCormick of Not Boring. Welcome to the show.

• 1:08Speaker 02

  So great to be here, and I'm both happy and sad, which I'm sure we'll dive into.

• 1:13Ben Gilbert?

  So much to unpack.

• 1:13Ben Gilbert?

  He comes to us with mixed emotions. All right, David, you've got this lovely introduction written up here. Take us in.

• 1:19David Rosenthal?

  This is non-traditional in so many ways because this is a big week here at Acquired. We've got DoorDash, we've got Airbnb IPOs coming up. We're gearing up for those. We're going to be live on the scene for those. We have Roblox, which maybe we'll cover next season, a couple others happening. We literally just recorded an awesome special episode, which is coming out later this month, but we knew this was happening. So last week, we dialed up Packy on Twitter. We said, hey, if this happens, can you come on the pod? Will you do an emergency pod with us? And here he is. Super excited to do it.

• 1:51Ben Gilbert?

  Yeah, why doesn't every company just like leak their, you know, their acquisitions ahead of time? So that way, we have a little bit of warning. I think we got totally blindsided, if I remember, with LinkedIn, with Whole Foods. I woke up to like a frantic text from David around the Whole Foods acquisition.

• 2:08David Rosenthal?

  I had just moved back to the Bay Area, and I did it in my in-laws attic.

• 2:13Speaker 02

  And LinkedIn was acquired for right around the same amount.

• 2:16Ben Gilbert?

  If I remember, 24 billion?

• 2:18David Rosenthal?

  That's right.

• 2:18Ben Gilbert?

  Yeah, I think that's probably the interesting comp. But I don't want to get too far ahead of myself. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:44David Rosenthal?

  Yep, your risk surface changes every week now. A vendor turns on an AI feature or someone writes in a new model without telling IT and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote unquote "shadow AI" running with no security review at all.

• 3:05Ben Gilbert?

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• 3:26David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every ad tool, the whole environment.

• 3:45Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance and the work to earn and prove trust. We're huge fans of Vanta over here and literally hundreds of acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V A N T A dot com slash acquired for $1,000 off and just tell them that Ben and David sent you. So we've talked about Slack a little bit here on Acquired before. We did a full episode around their direct listing that we'll link in the show notes when this comes out as a podcast. You can, you know, if you want to remember Stuart's epic blog post, "We don't sell saddles here," or perhaps-

• 4:29David Rosenthal?

  Your story growing up on a commune in British Columbia.

• 4:32Ben Gilbert?

  Yeah, we will. We will not recount all that today. We'll focus more in on this transaction, but go check out the history there. Packy, you wrote a piece, I think, two weeks ago. Tell us what that was about.

• 4:46Speaker 02

  Two weeks ago, yesterday. And so the piece was, I've been a long suffering Slack bull. And the piece was, I kind of touched on Slack in a few different cases. And this one was, once and for all, I'm just going to put down my full bull case on the company. Because, you know, from its direct listing, it's kind of suffered, it's tanked, it rises back up a little bit, it tanks again. So I wanted to put out there that I thought that the bears were wrong. And obviously, the big knock on Slack was that Teams was just going to come in and kill it. It's actually reported really strong numbers, which just because the narrative has been so bearish, you look at Slack's numbers kind of through this lens of, ah, they're not doing so great because compared to Zoom, they're not growing, or compared to company X, their net dollar retention isn't so good. But they're really one of

• 5:31Speaker 02

  the best SaaS companies in so many different category of metrics that, you know, just wanted to put that bear case-

• 5:37David Rosenthal?

  Yeah, I mean, they're top quartile in just about every metric across the best remembered in cloud index, right?

• 5:44Speaker 02

  Exactly. And I mean, right, the fifth fastest growing company and the second best net dollar retention up there in terms of gross margins. So like, all the things that you look for in a SaaS business, plus the fact that pretty much any fast growing startup that you can name uses Slack. And as they grow, Slack grows with them. And, you know, Slack, as we'll discuss, I'm sure, just reported earnings and their numbers look good yet again. So, you know, it's one of these companies that has been underappreciated, but I think over time was going to build into a juggernaut.

• 6:13David Rosenthal?

  Well, so you hit publish on that not boring piece two weeks ago. You CC Mark Benioff. And although he's probably a subscriber at this point, right? I mean, he's gotta be.

• 6:23Speaker 02

  I I did. I have to admit that I looked it up and he's he's not. There are other.

• 6:27David Rosenthal?

  He probably used an alias. That's he didn't want to.

• 6:30Speaker 02

  That must be true.

• 6:31David Rosenthal?

  Yeah, cuz he didn't want to preface the deal.

• 6:33Ben Gilbert?

  If you see like Bruce Wayne or sort of like a.

• 6:36Speaker 02

  Hawaii guy 72 just signed up, so maybe that's him.

• 6:40Ben Gilbert?

  Love it.

• 6:41David Rosenthal?

  So he got the memo. He got the he got the he got the post today in Salesforce earnings 27.7 billion dollar total purchase price works out to I think 4586 a share in cash and stock. I think little heavier on the stock than the cash piece, I think, if I'm right.

• 7:03David Rosenthal?

  But roughly 50 50, like 55 57% stock. That's a 55% premium to where Slack was trading before the news was leaked last week. 85% premium to the most recent Slack stock price crash after their their earnings in September.

• 7:21Ben Gilbert?

  Yeah, we should be clear. Is this the first time that the price per share is above their the the first day of trading? I think so.

• 7:29David Rosenthal?

  I think it might be. Certainly, I don't think it's been this high, but.

• 7:34Ben Gilbert?

  So like reminiscent of Dropbox in that way where it's sort of never really it kind of traded down and then flat and then down and then flat. And then we've we've been kind of in one of the flat spots for a while.

• 7:45David Rosenthal?

  And and so let's see Slack is going to remain independent. Stewart is staying with the company, staying as CEO of Slack. Deal is expected to close next year. Still has to get shareholder approval from Slack shareholders, which we might discuss, might discuss Packy's thoughts on that. And it is the largest software deal since IBM bought Red Hat two years ago in 2018.

• 8:11Ben Gilbert?

  Wow, is it really? I guess. Yeah, I guess you don't see these these public to public mergers that often.

• 8:18David Rosenthal?

  Yeah. Well, I think though, actually pure software deals, I can't, yeah, I can't think of anything else that's happened since.

• 8:26Ben Gilbert?

  Hmm. Yeah, the, the thing, I definitely feel like it's the most akin to LinkedIn, at least the way that it's big, you know, $100 billion plus valuation or market cap tech company, buying something that, um, you know, was started decades, maybe, no, probably one decade, uh, with, yeah, multiple decades after their founding. Cause one was Salesforce. Salesforce was, uh, early 2000s, right?

• 8:53David Rosenthal?

  No, I think it was late 90s. It was maybe 99, 98, 99.

• 8:56Ben Gilbert?

  Oh, wow.

• 8:57David Rosenthal?

  Was started.

• 8:58Ben Gilbert?

  Yeah. So they're sort of buying into the next, uh, next generation of enterprise software.

• 9:02David Rosenthal?

  Yep. Yep. And of course, um, the other bidder for LinkedIn was.

• 9:06Ben Gilbert?

  Was Salesforce.

• 9:07David Rosenthal?

  Salesforce. And then they filed an antitrust suit against, uh, Microsoft about it, I think.

• 9:13Ben Gilbert?

  Really?

• 9:14David Rosenthal?

  I think they sued to block the deal. Yeah.

• 9:16Ben Gilbert?

  Well, I think we're already on to this sort of, uh, early theme of this episode, which is going to be, uh, the, the battle with Microsoft.

• 9:23David Rosenthal?

  Yeah. First, Packy, let's unpack the emotions. How are you feeling? I'm like a sideline reporter here. Like, how are you feeling? Are you like, are you ready to go to Disney World? Are you declaring victory? Is this a, is this a tough loss? Is this both? What's going through your head right now?

• 9:38Speaker 02

  I think it's a little bit of both, right? I, when I wrote about the company, it was trading in the, you know, mid twenties. And so for anybody who bought after reading a not boring, awesome win. For me, great win. Love all of that. But my bull case was not to, you know, wherever this ends up in the $45 range, depending on where Salesforce trades. I mean, even if you look at just kind of the other top quartile BVP cloud companies and how they've traded Slack, if, you know, assuming they just trade in line with those companies, kind of from the beginning of the quarantine, I think that puts them in the low $50 share range. So, and that's right now. And I really think Slack's potential is long-term as they build and grow and they keep retaining and growing with customers.

• 10:20Speaker 02

  So, you know, I was really hoping that this was kind of a three to four X stock. And it's just such a rarity right now during coronavirus to find a SaaS company that you think is somehow undervalued. And so now I have to go back to the drawing board and find kind of what the next, what the next Slack is. But, you know, the underpriced SaaS companies that are growing at 49% year over year are hard to come by right now.

• 10:42David Rosenthal?

  Totally. I mean, that's like, I mean, we might as well just get right into it. Like, what, what was the disconnect here? Because this is crazy. Like, every other SaaS company out there, especially, you know, a work from home stock, has been just off to the races. And like, what has kept Slack so beaten down for so long?

• 11:04Speaker 02

  The biggest number one thing that has kept Slack beaten down is just the threat of Microsoft Teams. And not just kind of a specter of Microsoft Teams, but Microsoft Teams and Microsoft generally has gone after Slack by name. And to hear Stuart talk about it, that's because if Slack threatens email, then Outlook is threatened, and then the whole Microsoft suite is threatened. And so they've put particular emphasis on the fact that they're crushing Slack. And so Slack, you know, has 12 million users or whatever. And, and then Microsoft reports that they're just flying by Slack. And when they released their charts showing that they're passing Slack, you know, atypically, they put Slack's name right on the chart and call them out. And, and according to Stuart, that's something that nobody, except maybe Larry Ellison at Oracle

• 11:48Speaker 02

  a couple of decades ago, ever would have done, calling out a competitor by name. And so it was this like real kind of threat that Microsoft felt, again, according to Slack. And so they put everything that they had going after Slack. And so I think you can look at the numbers a couple of different ways. You can either say, you know, Slack is growing faster than 49 of the 54 companies, or Slack and Zoom are really kind of the two most public facing or consumer-y of all of the work from home stocks. And Zoom is growing at 300% and Slack's only growing at 49%. What's wrong with this company? That's one of the reasons that I love it so much long term is, you know, there's, I think, switching costs and moats in general are these double edged swords. And Zoom doesn't really have a mode, right? But it's really easy to hop on a Zoom.

• 12:31Speaker 02

  We don't have a shared Zoom account and we hopped on a Zoom in, in one link. And so it's really easy for Zoom to grow. Whereas Slack, you have to set up an org, you have to build your integrations, you have to do all those things that pay off over time.

• 12:42David Rosenthal?

  So, and there's no reason why anyone would. Join Slack, let alone join Slack as a paid member unless you're part of a company. Whereas there are, especially post-COVID, like a million use cases why, you know, like my parents have a paid Slack, a paid Zoom account now.

• 13:01Speaker 02

  Yeah, if you get sick of that 40 minute limit, you're just gonna pay off. It's only, you know, 14 bucks a month and so you go for it. So I think that's been the big thing. Then there's other things like, you know, chat is just annoying and distracting. And particularly right now, people are like, oh, man, another Slack notification. I'm sick of this. But the real, the real reason it's kind of suffered has been, I think, that Teams, bare case.

• 13:19Ben Gilbert?

  Yeah, Packy, how much of, give us a sense of the relative user counts of Microsoft Teams versus Slack? And then on the Microsoft Teams one, you made a great point around, hey, it's actually more of a Zoom competitor than it is a Slack competitor. Can you dive into that a little bit?

• 13:36Speaker 02

  Yeah, so I think, let's say that Microsoft Teams has about 10 times the number of users as Slack doesn't, they crossed maybe at the $100 million range, the $100 million user range recently, whereas Slack's in that 12 million range and they haven't really reported numbers recently on that. They also have a really growing, and we'll talk about Slack Connect because I think that's one of the reasons Salesforce bought it, but this growing connection between companies and that's growing super, super fast.

• 14:03Speaker 02

  But Microsoft Teams, I mean, it's, it's not architecture the same way that Slack is and that you can just continually add teams within your organizations and have different kind of sub channels. It's, it's limited in the number of teams that you can set up. You have to be really, really thoughtful from day one in how you set up your channels and your teams within, within teams. It's getting confusing with the nomenclature there. But it's not meant to be a 10,000 person org chat tool. It's meant to be the hub for kind of all things Microsoft within an organization. And so that's really good because you're able to grow. Microsoft is phenomenal at distribution. My, I don't use a PC, but my wife and my mother-in-law do, and I go to their computer sometimes when they're opening it and Teams just pops up even though they're not team users.

• 14:48Speaker 02

  And so, you know, the, the active users count, I think, and then Slack has called this out in the past, is potentially a bit inflated.

• 14:55David Rosenthal?

  Well, Microsoft's done this forever. I mean, um, back in the Azure days, they were including oh, three, 65 in the Azure numbers. And so they'd report numbers to the street like, oh, Azure's on fine. It's like, well.

• 15:06Ben Gilbert?

  Oh, it was, it was, it was Microsoft's fastest business ever to a billion dollars in revenue, but I'm pretty sure that included the internal accounts as, yeah, as revenue drivers.

• 15:17Speaker 02

  So they're up to their, you know, they're up to their old tricks again. And in this case, depending on how you think Salesforce competes with Microsoft, kind of worked, right? If you really do think an independent Slack is a threat, then Microsoft's strategy and Microsoft using its distribution kind of bully pulpit, uh, really kind of knocked out a competitor here.

• 15:37David Rosenthal?

  So what do you think like, yeah, this is super interesting. Why, we'll get back to Slack itself and Salesforce in a minute, but, um, why do you think Microsoft, why do we think Microsoft took this approach of so directly comparing Teams to Slack? Because it's, as you point out in your, in your piece, and you know, I think it's really not like Zoom is the big competitor for Teams. And yet you don't hear Microsoft talking about Zoom at all. Like what's, what are the, what's their thinking here?

• 16:08Speaker 02

  Zoom is not a platform and doesn't have line of sight to being a platform. Whereas if you're on Slack and you can use G Suite and it's integrated and you can use Figma and it's integrated and you can use the 2,400 different integrations that they have, then Slack all of a sudden becomes this hub for essentially a, a office suite that is comprised of best-in-class software and then all brought into one place together. And by the way, it potentially kills email, certainly internally and maybe increasingly externally. And so it's just a more direct threat, whereas the people use Zoom, they use Zoom, but you're still going to go back and use Excel and PowerPoint and email and all of the other things that you would have used otherwise.

• 16:49Speaker 02

  So it doesn't, it's not a threat to Microsoft's cash cow in the way that Slack would have been.

• 16:55David Rosenthal?

  Interesting. Because yeah, that's like, one of my big questions here, too, is like, why wasn't Zoom the one that acquired Slack here? Like, to me, that's a very compelling combination.

• 17:06Ben Gilbert?

  Your, your stock is potentially trading at a value that's worth a lot more like it's cheap currency. Like, why wouldn't you use it to go make acquisitions?

• 17:14Speaker 02

  I wrote a whole piece on, on Zoom and this exact point that what do you do when you have a stock that is by all measures incredibly, incredibly expensive and you have no moats? And the answer is you go out and acquire companies. I didn't have Slack as one of them, probably because I just wanted Slack to remain as an independent company.

• 17:30David Rosenthal?

  But You didn't want to trade your shares in for Zoom shares?

• 17:33Speaker 02

  Not at that, not at that valuation. I didn't. But I mean, they've, they've tanked a little bit over the past, uh, the past day or so. But yeah, I mean, I think Zoom should be more requisite here.

• 17:44David Rosenthal?

  Totally. Um, but yeah, that's a good point on Microsoft. Like, their whole, it's always, even though, you know, it's new Microsoft under Satya and all that, and, and it totally is in many respects, the strategy remains the same, which is, we have the best distribution channel in the world for enterprise software. We have core use cases where we're the dominant app in the, you know, vast majority of businesses that exist in the world, primarily being email, but also Word and Excel and PowerPoint 2. Um, and we feed stuff into

• 18:24David Rosenthal?

  that channel. And so like, the stuff that they feed into the channel is great and additive, of which video is super important. And that's why they're doing what they are with on the product side with Teams. But Slack, as small as it is compared to Microsoft, is actually like the one that's like, hey, we want, and Stuart has said in many times, like, we want to be the next Microsoft. You don't hear Eric saying, we want to be the next Microsoft.

• 18:50Speaker 02

  Eric is happy having just a very well running video product. Exactly. Yeah.

• 18:56Ben Gilbert?

  Well, I do think, and I can give a couple of more data points, too. I mean, Microsoft, a couple of years ago, decided to go all in on Teams. And so they're shutting down or rolling in Skype into Teams. They've, you know, Communicator and Lake are long since sort of dead and rolled into the Skype brand, but all of that is sort of becoming Teams now. Same with a lot of their, the, what used to look like Office 365 dashboards, Teams is becoming that sort of central hub for, for everything. And I know they did a lot of internal reorgs, too, to kind of put a lot of people who are working on suite wide or cross-platform

• 19:35Ben Gilbert?

  things under the auspice of Teams. And so that, they really are, you know, they really are looking at it like, well, we can bring a lot of users right away, even if they don't know that they're users, and then sort of increase time in app and engagement and usefulness of this app over time. And I think, you know, Packy, the thing I go back to is, let's say, Microsoft has that sort of 120, 130 million active Teams users. Most of them are probably using that either because they have Office 365 and it's a launcher of sorts, because their team technically uses it, even whether or not it's sort of their main mode of communicating. But more importantly, because we're all in work from home and they're using it for their video calls,

• 20:18Ben Gilbert?

  because it's the free and corporate approved video calling software that they can use. And so I really liked the point that you made, which is like, it is a total red herring to continue comparing Slack's users to Teams users, because it's complete apples and oranges, and the Slack share price is depressed because it doesn't look good compared to this thing that you really shouldn't be comparing it to.

• 20:42Speaker 02

  Exactly right. Yeah. If you compare it to video products, when everybody is on seven video calls a day, and it's very easy to set up, it's not going to look nearly as good as it would if you compared it to anything else that's a little bit tougher to set up and involves the full Teams participation.

• 20:57Ben Gilbert?

  Yep. Well, I think the, my kind of thesis on this whole thing is what we're really seeing is like the, the anti-Microsoft. I don't think it's like an alliance. It's really like the anti-Microsoft consolidation where if Microsoft is-

• 21:14David Rosenthal?

  This isn't like the rebel alliance here. This is like-

• 21:17Ben Gilbert?

  Right.

• 21:18David Rosenthal?

  Another empire stepping in.

• 21:20Ben Gilbert?

  Right. And I think a blog post just went up by Aaron Levy talking about how this is a show of force from best-in-breed applications. And whenever you see best-in-breed in the enterprise, the way to sort of decode speak that is Microsoft is not best-of-breed. Microsoft is the full integrated system that's best at nothing. And I don't, I don't know if I totally want to make these my words, but this is the, the viewpoint of the best-of-breed argument. They're best at nothing, but they're the best integrated. And so if you're buying from one single provider, it's the proverbial enterprise one throat to choke. You know, it, it works best together. You can have one person for your support. You can have one rep.

• 22:03Ben Gilbert?

  You can have one license. You get bundled pricing, all that stuff. And when you see best-of-breed, what that usually means is people buying from a bunch of different vendors, but it's the best, you know, purpose-built software for, for each of those things. It's very interesting to start to see consolidation among best-of-breed applications being from one company. And one does have to wonder, is this the first of several? Slack might be the most important because it is the platform, the entry point, the place which all, you know, you can branch out to many of the other apps from there. But if, if Zoom weren't so expensive, you know, would we see that? Is there some way that Salesforce has ambition to find other best-of-breed applications and bring them into the umbrella too?

• 22:48David Rosenthal?

  Well, and you know, you have to think, regardless of whatever Aaron and Box wants to do themselves, this is fantastic news for them and for their valuation, right? Because at a minimum, you know, file storage is going to be a big part of that puzzle. So either Box or maybe Dropbox is-

• 23:16David Rosenthal?

  One of the next items on the list for Salesforce, or if not, at a minimum, they just got a lot more strategic. And they can do, I'm sure they already have a partnership with Salesforce as a distribution channel, but that's going to become even more important. And if Salesforce is now going to be pushing this like, hey, best of breed, not easiest to buy for your IT department. You know, this is going to be a tailwind to all other, you know, I'll use this term. I don't mean it pejoratively, subscale software and productivity companies out there. I just mean subscale in that like you're not Microsoft or Salesforce. This is, this is just going to be, I think, a great for their go to market and distribution.

• 24:02Ben Gilbert?

  Yeah, the developer equivalent of this is the Microsoft stack versus the open source ecosystem. And now you sort of have the Microsoft productivity stack versus the best of breed ecosystem, of which Salesforce is now the very credible centerpiece. You know, in the open source ecosystem, it was like, well, you know, and this is a decade ago, I use PHP as my scripting language, which means there's this whole variety of open source vendors that I use for all the different pieces in my stack, or now Python or Node or whatever. And I think the, the way to think about that in the productivity world is like, well, yeah, we use Slack. And the question, this is the leap. It's like, we use Slack and sales for like, the analogy starts to fall down for me. So this is, I have this queued up. I need to quote this. Here's the key line in the press release.

• 24:47Ben Gilbert?

  Combining Slack with Salesforce Customer 360 will be transformative for customers and the industry. The combination will create the operating system for the new way to work, uniquely enabling companies to grow and succeed in an all digital world. And then you scroll down and you see Slack will be deeply integrated into every Salesforce cloud as the new interface for Salesforce Customer 360. Slack will transform how people communicate, blah, blah, blah, blah. So what does it mean to be this new interface to Salesforce Customer 360? And like, like, what does that actually mean in practice? Does that mean that this Salesforce Customer 360 is like the very best Slack bot to ever exist and people interact with 360?

• 25:32Ben Gilbert?

  Like, who's got ideas?

• 25:34David Rosenthal?

  They're going to rebrand Slack bot to Salesforce bot.

• 25:39David Rosenthal?

  Oh, man.

• 25:40Speaker 02

  Then he off that.

• 25:41David Rosenthal?

  Yeah.

• 25:42Speaker 02

  Yeah, I, I was talking to my friend about, about this deal earlier and he was like, getting, getting Salesforce as a company is like somebody giving you like the chassis of a car and then a box of parts and then having to figure out how to put them all together before you drive it. The last company I was at, the Salesforce implementation was one of those things that every month was about a month from being done. And so it's really hard and, and maybe that's why, you know, Slack over time becomes kind of the on-ramp to the whole Salesforce ecosystem and they do figure out a way to integrate it because Slack, for all the work that they've had to do to make their onboarding a little bit easier and they have struggled there, is certainly a much easier product to onboard to your organization than something like a Salesforce might be.

• 26:24David Rosenthal?

  I don't know. I read all of that and I'm just like, that translates to me as Slack just, uh, upped their sales, their, their own sales, uh, force, uh, by like a hundred X in terms of headcount and power. And that's what that translates to for me.

• 26:43Ben Gilbert?

  Yeah. And in the sort of like classic acquisition category that we always do on episodes, I mean, this is a distribution deal, right? Like this is not, like the product velocity is not going to change. Salesforce is probably not going to integrate the Slack product deeply into the existing Salesforce. I mean, they say they are, but it's unlikely. I think it looks a lot more LinkedIn where it's a totally separate thing and they leverage the Salesforce distribution to be able to get it into more enterprises.

• 27:12Speaker 02

  That sounds right.

• 27:13David Rosenthal?

  You know, the, Becky, I think you made the, this point, well, several times. Slack's growth story over really its whole life as a company has been, we get small innovative organizations to start using the product. Uh, and, and sometimes that's, um, small innovative organizations, teams within larger companies. Uh, but oftentimes it's startups. We get them to start using the product and then it grows. As those companies grow, we grow. Uh, and you made the point that like, yeah, so you're spending all the sales and marketing to acquire these customers. But then as those customers grow and they retain and they and they expand with you like

• 27:55David Rosenthal?

  that's going to lead to a free cash flow monster, hopefully in the future. What's missing from that playbook is a credible way to go get the big organizations. And this feels like the unlock to that.

• 28:10Ben Gilbert?

  Yeah, this makes sense. The only question I meant then is if you look at it like great, you know, sales Slack is a great way to, you know, index startups. Basically, if you want to make a bet that startups grow and then have lots of money to spend in the future because they're cash generating machines and need lots of great tools, like maybe the place that Salesforce actually ends up investing is a migration path from you've loved Slack and now we make it easy to onboard to the full, you know, Salesforce CRM suite. I just don't, you know, it's probably my product background, but like, I don't, I don't see that. Like, it's hard for me to imagine like what that bridge looks like where you're like, oh, great, you and your teams have all been communicating in this place and therefore somehow your Salesforce

• 28:54Ben Gilbert?

  CRM implementation will now be easier.

• 28:57Speaker 02

  Well, I think the big thing here, and they've they mentioned it in the press release as well, is Slack Connect. And to the extent that you think that Slack Connect will be a way that teams can, that a company can communicate with all of the different partners or clients that it has, then that makes a ton of sense for a Salesforce integration where you're not just plugging into email and tracking your email conversations, but you have your lead right there. You click, start a, start a Slack Connect channel and then you're in conversation right within the Salesforce product. So to the extent that there is an integration, that's where I see that happening. Slack just reported their numbers and they grew, I think, from 380,000 Slack, Slack Connect

• 29:38Speaker 02

  endpoints to 520,000 Slack Connect endpoints in the last quarter alone. And so this has been a huge area of focus for the business, maybe in retrospect, raring up for a Salesforce acquisition because this certainly does make them a lot more attractive as that kind of, I think Ben Thompson called it the, the work social network. But certainly I think that's the most appealing piece of the product if I'm Salesforce.

• 30:01David Rosenthal?

  Yeah, let's, let's talk a little bit more about Slack Connect. What, well, why is this so strategic for Slack? And I mean, this has been the drum that they've been beating, basically, not their whole life as a public company, but most of it, right?

• 30:17Speaker 02

  Yeah, I think it's strategic for Slack. For someone, Stuart's talked about the product and how to describe it. And I wrote about this in the piece, I'm repeating myself here. But when they've talked about the product, they've always said it's hard to explain. But when you try it, you know it. And so I think what Slack Connect represents is if you want to work with Stripe, or if you want to work with Amazon and the Stripe or Amazon team thinks it's a lot easier for you to communicate in a shared channel, then guess what? Law firm, finance firm, lender, all of that, you're going to join Slack. And then you're going to try it. And because the product is better than a Microsoft team's, you're going to love the product. And then maybe you'll start paying for Slack and then maybe it'll spread in your organization.

• 30:58Speaker 02

  So I think more than anything, it's a way for people to kind of try before you buy the Slack product because your kind of innovative partner has told you that they want you to use that product. And it actually, you know, when I was at Breather before, Cushman and Wakefield, the first time that they used Slack was to set up a Slack channel to talk to us. And so I think like that, you know, that's that in action. And you can see that happening kind of writ large, just so the companies can kind of keep that whole conversation in one place and one interface that they're familiar with.

• 31:26Ben Gilbert?

  Hmm. And how does shared channels between organizations play into that?

• 31:31Speaker 02

  So I think shared channels has kind of become a part of Slack Connect. And that's what Slack Connect is. I think shared channels was just the first kind of iteration. But what Slack Connect is, is a bunch of shared channels between organizations.

• 31:43Ben Gilbert?

  Yeah, that makes sense. I have, I mean, for what it's worth, and we have a super unique use for Slack at Pioneer Square Labs, because we have one for the studio and then we have one for every company. And it helped, it actually is very meaningful and helpful in the transition. And the transition, we spin out a company to be able to have shared channels until that company starts closing them off to us and then actually uses them on their own. But at the very beginning, you know, we're the whole team, except for the founders. So it's great to have that, that bridge set up. But yeah, I do wonder, you know, it has always seemed like in Slack's pre-public lifetime, they were an internal tool and email was the external tool. And it seems more and more like Slack is trying to also find natural ways to be your,

• 32:26Ben Gilbert?

  your external tool, which is kind of an interesting analogy to Salesforce, where Salesforce is a way, Salesforce is an internal tool, but it measures all of your external communications and external deal status. And so there's got to be some. You know, again, Lucy Goosey on the the actual product implementation, but you can see how that philosophically aligns with where Slack wants to go.

• 32:47Speaker 02

  And there is this great tweet, and I think they are kind of trying to articulate email at this point, that this great Slack tweet from 2013, there's like, people saying, we want email dead. If we wanted email dead, it'd be coldened in the ground. So they've been kind of dancing with whether or not they're an email killer for a very long time, but it seems like that's exactly.

• 33:06David Rosenthal?

  One of the best parts of your piece, you had used the Wayback Machine and you had Slack's like, marketing positioning and how to like, you know, I mean, I think this is the, to me, this is the whole point of the story here, which is like, there are pros and cons to Slack and like, they've done some really good stuff for the past year and they've done some not so good stuff. And I think one of the things they've done not so good on is like, the hell is this positioning? Like, I get Stuart's quote, like, I get it on Slack too, you gotta use it to know, but like, come on, man, you're like an eight year old company at this point, you're a public company, you gotta be able to explain what you do succinctly. And like, even as a public company, they've been just iterating, that's just like iterating, they've been massively changing their main marketing message several times.

• 33:46Ben Gilbert?

  Well, I give them credit for that. I mean, they, they, they went from a thing that was like, trendy in startups to like, useful in addition to all your other forms of communication to, oh my God, we're all working from home and now it's essential. So like, they're, they're, they're full pivot to like, where your virtual office, I can't remember exactly what the phrase is, but I think it transitioned from like, where work happens to your virtual office. I, you know, more power to them for that.

• 34:12David Rosenthal?

  Fair enough. But there was the moment in there where it was like, we're the email killer. It's like, okay.

• 34:18Speaker 02

  Yeah, totally. And that resonates with people though, right? Like, I think, you know, it doesn't describe fully what they do, but something as simple as we kill email is something that people can really rally behind versus we're where work happens. People don't know what that means. And so there is like, maybe, you know, Stuart was a philosophy major and. You know, logician and all of that. And so maybe there is too much of an emphasis on getting those words exactly right versus just resonating with what people wanted the product to do.

• 34:46Ben Gilbert?

  It is also a classic sort of PR move to describe a problem and let people assume you are the answer to it and assume it in their own way. Because, you know, in fact, Salesforce has a great example of this. And we tweeted a snarky comment about their old no software slogan.

• 35:06Speaker 02

  Oh, yeah, that's right.

• 35:08Ben Gilbert?

  People hated all the configuration that came with on premise software. So they just made their tagline, no software, you know, the software with the thing crossed out of it. And like, that doesn't say what they are, but it does say, oh, yeah, I hate that. Like, awesome. You guys are the answer to that. And you can imagine what the answer would be. And I, the, one of the funny things about enterprise software broadly and Salesforce specifically is unless you are an individual contributor, whose job it is to use that software, you actually rarely get a glimpse of it. Like, it's not like, like indie developed software that proudly shows screenshots on the website. It's sort of like, the UI is, is hidden from you until the very last moment when you actually have to use it. And often

• 35:48Ben Gilbert?

  in, in sales demonstrations, it's not actually shown to you, especially if you're, you're not the actual end user. So I guess the, this is a little bit of a roundabout way of me saying like, have, have either of you ever seen Salesforce's new lightning interface?

• 36:05Ben Gilbert?

  Like, I've heard it talked about a lot. Have either of you seen it?

• 36:07Speaker 02

  No.

• 36:08Ben Gilbert?

  I, I think that's, that is in stark contrast to Slack's sort of like, philosophy of everybody listening to this knows what Slack looks like. And even if you, you know, didn't use it at your company for a while, you were well aware of what the feature set of that software is. And Salesforce is the ultimate sort of embodiment of enterprise software sold through traditional enterprise ways. We don't need to show you pixels until we absolutely need to, which is often post sale. And like, we're going to sell you on a dream. I don't exactly know what point I was making there, but yeah.

• 36:44David Rosenthal?

  It is true, though. I mean, I got, I remember the first time that I actually used Salesforce, not the Lightning interface, whatever, whatever that looks like. I was just like appalled at how bad it was.

• 36:58Ben Gilbert?

  Yeah, but it wasn't software. And so whoever bought it.

• 37:01David Rosenthal?

  It's not pretty software.

• 37:02Ben Gilbert?

  Whoever bought it sort of assumed that it would solve their problems. All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 37:19David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 37:33Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 37:43David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 38:01Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 38:17David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 38:34Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 38:43David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you.

• 38:54Ben Gilbert?

  Well, I think this is an interesting time to move into pricing and sort of conversation around, you know, they paid $27.7 billion. Let's contextualize that in the size of the business in revenue. And obviously, they're not profitable. Paki, you're, you know, one of the best educated people in the world on this, having just done a bunch of research. So how big of a business is this? And then how reasonable of a price is it for that business?

• 39:23Speaker 02

  Yeah, so the business is, and they just again, released their numbers for this quarter. So $235 million this quarter. Say next year, you know, this is a billion dollar run rate company with 86% gross margins that just became free cash flow positive and grew from 10 million, I think, to 36 million in free cash flow this quarter. So that's a really nice improvement from the company and kind of the thing that you expect to happen when you spend a lot of money to acquire customers upfront and then over time they retain and more of that cash drops to the bottom line. So it's a moderately sized business, right? Like you're paying 27.7 times next 12 months revenue. So it's not a, not a cheap multiple on the business there by any stretch of the imagination.

• 40:08David Rosenthal?

  What is cheaper expensive these days? Like, I don't even know.

• 40:13Speaker 02

  Yeah. So it's, you know, it's not cheap. Nothing's cheap right now. You know, depends, we'll see if you think it is strategic and if they can just push it through the, the sales force distribution channel. But you're essentially paying 27, 28 times next 12 months' revenue for this business, but a business that is still growing 40 to 50% year over year. A business that does have phenomenal margins and a business that is, you know, increasing its free cash flow at a pretty rapid rate here.

• 40:41David Rosenthal?

  What's the, I don't know if you had time to look yet at the, you said it was 240 revenue for this quarter or 235, something like that?

• 40:52Speaker 02

  235, I believe.

• 40:53David Rosenthal?

  235 million. What year-over-year growth rate, is that still sustaining in the 40%?

• 40:58Speaker 02

  So that might be why they, yeah, that might be why they sold. Last quarter, it was 49% year-over-year. This quarter was 39% year-over-year. So pretty dramatic growth.

• 41:08David Rosenthal?

  Yeah, that's. So they had a bunch of good news to announce this quarter in Slack Connect. But yeah, that's, that's got to be a pretty concerning top line number. Like if you're, because there's no reason that should be slowing, right? Like, um, there should be tailwinds at the company's back. They should still be getting net expansion. Now, in the beginning of the pandemic, uh, that expansion got hit because companies were laying people off. And so that was leading to contraction in monthly revenue, uh, in their existing accounts. But I gotta think most of that's behind them. So, hmm, interesting.

• 41:49Speaker 02

  Yeah. Paid customers up 140% year over year. Slack endpoints, uh, connect endpoints up 240% year over year. I'm looking to see if they talk about net expansion because that's obviously been something that they've been pretty, uh, pretty proud of that does not show up at least in the press release. And so maybe, you know, if that contracts again from 130 before the pandemic to 125 to now 120 and revenue slows a little bit, then that begins to, you know, paint a picture that maybe you want to get out before that happens.

• 42:18David Rosenthal?

  Yeah. Well, because that's, that's the, um, to me, that's a big question here, which is like, okay, we've talked about a lot of strategic reasons to do this deal. All makes sense and whatnot, but they did just flip into cash flow positive territory, them being Slack. They were still growing rapidly. They're still top quartile in all these best emerging cloud index metrics. Why sell, you know, like, um, I mean, unless they just felt like they were going to continue to get hammered by Wall Street and didn't want to deal with that, but like, um,

• 42:53Ben Gilbert?

  It's a 55% premium, David. Like I, you know, that's pretty rare as a public company to get. We, we, in the past, we've looked at these and we've said like, well, 20% premium is basically baseline. And if you can get up to 30% or 40% even like that, you know, that's good, do the deal. But if your stock price hasn't ever hit your listing price and you've been basically flat, if not down over, you know, the 18 months or 16 months since being a public company and someone offers you a 55% premium, it's hard not to take it.

• 43:25David Rosenthal?

  I mean, I think that's true. Well, I want to hear Packy's thoughts.

• 43:28Speaker 02

  No, I mean, I think that's true. I think for me, not having to sit inside of Slack and sell against Microsoft every day, I think this could be a triple on its own in the next year or so. And so it's disappointing from that perspective. On the other side of the table to say, yeah, we're going to plug you into Salesforce's Salesforce and you're going to be able to kind of match the distribution power, at least approach the distribution power of a Microsoft and you're going to be able to do all of these things that you want to do to connect the full ecosystem of best in class products. You can see that that's kind of a tempting thing to be able to do in Microsoft. For the amount that they say that Microsoft isn't that big a threat, they also sued Microsoft for leveraging their

• 44:12Speaker 02

  distribution advantage against them. And so it's not as big. At the very least, it's a big annoyance and a pain to deal with day in and day out. And so maybe if you combine that with the fact that it's a 55% premium, you're happy to take that deal.

• 44:29David Rosenthal?

  Yeah, I think there has to be some element, though, of just fatigue on Zoom's part to do this because Slack? Oh, sorry. Zoom is not fatigued on Slack's part to do this. Because again, to me, just like they're coming back to like, they just flipped a cash flow positive. So like, there's no gun to their head, you know, other than just people being mad at them. And I wouldn't have necessarily thought that they would care too much about that. On the other hand, I also don't think, based on our episode, our main Joe episode that we did on Slack, I also don't think that adding several more billions to his net worth matters that much

• 45:14David Rosenthal?

  to Stuart. So maybe he was like, well, this is going to be the best chance to realize the mission the soonest. But it's still, it's just a little perplexing to me.

• 45:23Speaker 02

  Yeah, you wonder if they couldn't have gone out and just acquired Frank Slutman to come in and, and rallied the troops and rallied the sales force and go out and sell against Microsoft. If, you know, Stuart's very much a product guy and not a sales guy. And maybe, maybe that's the other answer here. And so instead of bringing on a new CEO who's really more of an enterprise SaaS guy, you just sell the business and, you know, you have the successful exit out of 55% premium and all of that. Because I think that's another, another people talking.

• 45:50David Rosenthal?

  And Stuart gets to continue being Stuart and being the product guy. And, you know, Slack Connect, like, it's a big vision and it's a big product. And they've done really well for the product standpoint from that. And he doesn't have to go be Frank Slutman and Benioff can be Frank Slutman.

• 46:05Speaker 02

  Exactly.

• 46:06Ben Gilbert?

  You have to wonder if this is the beginning of the rebundling of enterprise sales. Like, we spent the last five to eight years in an era of, well, if you think back like 15 years ago, Bring Your Own Device happened. And then the last five to eight years, it was anybody with a credit card gets to buy any old SaaS service. And there's subscription fatigue in a big way at, at any company. I mean, we, like, we're a 22-person company at PSL. We have a spreadsheet to manage all the subscriptions that everybody signed up for. And then there's harassing at the end of every month. Who signed up for this on what card? I can only imagine how painful that is at, at enterprises. And so you have to imagine too, if Salesforce is kind of saying, actually, we have the opportunity

• 46:50Ben Gilbert?

  to run the Microsoft playbook here. And, uh, and we're going to continue to see more, more consolidation here to alleviate the pain of procurement around, um, well, basically people going around procurement.

• 47:04Speaker 02

  And I think, yeah, I don't know. I think that's an interesting point. And I can't imagine that, you know, as the companies that are used to buying Microsoft and Oracle and even Salesforce and all those kind of age out. That the new wave of startups is going to be like, you know, we'd really love to buy from is Salesforce, or we'd really love to buy from Microsoft. And so maybe there's this transition period that we're in, which is like a five to 10 year thing. But I think the way that that ends up getting solved is, is, you know, their company is like ramp on the corporate card side that that is trying to show you your spend in one place and show you where you can save. And so whether it's a corporate card, whether it's a software solution that kind of comes in and, and kind of replaces the spreadsheet there, I think

• 47:46Speaker 02

  there will be other solutions than companies, you know, growing tech companies are becoming a bigger and bigger part of the market. And I can't imagine that they enjoy working with Salesforce more than they hate managing all of those expenses.

• 47:58Ben Gilbert?

  And, and Packy, you raise a great point, too. I think it's, it's sort of novice of me to suggest that the point of integration in 2021 would be the same as the point of integration in 2005. Like, the rebundling won't happen in the same way that it got unbundled. The rebundling will be at the credit card level, or, you know, and, you know, not, someone's not going to go build the Microsoft bundle the way Microsoft built the Microsoft bundle.

• 48:22Speaker 02

  I think that's right. So it makes this fun.

• 48:25David Rosenthal?

  Indeed, indeed. Well, speaking of prognosticating about the future and strategic decisions in the landscape, I don't think we can leave this section without talking about what I think you wrote about really eloquently in your piece about your take on the bear case for Slack as an independent company. And this actually totally jives with our friend Jake Saper over at Emergence is about to publish a blog post about this, like, the flip of this being an investment theme. He calls it deep collaboration. But like, that

• 49:07David Rosenthal?

  there are all these other workflow apps out there now, whether it's Figma, or Notion, or whatever, that actually have chat and collaboration built into them. So you don't need to go over to Slack in order to collaborate on a Figma document, or if you're working on a legal document with Ironclad, or something like that. Let's talk about that, because I think this is, this is a really astute observation.

• 49:31Speaker 02

  Yeah, that's fascinating. And a lot of this comes from Kevin Kwak, who's more astute than I am on these things. But the point being that, you know, his point that he makes in a great piece that he wrote on Slack is that Slack is really, once every piece of what a business does has a Figma-like software that has collaboration embedded, then Slack becomes this kind of like backup, use it for emergencies, something has gotten wrong in the collaboration tool. So let's go over to Slack and chat about it. Or it kind of becomes, you know, what email is today, which is like we make a company announcement here, or we do things that are more broad, but when we actually want to get work done, then you're right, we go into Figma, or we go into Pitch to do our presentations together in there.

• 50:16Speaker 02

  So there's all these different things. I think that is, that does get a little bit confusing. His solution, and one I think is going to be a pretty hot target right now, is something like a Discord that is a chat tool that exists on top of all of the other kind of collaboration tools. And you can be video chatting. I wrote about remote work and kind of all the work from home products that are being built natively for remote work yesterday. And there's five good options that I saw just in a couple of days of research that are trying to really kind of build something that feels like an HQ, both in terms of like, schematically, it feels and looks like an HQ, but then also, you know, there's different noise levels that you hear when you approach people or when you go further away from people, or you pull up the code that you're working on

• 51:00Speaker 02

  in a, right there on the screen, and you all have your little video circles around that. So there's some really interesting software being built in the space. And so maybe that's, I mean, to me, that's the bear case, right? If you're bull case on Slack, which mine is, is that they can acquire all the young, fast-growing companies and become this kind of like central hub for everything they do and grow with them, then the biggest threat to the company is that there's an even better, kind of newer wave of software that comes in and cuts off that bottom and takes all of the younger companies that are coming in and maybe even starts going up and stealing the stripes in the other companies there. So to me, that's the big risk, is that there's one collaboration software that people interact with directly, and then two, the kind of next generation of Slacks that are built more for this world

• 51:42Speaker 02

  where we all have to be collaborating with kind of whatever that software is as the central hub versus as something that we chat with each other on in the office.

• 51:52Ben Gilbert?

  I love that point. I think it's so astute that like the, the worst nightmare for Slack is that chat gets good in apps. And, and suddenly I'm like, oh yeah, Slack, ah, I pop in there to like drop a GIF in random.

• 52:07Speaker 02

  Happy birthday. Is there something to be a big use case?

• 52:10Ben Gilbert?

  Right. But yeah, to the extent that work stops, I mean, it's funny where work happens, to the extent that work gets federated and happens in apps rather than in the central, you know, communication nexus, they're in big trouble. And I love your idea of open up this, the Slack API, not in a way that's like build, build bots within Slack, but in a way that's like embed Slack in your app so that you don't have to roll your own Slack. Cause it's a crap ton of work. Anytime anybody's like, well, let's implement chat. Like see Zoom as example A. It's chat is awful. Like sometimes randomly I'll paste a link and it won't hyperlink it. Like, I mean, there's, this is a massively successful company with a, just a chat where

• 52:52Ben Gilbert?

  every time I try and send a message to one person, I accidentally send it to everyone. And I think that like, uh, there's, there's huge, um, defensive opportunity for Slack to, to be the way that you implement chat in your app.

• 53:04Speaker 02

  And they just started hitting at it too, before this. And he was on, he went on the 20 minute VC with Harry Stebbings and talked about kind of being this connective tissue between different apps and like, really like what the next level of integration looks like for Slack. And so that would have been an amazing way to do this, I think, to be able to just embed Slack in different apps. Cause to your point, everything that they've done that seems really simple and that makes chat seem really simple is really, really hard. Like I included the graph of all of the decision tree that needs to happen to decide whether at 8:05 PM to send you a notification if I Slack you. And it's really complicated. And so like, there's all that stuff that you can just offer as a service through other products that, you know, would have been interesting and maybe will still be interesting

• 53:49Speaker 02

  in the combined company.

• 53:51David Rosenthal?

  If either you are more knowledgeable than me, because I've only used the product a little bit, can we double click on Discord a bit and talk about how that's different? And why it's maybe more suited to this, I don't know, I want to, probably the wrong word, but embedded type use case, or like coexisting with the actual apps?

• 54:13Ben Gilbert?

  Let me first make my snarky comment, which was if you thought Slack was unintuitive to learn, wait till you see Discord.

• 54:20Speaker 02

  It's the first piece of software that's really made me feel old, using it.

• 54:24Ben Gilbert?

  And my, my second, you know, the, the, the other side of that, which is viewed as a positive, is it's much more customizable. Not like crazy. I mean, it's not MySpace with an open HTML canvas, but it's, you know, it's the Android to Apple's iPhone, where it's, it allows far more extensibility in the chat canvas. So the question is, so their go to markets have been entirely different, obviously gaming and influencer communities, rather than the enterprise. And in fact, Slack has made it sort of difficult to use the product for any of that, anything that's not the enterprise and have sort of turned a blind eye to.

• 55:00David Rosenthal?

  Cough, our acquired Slack.

• 55:02Ben Gilbert?

  Yeah.

• 55:02David Rosenthal?

  Oh, my gosh. I've been beating the drum with so many people there. I've been like, please give us some basic features. We are evangelizing your product.

• 55:10Ben Gilbert?

  Yeah. And my favorite, the, you know, longtime acquired Slack members will know that my, my particular bee in my bonnet around that is because we are using it as a community product, it doesn't like respect how admin-y we want to be. And so it will email like all users and tell them like, oh, you're hitting X limit. And you're like, what? It's like thousands of people getting this email and it's reporting analytics like, oh, there's this many of you are active this month or this week. And you're like, why are you sharing that with all these random? So, um, yes.

• 55:43David Rosenthal?

  I know we're not going to pay you $3 million a year, or whatever we have to for our 6,000 people in the acquired Slack.

• 55:49Speaker 02

  But that is such a good point, right? It's not just the product, it's also the way that they, the way that they charge and the business model where Discord. Makes people pay for upgraded features like better video or different like things that maybe super users might want, but it doesn't penalize everybody else. And so I don't know how you do that if you're Slack and then how you communicate that to the enterprises that people are getting all these other. So it's more complicated than just do what Discord does. But certainly from a business model perspective, Discord handles those use cases a heck of a lot better. Much better.

• 56:22Ben Gilbert?

  Yeah, I mean, so there's the marketing side of it and like the ideal customer profile where, Slack targets the enterprise and Discord targets communities. But it's, I think, an overly simplistic view of the two products to call them similar or the same other than who they're sold to. Because I think when you think about all the deeper features of each, they're way different. So like the ability to have a shared channel between two enterprises, or the ability to create a Slack bot that communicates with a time tracking tool, like those are not the types of things that Discord has ever built toward. And I think it's like the classic, enterprise software especially, but all software is that iceberg where 90% of the

• 57:06Ben Gilbert?

  real hard work is below the surface. And I think it's only that 10% above the surface between Slack and Discord where it actually feels like the same thing.

• 57:13Speaker 02

  I think that's, I think that's right. But I do think that this next generation, companies like Huddle are going to come out and kind of combine the best of Discord with all of the below the surface level kind of features of Slack. It'll be interesting to see where those turn out, but I think there's some promise there.

• 57:31Ben Gilbert?

  And frankly, if Slack was going to get cut off at the knees where someone else was going to be the tool for the new upstarts, if that was already true, being owned by Salesforce is going to make that way more true. Like if your bet on Slack is to, you know, the same way that you would bet on Stripe, like that the next great company is going to use this as an infrastructure choice, like that has to be the bet that you can keep making. And I would say Salesforce buying it loosens my conviction in that dream scenario staying

• 58:04Speaker 02

  Yeah, I would assign a negative price to the rest of the Salesforce 360 cloud.

• 58:11Ben Gilbert?

  Yeah.

• 58:11David Rosenthal?

  All right. Well, Packy, there we go. There's the remaining part of your upside is invest in in somebody that's gonna build the next messaging, deep collaboration layer for the enterprise with Discord type features for the enterprise. There we go.

• 58:25Speaker 02

  Or as we all know and love, we can just invest in Tencent and own a little piece of Discord that way.

• 58:31David Rosenthal?

  Yes.

• 58:34David Rosenthal?

  So the more I think about Tencent and we should disclaimer, we're all, at least I'm a shareholder. I think you are, Packy. I don't know about Ben. But it's kind of like, I feel the same way about Berkshire, right? Is like, I could go, I can't even, but if I could go invest in KKR and Sequoia and like all these funds and whatnot that are going to give me great returns, right? But I'm going to pay two and 20 or three and 30 on that. Or I could just go buy Tencent shares or Process shares, which is the spin out from Naspr's or Berkshire shares. I could pay no management fees and no carry to get access to equally good, if not better, investors globally.

• 59:16Speaker 02

  I looked this up yesterday, coincidentally. Do you know how much, since I wrote about Tencent, call it, you know, in August, since I wrote about Tencent, how much the value of their holdings and their top 10 holdings has increased?

• 59:29David Rosenthal?

  Oh, I saw your tweet, so go for it.

• 59:32Speaker 02

  $55 billion. And at 64, if you assume that Epic has kind of grown at the same rate that Unity has, and I would imagine that, you know, if it were public, it would.

• 59:41David Rosenthal?

  Which is just wild. Meanwhile, the share price has been, you know, it's like up a little bit, but relatively flat.

• 59:47Ben Gilbert?

  Do you know what the basis is? Like, when you look at all the purchase prices of all those investments?

• 59:53Speaker 02

  It was, so I pulled 103 of their 700 investments by, you know, translating things in Google Translate from Chinese, from Mandarin to English. So even the fact that I have the ownership is crazy. I don't have the basis on a lot of them, but certainly they've been in companies for, you know, Snap, their investment just doubled, right? And Tesla, they had 5%. And so that obviously has done phenomenal well. Spotify has doubled. So like, just all these massive companies that that's in their portfolio and have doubled, plus. Epic plus Roblox, which is about to IPO plus Discord, which has had its valuation shoot up and is now even more attractive. So like any good company that you can think of and you're like, I wonder who's invested in them. Tencent is probably there.

• 1:00:37David Rosenthal?

  Well, the good news for you is I don't think anybody's going to acquire Tencent. So I think you can let that ride for a long time.

• 1:00:43Speaker 02

  How do you think the US government would feel if Amazon tried to acquire Tencent?

• 1:00:48Ben Gilbert?

  I feel like the US government would be fine with that. Yeah.

• 1:00:53Ben Gilbert?

  That'd get off Amazon's back a little bit.

• 1:00:55Speaker 02

  True.

• 1:00:56David Rosenthal?

  Oh, man.

• 1:00:57Ben Gilbert?

  All right. So let's, let's try and get to some like, what's the bottom line here? There's been a lot of takes. I'm going to close my eyes on price for a minute and just, and let's just talk about like narrative bottom line. Like, Packy, if you had to summarize this and they're like, well, TLDR, tell me about, you know, why is this acquisition interesting? And why? And what's your take after an hour here of talking about it? What do you think?

• 1:01:19Speaker 02

  I think the acquisition is interesting for a few reasons. I think the acquisition is interesting. One, because as you guys pointed out, it gives Slack this massive professional sales force to go push their product into all of the orgs where it struggled to, to gain a foothold so far. I think product wise, it could potentially be interesting if they can figure out a way to integrate Slack Connect and Salesforce and make it really easy for people to communicate both with their clients and even with potential targets on, on big enough deals that they'd be willing to enter into a Slack channel together. And I think it's interesting because, and we haven't talked about this, but Salesforce is kind of the biggest acquirer that didn't get dragged up in front of Congress. And so is Salesforce in this really unique position where they can be this under the radar company that

• 1:02:02Speaker 02

  just picks off all of the targets while everyone else is, is kind of exposed to antitrust scrutiny?

• 1:02:08Ben Gilbert?

  Oh, Microsoft didn't.

• 1:02:10David Rosenthal?

  Did they? They were involved in some of that, right?

• 1:02:13Ben Gilbert?

  Oh, maybe in the more, in the later one.

• 1:02:15Speaker 02

  Yeah, they were.

• 1:02:16Ben Gilbert?

  That's a fair point.

• 1:02:16Speaker 02

  They certainly, for antitrust reasons, they're probably the only one who actually could not have acquired Slack, whereas everyone else, maybe optically it wouldn't have looked good.

• 1:02:24David Rosenthal?

  Plus, Microsoft's got to have such a hangover from the DOJ.

• 1:02:27Ben Gilbert?

  They do. Well, my data's eight years old, but yes.

• 1:02:30David Rosenthal?

  Well, actually, Ben, you could talk about this. Like, what are the internal processes and controls within Microsoft to make sure that, like, you never write the word monopoly in a document?

• 1:02:43Ben Gilbert?

  It wasn't as bad as you would think. It's only like if something really gets elevated to, you know, serious discussion of a big strategic move that it gets considered. It's not really at that sort of the IC level. I will say there was a thing, there was a whole milestone, and I'm trying to remember how long Microsoft's milestones were, maybe six months in Office, where it was like the documentation milestone or the cleanup milestone or something like that around the Office file format, because a lot of the DOJ stuff was around, wait, you claim to have this open file format, but you're the only ones who have any documentation on how the file format works. So, so I do know like that there's entire sort of like billions of dollars that had to go into the manpower of cleanup after that.

• 1:03:27Ben Gilbert?

  So then there's, there's some processes in place. But no, it's, there's not like a thing that blinks at your, at your computer if you type the wrong word.

• 1:03:35Speaker 02

  Company game night, you can play anything but monopoly?

• 1:03:40David Rosenthal?

  Yes.

• 1:03:42David Rosenthal?

  I'm envisioning like the, it's too big now, but when the days when Gates used to have all the interns over to his backyard, just like have like, like he'd get up on stage and be like, all right, here's your orientation, like, you must absolutely not say these things.

• 1:04:04David Rosenthal?

  Our enemy is the government.

• 1:04:07Ben Gilbert?

  Well, let me, let me come in with my, so, Packy, great, I think, great three points. The one other point that I would make, that's sort of the thing I've been noodling on that we didn't really talk about is this notion of growing by acquisition, which is something that we've talked about, especially on the LP show with, with Will Thorndike, author of The Outsiders. It's a famous sort of move by media companies and other outsider CEOs where the core business has growth, but not insane growth. And, you know, you grow the company by acquiring high-growth assets. And, you know, again, we can Debate whether Slack is a high growth asset relative to some of these other SaaS companies these days.

• 1:04:45Ben Gilbert?

  But they're a large enough enterprise company where if what Salesforce wants to do is meaningfully grow their enterprise revenue quarter over quarter, they got to acquire their way into new revenue streams to do that. And where are there possibly large future revenue streams that they could acquire? Slacks. So I think that's a, if I sort of had to describe, why, why would you do this deal? If there's not real product integration to be done, but you sure as heck can, you know, increase their, their growth through your own Salesforce. But because the market is relatively underpenetrated with this Slack product, that's how I would describe what Salesforce is up to here. David, anything else?

• 1:05:32David Rosenthal?

  I think the only thing is, we could do a quick, what would have happened otherwise on other potential interested acquirers? Probably namely Google. We touched on Zoom a little bit. Maybe we can circle back to that too. Let's do, let's do Google and Zoom.

• 1:05:44Speaker 02

  Google, Google I wrote about, actually a couple of months ago, I wrote about a Google Slack acquisition. I think that one, I mean, you know, part of the press around this is that it's now Salesforce versus Microsoft. I don't think that's really the case unless people start using Quip documents to replace Word and whatever else. But I do think that a Google plus a Slack with Google's distribution really is a powerful combination. When you have G Suite, you have Gmail as your outlook competitor, you have Google Sheets, which, you know, maybe the finance team still needs Excel, but most of the other, rest of the company can use Google Sheets and Google Docs and all of those things. Then you really have this suite that you can onboard a new company by just signing up for Google plus Slack plus Looker,

• 1:06:29Speaker 02

  which I like better than Tableau. And like there's, you know, it just really, it feels like they're building kind of this new wave office bundle versus even Tableau. Like I love Looker, my brother loves Looker, my dad loves Tableau. And so I think it does make a little bit more sense in that Google suite of products, which is what I thought they're building. And Google hasn't been, you know, Google's actually to me been maybe the most disappointing thing in terms of their kind of innovation or their growth, unless one of the other bets pays off. But they have, you know, this ad business, which for now is spitting off a ton of cash. The, the idea that they wouldn't. Play in this, I don't even know how to read that, but it just seems like such an obvious move for Google to come in. And then there's Amazon on the other, is the other

• 1:07:11Speaker 02

  one. They had a partnership where, you know, they powered Slack's video product and Slack used AWS and all of that. So that's another one, but Google to me makes a ton of sense.

• 1:07:22Ben Gilbert?

  Yeah. Do we know, was Google a bidder at all in this? Or I didn't see anything about that.

• 1:07:26Speaker 02

  Nor did I.

• 1:07:27Ben Gilbert?

  Huh. You're right. It makes a ton of sense for them, especially when you consider like the startup productivity stack. And I would say not the bleeding edge, pre chasm crossing startup stack. That's like Notion and Airtable, but you think about like the, like, you know, 500, 500 to 5,000 person companies. It's a Google Docs company that uses Slack for internal communication. Like that, that is a, that's sort of a natural bundle.

• 1:07:56Speaker 02

  Yeah. The Google, Google suite is, the G suite is really like one of the best integrated things into Slack where the docs pop up and it really is one of the nicest integrations in the product.

• 1:08:06Ben Gilbert?

  Which is custom, by the way.

• 1:08:08Speaker 02

  That I would have been happy about.

• 1:08:09Ben Gilbert?

  They, there was a like CEO conversation to custom build some stuff there, like especially around the different types of sharing and how you can grant access from within Slack.

• 1:08:19Speaker 02

  Yes.

• 1:08:19Ben Gilbert?

  Like that was custom work that Google had to do in order to enable that in Slack.

• 1:08:24Speaker 02

  All that work down the drain. That, that's the acquisition that should have been.

• 1:08:28Ben Gilbert?

  And that's the kind of thing like, you know, for the founders listening to this who have never sold a company before, that is the typical kind of thing that forms a relationship between companies that then leads to acquisition. Like that's the way to do a dance where you're like, well, you know, let's do a partnership. No, not like a bundle distribution, go to market partnership. What's an interesting product thing that we could do that would provide value for both of our users? Companies get to know each other. They get to understand each other's user bases. And then that's the kind of thing that tends to lead to, to a deal. So, Packy, now that you bring it up, like it is surprising to me that we, we aren't seeing Google's name here.

• 1:09:00Speaker 02

  Yeah. Boring one out for that deal.

• 1:09:02David Rosenthal?

  Especially since I hear you, Ben, that like, you know, 55% premium that is going to. But when I think about relative to the potential of Slack and the multiples for some of these other SaaS companies out there, this price does not feel high to me.

• 1:09:18Speaker 02

  Right. And what if, what if Google makes, what if Google makes free Slack an ad product, right?

• 1:09:24Speaker 02

  Would you guys accept ads to, to get rid of sending emails to everybody?

• 1:09:29David Rosenthal?

  Maybe, probably. Well, and also, you know, the other pieces here is financing. So like Salesforce is taking out debt to finance this. Now, of course, they have a strong balance sheet. They can do this. It's not like a problem for them. Google's just got like literally an infinite amount of money sitting there, spending, you know, what is this 27.7 billion purchase price for Salesforce. Google could have spent 35, 40 billion, no problem, wouldn't have made a dent in their treasury.

• 1:10:03Ben Gilbert?

  When do the documents get disclosed? David, you probably know this with like a party A, party B, how, how the deal went down.

• 1:10:11David Rosenthal?

  Uh, probably when it'll come to a vote to Slack shareholders.

• 1:10:16Ben Gilbert?

  Okay. So we'll know in the next quarter, next, next few months, if there were, if there was a bidding process here.

• 1:10:22David Rosenthal?

  Other discussions, yeah.

• 1:10:24Ben Gilbert?

  I love public mergers.

• 1:10:26David Rosenthal?

  Yeah. And then I think the, the other question, we touched on it at the top of the show is, is Zoom, right? Like what's Zoom's market cap now? Gosh, if I recollect is 130 ish billion, maybe a little more.

• 1:10:42Ben Gilbert?

  Sounds right.

• 1:10:43David Rosenthal?

  And so this would be a big chunk to do a stock deal with Zoom. It would, it would be a pretty big chunk, which is probably why it didn't happen.

• 1:10:51Ben Gilbert?

  I mean, maybe Slack didn't want Zoom stock at this price.

• 1:10:54David Rosenthal?

  Could be.

• 1:10:55Ben Gilbert?

  But I also, you know, if, if you're, if you work at Zoom and know the answer to this, I think David and I and Paddy would, would love to know personally, but I would also chalk it up to like, in all likelihood, Zoom has an underdeveloped corp dev function where like this would have to be a Eric wants to do this deal and is going to shovel other, other stuff off of his plate to pursue doing this deal. And, and, you know.

• 1:11:18Speaker 02

  And look this up. They have a two person, or at least, you know, two months ago or a month ago, when I wrote about it, they have a two person corp dev team that's both, you know, a couple of months old at the company.

• 1:11:26Ben Gilbert?

  Right. So it's like for a company of that level of maturity, it would have to be a CEO pet project in order to make a make any progress on it.

• 1:11:34Speaker 02

  And it feels like they want to do, yeah, video. There's plenty to do in the video space. And that has always been kind of their strong, strong suit is how focused they've been on video.

• 1:11:44David Rosenthal?

  Yep. And that actually I would, uh, this would be fun. Maybe we could sidebar here. I would disagree with you a little bit, Packy, on, uh, the view on Zoom.

• 1:11:55David Rosenthal?

  I think that view makes sense if you think of Zoom as a enterprise productivity tool,

• 1:12:03David Rosenthal?

  which I think a lot of people do, but to me, it's actually much broader. And the opportunity is this that we're doing on Zoom right now. It's like, yeah, they're good, great enterprise productivity product. Make a lot of money on that. Perfect. But like the huge opportunity is they are the video platform for the entire economy. And so I could totally see Eric being like, that's our focus. That's what we're doing. I'm not going to get distracted on this.

• 1:12:28Speaker 02

  I completely, completely, there should be a million startups built on top of Zoom instead of Agora in the next year. And so their focus should be on becoming a platform.

• 1:12:38David Rosenthal?

  Yep, yep.

• 1:12:39Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Legora, the agentic operating system that is redefining how the world's best legal teams work.

• 1:12:53David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Legora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 1:13:09Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 1:13:24David Rosenthal?

  And that's how you get features that customers love like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 1:13:48Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 1:14:07David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 1:14:37Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you.

• 1:15:03Ben Gilbert?

  Grading?

• 1:15:03David Rosenthal?

  Grading, let's do it. Okay, so we thought, let's do two separate gradings here to bring it home. One, we'll grade Slack's tenure as a public company. I'll render a grade on that over the past, was it 15, 16 months or so? And then two, we'll do our looking forward, let's paint an A+, C and F scenario for the next five years of Slack within Salesforce.

• 1:15:31David Rosenthal?

  All right. So taking Slack's tenure as a public company, I'll go first. I mean, it's really hard for me to come up with reasons not to grade this pretty harshly.

• 1:15:46David Rosenthal?

  The

• 1:15:47Ben Gilbert?

  Which for those of you who don't know David Rosenthal personally, that is David being mean. Like David can't say it. David can't come out and say like, they've done terribly like that. You won't hear him say that. So this is like

• 1:15:58David Rosenthal?

  It's just not in my DNA. Yeah, this is, this is pretty bad. So I'm going to go with a C minus tenure as a public company. I maybe it deserves to be worse, but you know, like the outcome here is above the DPO, the final, the first day of trading on the direct public listing. So it's not like they destroyed value in the public markets. On the other hand, like didn't come close in trading to in a, you know, 15, 16 months as a public company to meeting that day one price or let alone eclipsing it.

• 1:16:36David Rosenthal?

  And I think, you know, let, maybe it would have been impossible to fight this Microsoft Teams bullying narrative. So maybe this was an unwinnable battle, but like they lost it, right? Like, you know, at the point, like, Packy, I think you have great points, like Teams is not the competitor here. And this is a great company with great metrics. And yet they let this become the narrative that like Teams is just going to destroy these guys. And I think that's why we ended up here.

• 1:17:10Ben Gilbert?

  Yeah. I mean, it's interesting because it's not actually, if we're grading the performance as a public company,

• 1:17:18Ben Gilbert?

  the stock price movement is a failing of the CEO's ability to give the market confidence in the future of this company. If we were to take a, I think Hamilton points this out in seven powers and Packy, I know you're a avid reader of, of Hamilton's work with seven powers too. And, uh, you know, so I think it's worth bringing up, public market investors are not short sighted. They over index on recent signal, but the reason is because the stock's price and the enterprise value of the company is primarily formed by an investor's view of what the next 30 years of cash flows are going to be. And they, of course, over index on recent signal if it

• 1:18:00Ben Gilbert?

  paints a picture of how those 30 years are going to go. And so what we're seeing here is despite relatively strong performance as a business, the market doubted the business's long-term prospects, even though the business did even better quarter over quarter over quarter as a public company. So it's interesting, like, you know, depending on what we're grading here, you'd sort of grade different things. Like, I'm in camp B-ish, B+, as actual, like, execution on their goals. But, you know, F on the ability to, you know, generate, you know, value for shareholders. Well, not F, I guess, because it didn't go down, but like, C minus.

• 1:18:45Speaker 02

  Yeah, I think it's interesting that this communications company's biggest problem was communications and telling its own, its own story. But I think my answer actually changes, right? Like, I've suffered through this kind of just like bouncing in the 25 to 30, down to 16, like, range as a public company below the DPO price, and been fine with it because I thought that there was, you know, that they shared the long-term vision that I had for the company, in which case, if you just asked me to grade it on the spot, I'd say it's totally fine, everybody's misjudging it. They also see that this thing just compounds over time and compounds over time and compounds over time. Obviously, this deal changes my perception of how they view

• 1:19:28Speaker 02

  themselves. And so in that case, you know, I kind of have to give it somewhere in the C-range as a public company, just because it stayed pretty flat, which is, you know, it's average, it's C, and it's underperformed the market pretty significantly, and particularly at a time where people are more, you know, you're discounting. Future cash flows for those 30 years, which should be Slack's, you know, to Slack's great benefit, you're discounting it at this tiny, tiny, tiny discount rate. And yet it's not being reflected in the stock price. If they're not taking that long-term view, then I think, you know, it can't be any better than a C for me, unfortunately.

• 1:20:02David Rosenthal?

  Fortunately for you, you kept buying and not just at the DPO, right?

• 1:20:07Speaker 02

  And I mean, that's part of their legacy as well, right? The, the biggest DPO to date. Yeah.

• 1:20:13Ben Gilbert?

  Direct listing.

• 1:20:13Speaker 02

  Yeah.

• 1:20:15David Rosenthal?

  I don't know if Slack or Spotify was bigger. They might have been about the same size. And Spotify is, well, Spotify had doldrums for a long time, but has performed excellently recently.

• 1:20:26Ben Gilbert?

  The, the, the one thing I will say is like, uh, how I was, whatever I was there, B or B minus, uh, C plus on, on execution. Um, I, Packy, before reading your piece and before talking with you was much more negative. In fact, I had like a joke I was about ready to make on Twitter, um, that, uh, actually, let me get it word for, word for, word for word. Uh, Slack has basically stopped updating the product. And when they do, we all complain about the new worse UI. I think they'll fit in just fine at Salesforce. And I ended up not tweeting it because I think like the work that they are doing is the 90% work that's below the surface where like, I, you know, it, it feels like I haven't gotten an update other than, you know, shared channels and, and multiple workspaces since

• 1:21:11Ben Gilbert?

  2015. But like, if you look at the app ecosystem and the way that that's been strategic for their business, that's actually huge. So I think I, I want to like wave my arms around and say, uh, I think anybody who's knocking Slack for, um, decreasing product velocity is just looking in the wrong place.

• 1:21:29Speaker 02

  Completely agree with you there.

• 1:21:31David Rosenthal?

  All right. So A+, C and F scenarios within Salesforce for the next five years. I mean, the F, the F is always obvious, right? Like.

• 1:21:41Ben Gilbert?

  And, and, and to be totally clear, this is, uh, how good of a use of $28 billion was this for Salesforce versus the history of other uses of capital by companies, um, both in internal and external investments.

• 1:21:56David Rosenthal?

  Or actually, well, maybe the F is not obvious. I think the F to me, we can all debate is, um, They're wrong strategically that building a, uh, what have we decided to call it? Not a arm the rebels, but an alliance, an alternative alliance, anti-Microsoft alliance, best of breed alliance is actually not the right strategy.

• 1:22:20David Rosenthal?

  Big enterprises don't really care about that anymore. They're still happy to buy on credit cards, uh, distributed across the organization. It turns off all the startups and innovative high-growth companies are like, ew, Slack is part of Salesforce. I don't want that anymore. I'm moving over to Discord or whatever. Um, that feels like the F to me.

• 1:22:43Ben Gilbert?

  Yeah, I don't know. I don't think that sort of like stench is real. Or is it's going to meaningfully impact people's decisions whether to adopt or not. But what I do think is real along those same lines is, uh, this decreases the likelihood that Slack comes out with that next innovative, I don't know, feature or user experience that makes people go, oh my God, I have to use this product.

• 1:23:11Speaker 02

  Yeah, I think the F to me is, you know, trying to integrate Slack and Salesforce, the products and failing and turning Slack more into Salesforce than Salesforce more into Slack. I think that's, that's enough for me. Um, and I think another, you know, potential F is, I do think there's a stench if all of a sudden you start getting cross-sold Salesforce, uh, when you sign up for Slack and, you know, the acquired FM Slack starts getting hit up with emails for Salesforce 360 and Lightning and all of that.

• 1:23:41David Rosenthal?

  Oh, look at this Lightning interface.

• 1:23:42Speaker 02

  Right? Which I think it happens. I think if the distribution channel goes one way and it's just pushing Slack to Salesforce, then those are corporate buyers anyway, whatever. But if it goes the other way, then I think that could be pretty ugly.

• 1:23:54Ben Gilbert?

  And I think the risk of this is very low, to be clear. Like, you look at Salesforce's other acquisitions, like, did users of Quip started getting sold? You know, Salesforce and the 365 interface and, you know, did Heroku users start? No, like, you didn't even know that Salesforce was the parent companies of those things. Now, did they both atrophy? Absolutely. Like, did, why wasn't Quip Notion? You know, why wasn't?

• 1:24:20David Rosenthal?

  Arcota, really?

• 1:24:21Ben Gilbert?

  Yeah, great, but yeah, that's actually the better comp. Or why is it that every startup that we start now at PSL is started on AWS directly? Like, we no longer, you, like, you don't, you don't need to use Heroku. You don't need that middleman that makes it easier to spin up a cloud app. Amazon actually has made it, you know, both more confusing and easier. You know, they've made it more complex, but then they've also created relatively simple onroads. So.

• 1:24:45David Rosenthal?

  To be fair, that's probably not Salesforce's fault. Heroku and all the past players were probably dead, anyway.

• 1:24:50Ben Gilbert?

  But that's the thing. Why did they buy them? Like, did they think they were buying the next generation of category leader among those things that was going to, you know, surpass Microsoft in those ways? Or not? And if they're looking at Slack to be, you know, is this their third attempt? Or maybe even more than that, to buy the next generation tool? You know, are they buying it at the peak and it's going to product atrophy from here? And therefore, people are going to go, you know, startups are going to go use the next generation of, you know, of collaboration software? That, that is the biggest existential risk in the F scenario. A+?

• 1:25:26David Rosenthal?

  Yeah, let's do A+. We'll do, we'll do the exciting stuff.

• 1:25:29Ben Gilbert?

  A+ to me is that Slack on its own has been a reasonably high-growth SaaS company, and they were six, and Salesforce is successful at buying fast-growing SaaS revenue. And now they get to pump it through their channel, and their channel receives it well. And they just, like, are able to massively increase the revenue growth for Slack and have more and more companies adopt it. In fact, they may even be able to convince large companies, maybe not enterprise, but large companies, that, you know, it's now a trustworthy vendor. It's not some startup they're buying with the, you know, full seal of approval from Salesforce, and that comes with a Microsoft-like, not quite Microsoft, but Microsoft-like level

• 1:26:12Ben Gilbert?

  of, yeah, yes, I authorize this use at the, you know, 30,000 to 50,000 seats throughout my organization. So, maybe there's a new market unlock there.

• 1:26:23David Rosenthal?

  Um, I think that makes sense. I think actually the, to me, that's like a A, A minus to A, probably A. I think the A plus is this catalyzes a, the Salesforce, the anti-Microsoft alliance centered around Salesforce as a totally viable and successful new distribution channel for best of breed SaaS companies. And we see Superhuman go into the Fortune 100 and we see Coda go into the Fortune 100 and, um, and Notion and Figma. And well, Figma doesn't need any help, but, uh, you know, uh, all

• 1:27:07David Rosenthal?

  of those new SaaS products now use this as a distribution channel, whether Salesforce acquires them or not, probably not. But now this opens up the door to whole new markets for them.

• 1:27:18Ben Gilbert?

  I like that take.

• 1:27:19Speaker 02

  Yeah, I think mine is somewhere similar and it just revolves a little bit more around Slack Connect really being what they think it's going to be and not just creating the work, kind of social network or this horizontal layer, but also making being, you know, a target in Salesforce a better experience, kind of like humanizing the whole sales process a little bit versus getting hit in some awful drip campaigns. So to me, it's, you know, if it can make the sales process writ large, a little bit more enjoyable, then that's a win while, you know, creating all these links between all these companies and really kind of building this network and backs up.

• 1:27:55Ben Gilbert?

  Awesome. Well, I think, uh, that listeners is the complete set of opinions that we have on the deal with the facts that we have today, a mere two hours after the deal was announced. Any closing thoughts before we, uh, we wrap up and do our little closing here?

• 1:28:12David Rosenthal?

  This was a blast.

• 1:28:13Ben Gilbert?

  Yeah, it was super fun.

• 1:28:13Speaker 02

  Really fun.

• 1:28:14Ben Gilbert?

  Yeah, first time being on YouTube too. If you're listening to the pod, um, that's, it's, it's fun. Uh, we tried YouTube Live here. So I got to read some of the comments in real time and maybe for future, uh, emergency pods, we will do the same. Well, first of all, thank you to Packy. Uh, where can listeners find you and subscribe to Not Boring?

• 1:28:31Speaker 02

  Sure. So they can subscribe at notboring.substack.com or I'm on Twitter at @Pakym. P-A-C-K-Y-M. Thank you guys for having me. This has been a blast.

• 1:28:44Ben Gilbert?

  Of course.

• 1:28:44David Rosenthal?

  So fun. We're so glad you could join. And yeah, definitely subscribe to Not Boring and follow Packy on Twitter. You're one of the best followers on Twitter, especially tech Twitter.

• 1:28:55Speaker 02

  Thank you.

• 1:28:57David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:29:03Ben Gilbert?

  Yes. There is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:29:14David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:29:34Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:29:47David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:29:58Ben Gilbert?

  We didn't mention the LP program this time, but I think most folks probably know what it is. And if you liked this little bit more informal type conversation, we get to have a lot of this, this conversation. And Paki, you've been in those Zoom calls. How's it been for you?

• 1:30:12Speaker 02

  It's an absolute blast. I told you guys after, after the last one, but doing the Outsiders Book Club with Will Thorndike, after having written about The Outsiders and being obsessed with the book, is just such a cool opportunity with a bunch of smart people. So yeah, total, total blast. Highly recommend it.

• 1:30:27Ben Gilbert?

  Cool. Well, if you've been teetering on the edge, you can join and we have a link in the show notes to become an LP at acquired.fm/lp. I think that's it. We talked a lot about Slack this episode. We've got one of those. You can join it, acquired.fm/slag. And with that, listeners, have a good one. We'll see you next time.