Accidental Pursuits

Context

Ben Horowitz may be recognised across the globe as one of the most successful venture capitalists in Silicon Valley. Yet, not all of his investments have scaled by following a clean-cut method of growth. Some are known for treading a more unconventional path.

One venture in particular – the online gaming company Tiny Speck – had to pivot from near death and enter a different industry before it eventually hit its stride. It had only about US$6m in cash left before depleting its resources and being forced to shut down.

That failed gaming company, however, would later become the multibillion-dollar enterprise tech company known today as Slack – an investment that Horowitz described as “accidental”.

Real-Life Story

The brand name “Slack” has become synonymous to team collaboration and communication. But few people realise Tiny Speck, the company behind the enterprise tool, was initially a gaming company that suffered a massive failure.

Tiny Speck had received backing from Horowitz when it was building the game Glitch. However, two factors worked against the product. First, users were able to finish the game in as fast as two days. This was terrible for retention, Horowitz recounted.

Second, the game was built on top of Flash, a software that Steve Jobs of Apple had disavowed. The game was eventually locked out of the mobile game ecosystem for iOS. With the game’s technical limitations and a smaller market to pursue, the company was left scrambling for cash.

Tiny Speck founder Stewart Butterfield asked Horowitz whether he wanted his investment back or would continue backing the company as it changed direction. By then, Butterfield had the idea of turning an internal communication tool, which was used by his engineers at Tiny Speck, into an actual product.

“It sounds like a really horrible idea,” Horowitz recalled on stage at a conference in 2015.

Initially sceptical, Horowitz supported Butterfield’s decision to pivot after recognising the potential of the communication tool.

Despite his doubts about Butterfield’s ability to transition from consumer to enterprise software, Horowitz ultimately decided to let him pursue the idea, reasoning that his $6m investment was not significant enough to impact his VC firm negatively. Horowitz also felt a sense of duty and curiosity and wanted to see the project through.

This pivot allowed Slack to focus on user needs, resulting in a product that integrated seamlessly with various applications and emphasised collaboration. With strategic decisions and robust marketing, Slack quickly gained traction, becoming one of the fastest-growing enterprise software products, ultimately reaching a valuation of $28bn following its acquisition by Salesforce.

Horowitz trusted Butterfield, and this facilitated a collaborative environment where innovative ideas could flourish. His investment strategy with Tiny Speck also differed from his approach to other startups. Unlike typical investments where metrics and market fit are heavily scrutinised, Horowitz empowered Butterfield to embrace unconventional ideas wherever they sensed potential.

When Tiny Speck faced financial difficulties, Horowitz opted to support the new direction it was taking rather than pull funding. All this reflected a more hands-off, trust-based approach compared to other startups where Horowitz might demand more oversight.

Overall, Horowitz valued Butterfield’s unique insights gained from the challenges of developing Glitch, prioritising the founder’s experience and knowledge over traditional metrics, which he applies in his broader investment strategies.

This collaboration exemplified a founder-first ethos that is central to Horowitz’s investment philosophy.

PostScript: Slack generated approximately $5.97bn in revenue in 2023, reflecting a robust demand for its services and a significant contribution to Salesforce’s overall revenue post-acquisition. The team collaboration tool holds an 18.54% share of the enterprise productivity market, positioning it as a leader among communication tools. It’s also expected to grow to 25% by 2025. With over 750,000 organisations using Slack and an estimated 32.3 million daily active users, its extensive user base drives consistent subscription revenue.

Key Lessons

1) Pivoting with courage and conviction

WarTime CEOs recognise when a strategy isn’t working and are willing to pivot boldly, even if the alternative seems unproven. Tiny Speck’s transition from gaming to enterprise software highlights the importance of adaptability in the face of failure. WarTime CEOs foster an environment where unconventional ideas can thrive, leveraging setbacks as springboards for reinvention.

2) Trusting your founders, not just your metrics

While data-driven decisions are essential, WarTime CEOs also prioritise the instincts and unique insights of their team. Horowitz’s trust in Stewart Butterfield’s vision, despite initial doubts and poor metrics, underscores the value of founder-led innovation. WarTime CEOs balance oversight with empowerment, especially when navigating uncharted territory.

3) Leveraging internal strengths to create external opportunities  

Slack’s origins as an internal tool highlight the value of repurposing internal innovations for broader market success. WarTime CEOs explore whether existing assets or processes within their organisations can be scaled or adapted to solve external challenges, turning overlooked resources into competitive advantages.

4) Challenging assumptions to find hidden potential

Horowitz initially thought the idea of turning an internal communication tool into a product was “horrible”. However, by challenging his assumptions, he uncovered its broader potential. WarTime CEOs develop the ability to question entrenched beliefs, remaining open to unconventional ideas that might seem counterintuitive at first glance.

Find Out More

Do you want to learn more about the practical tools noted above? Are you aiming to find the right support for scaling up your business?

Feel free to click the button below if you feel you might need help.

Until next week, may the force be with you.

Kevin

P.S. Enjoyed this newsletter? Forward it to a friend and have them sign up here.

Whenever You’re Ready, Here are 4 Ways We Can Help You …

1. Business Turnaround and Transformation Tools, including templates, checklists, and dashboards

2. MasterMind Sessions - to teach you how to execute business turnarounds and transformations

3. One-on-One Calls - for mentoring with our expert panel

4. Promotion - amplifying the message of your business through sponsors