WEBVTT - Slack CEO, CFO On Why They Went With A Direct Listing 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penl Podcast. I'm Paul Swinge. You, 0:00:05.360 --> 0:00:07.680 along with my co host Lisa Brahma wits each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.120 at Bloomberg dot com. Let's get a little bit more 0:00:23.120 --> 0:00:26.200 insight into the company Slack, and we do that we 0:00:26.280 --> 0:00:28.560 bring in Man Deep. Seeing. Man Deep is senior tech 0:00:28.600 --> 0:00:31.960 industry annalys for Bloomberg Intelligence. So we've talked a lot 0:00:32.040 --> 0:00:35.080 Man Deep about the actual process of a direct listing, 0:00:35.159 --> 0:00:37.320 but I wonder if you can just give us a 0:00:37.320 --> 0:00:39.720 sense of what this company is really all about and 0:00:39.800 --> 0:00:42.200 why investors are, you know, kind of I think pretty 0:00:42.240 --> 0:00:45.240 interested in this in this new offering here. Sure. So, 0:00:45.600 --> 0:00:47.760 Slack is a company that was born on the cloud 0:00:47.800 --> 0:00:51.680 and it's writing this trend of mobility and shift to cloud. 0:00:51.960 --> 0:00:55.040 When you think about their technology stack, you're really re 0:00:55.240 --> 0:00:59.320 platforming from on premise environments to a cloud based environment. 0:00:59.600 --> 0:01:03.080 And Black is a single product company. What it does 0:01:03.200 --> 0:01:07.559 is real time messaging platform zoom IF, which went public 0:01:07.640 --> 0:01:11.200 before Slack, it does you know, real time video communications. 0:01:11.200 --> 0:01:13.840 So I feel like there is a lot of fragmentation 0:01:13.920 --> 0:01:16.559 on the cloud now and what you're seeing is single 0:01:16.640 --> 0:01:20.200 product companies doing very well because cloud, remember is a 0:01:20.280 --> 0:01:24.440 recurring subscription model, so you have tons of visibilities. Once 0:01:24.520 --> 0:01:27.560 you have a customer, it's very sticky, and I think 0:01:27.640 --> 0:01:30.280 that's why these companies are getting a lot of premium 0:01:30.319 --> 0:01:33.000 because there is growth, There is good growth, there is 0:01:33.040 --> 0:01:35.760 predictable growth. But at the end of the day, I 0:01:35.800 --> 0:01:38.600 think they're going to run against some Microsoft or a Google, 0:01:38.920 --> 0:01:41.640 and that's where you're you're gonna say, Okay, how how 0:01:41.680 --> 0:01:43.840 much RAM does this company have? And I feel like 0:01:44.160 --> 0:01:46.200 they haven't hit that point yet, but it will be 0:01:46.319 --> 0:01:48.960 very soon. I should note that Bloomberg Beta, the venture 0:01:49.000 --> 0:01:51.840 capital arm of Bloomberg LP, is an investor in Slack, 0:01:52.080 --> 0:01:53.520 So it kind of brings up one of the questions, 0:01:53.520 --> 0:01:56.400 you know it it seems like a business that very 0:01:56.440 --> 0:01:59.360 relatively early stages that is slack of their growth profile. 0:01:59.680 --> 0:02:01.760 But we've seen in the past or somebod these you know, 0:02:01.760 --> 0:02:07.160 cool technologies really hit that Microsoft Software or or Google 0:02:07.280 --> 0:02:08.720 or an amaza. I can just come in and buy 0:02:08.760 --> 0:02:11.480 them up. And do you think that's a reasonable scenario 0:02:11.560 --> 0:02:13.920 here for a company like Slack. Sure, So that's a 0:02:13.960 --> 0:02:17.080 great point. We've seen that beginning to happen now with 0:02:17.200 --> 0:02:22.120 Salesforce buying Tableau. What it tells you is the cloud. 0:02:22.200 --> 0:02:26.280 The large cloud companies like Salesforce, like Microsoft, even you 0:02:26.320 --> 0:02:28.480 know you can put Service Now in the same bucket, 0:02:29.000 --> 0:02:33.399 are looking for acquisitions because as a company, you don't 0:02:33.400 --> 0:02:36.200 want to deal with fifty different vendors. If I have 0:02:36.280 --> 0:02:39.280 a point product from Slack, point product from Atlastian, point 0:02:39.280 --> 0:02:41.840 product from drop Box, that's not going to help me, 0:02:41.880 --> 0:02:45.239 you know, manage my enterprise systems any easier on the cloud. Yes, 0:02:45.280 --> 0:02:49.200 cloud is a better model with you know, subscriptions on demand. 0:02:49.639 --> 0:02:51.320 But at the end of the day, you want to 0:02:51.360 --> 0:02:55.880 see vendor consolidation. And I think with Slack, their revenue 0:02:56.160 --> 0:03:00.120 is very growth is very strong, it's recurring. But at 0:03:00.120 --> 0:03:02.000 the end of the day, how many customers can they 0:03:02.040 --> 0:03:04.400 add for that single product, And that's a question that 0:03:04.440 --> 0:03:06.840 investors want to know. Well about a month or so, 0:03:07.040 --> 0:03:08.919 it seemed like we were talking to you a lot 0:03:09.040 --> 0:03:12.880 about uber Um and Lift and one of the problems 0:03:12.919 --> 0:03:16.640 was I from an investors perspective is they weren't profitable 0:03:16.639 --> 0:03:20.600 and the path of profitability was very unclear. Is Slack profitable, No, 0:03:20.800 --> 0:03:23.600 it's not. In fact, they spend a ton of money 0:03:23.800 --> 0:03:28.239 on customer acquisition costs that the sales and marketing expenses 0:03:28.240 --> 0:03:32.240 are really high. They have operating margins of negative negative 0:03:32.280 --> 0:03:35.520 free casual margins. The good thing with Slack compared to 0:03:35.600 --> 0:03:38.840 the right sharing guys you alluded to, is that they 0:03:38.880 --> 0:03:43.600 have higher gross margins. Slack has typical you know, plus 0:03:43.640 --> 0:03:47.160 gross margins. That's typical for any software company. And so 0:03:47.440 --> 0:03:49.680 the only level they need to pull this to lower 0:03:49.720 --> 0:03:52.440 their sales and marketing expenses and that way they can 0:03:52.480 --> 0:03:55.680 be operating margin positive. The risk is if they do that, 0:03:56.040 --> 0:03:58.200 then you know they're not going to acquire customers at 0:03:58.200 --> 0:04:01.240 the same pace and that's the key to driving revenue growth. Interesting, 0:04:01.360 --> 0:04:04.120 is this a global stories? Is a u S domestic? 0:04:04.400 --> 0:04:07.320 So they have exposure in Europe. For most of the 0:04:07.360 --> 0:04:10.800 software companies, especially the cloud ones, they are America and 0:04:10.800 --> 0:04:14.400 Europe centric. They have very little exposure to China, and 0:04:14.480 --> 0:04:16.760 so in this case they are thirty percent of their 0:04:16.800 --> 0:04:20.120 revenue comes from Europe. Interesting, so it's we'll have to 0:04:20.160 --> 0:04:22.240 take a look, Mandy, if you're gonna stay with us. 0:04:22.279 --> 0:04:24.559 So we're gonna see how this stock opens that hasn't 0:04:24.560 --> 0:04:28.560 open yet in the marketplace, um, but expected sometime later 0:04:28.600 --> 0:04:31.080 this afternoon. UM. So we'll have to see other place 0:04:31.120 --> 0:04:33.839 coming up. Of course, we have Emily Chang of Bloomberg Television. 0:04:33.880 --> 0:04:37.680 She's sitting down with Slack CEO Stewart Butterfield and the 0:04:37.720 --> 0:04:40.560 CFO Alan Shim at the New York Stock Exchange to 0:04:40.640 --> 0:04:43.760 talk about this new offering, to talk about the future 0:04:44.320 --> 0:04:47.000 of the company. So that'll be coming up in just moments. 0:04:47.240 --> 0:04:51.080 But but clearly and highly anticipated transaction. Not only is 0:04:51.120 --> 0:04:54.040 it a you know, a well known technology company, high growth, 0:04:54.120 --> 0:04:58.320 lots of investor interest, but it's also direct listing way 0:04:58.440 --> 0:05:00.520 of issuing shares to the public and is not an 0:05:00.520 --> 0:05:02.640 I p O. It is a direct listing where your 0:05:02.640 --> 0:05:07.400 secondary shareholders are offering shares in the public marketplace. Uh. 0:05:07.440 --> 0:05:09.800 And buyers are being lined up and they're trying to 0:05:09.839 --> 0:05:13.200 figure out the right price which they can open this stock. 0:05:13.279 --> 0:05:15.480 So we will see that coming right now. Let's go 0:05:15.560 --> 0:05:18.159 to Emily Chang of Bloomberg Television. Welcome to our Bloomberg 0:05:18.200 --> 0:05:22.120 TV and radio audiences. After bumper crop of I p 0:05:22.200 --> 0:05:26.400 O s either languishing or wildly exceeding expectations, Slack is 0:05:26.440 --> 0:05:28.960 taking a route to the trading fuller, it hopes will 0:05:29.000 --> 0:05:32.960 provide a much more well boring outcome a direct listing. 0:05:33.240 --> 0:05:34.800 As we wait for the stock to start trading on 0:05:34.839 --> 0:05:36.640 the New York Stock Exchange, I am joined from the 0:05:36.640 --> 0:05:39.800 trading floor by the company's co founder and CEO Stewart Butterfield, 0:05:40.080 --> 0:05:43.600 and CFO Alan Shim. Gentlemen, thank you for joining us. 0:05:43.680 --> 0:05:47.360 Congratulation big milestone. We are waiting for first trade. The 0:05:47.400 --> 0:05:49.880 stock indicated to open thirty to thirty four dollars a share, 0:05:49.920 --> 0:05:51.960 which is higher than your reference price of twenty six 0:05:51.960 --> 0:05:55.719 dollars a share. Stewart, how confident are you in this 0:05:55.800 --> 0:05:57.800 moment as you wait there for this stock to start 0:05:57.800 --> 0:06:01.200 trading about the process that the wreck listing was the 0:06:01.200 --> 0:06:05.960 way to go. Um. We'll see, But I think for 0:06:06.400 --> 0:06:09.640 at this point it has been working exactly the way 0:06:09.680 --> 0:06:13.320 we're supposed to work. Um. And ultimately we'll open, we'll 0:06:13.320 --> 0:06:15.440 have a high and a low today, we'll close, and 0:06:15.440 --> 0:06:17.040 then the same thing is gonna happen tomorrow and the 0:06:17.080 --> 0:06:19.400 next day and the next day, and we are very 0:06:19.480 --> 0:06:22.599 much focused on the long term. Now, you're still paying 0:06:22.640 --> 0:06:24.800 large fees to bankers. You still raised a lot of 0:06:24.800 --> 0:06:27.680 money on the private market. So what problem are you 0:06:27.720 --> 0:06:31.719 really solving Stewart by doing a direct listing versus the 0:06:31.760 --> 0:06:36.440 traditional I P O. Well, the first one is that 0:06:36.480 --> 0:06:38.599 no need to raise primary capital. We came into this 0:06:38.680 --> 0:06:41.480 process with over million dollars on the balance sheet, so 0:06:41.920 --> 0:06:44.320 the delusion to existing shareholders would have been tough. I 0:06:44.320 --> 0:06:46.280 think we did get a little bit more freedom and 0:06:46.320 --> 0:06:48.880 how we tell the story. So in addition to a 0:06:49.000 --> 0:06:51.920 road show, but instead of only having a road show 0:06:52.000 --> 0:06:54.800 in private rooms with the investors, we were able to 0:06:54.800 --> 0:06:57.440 do an investor day, live stream it and make the 0:06:57.520 --> 0:07:00.120 video available to everyone. Um, and that I think is 0:07:00.160 --> 0:07:04.159 a pertition a better position. Now Alan Slack is still 0:07:04.200 --> 0:07:07.120 unprofitable and the markets have rewarded profits even if they're 0:07:07.120 --> 0:07:11.400 slim profits. How far out is profitability? Well, our primary 0:07:11.400 --> 0:07:14.400 focus right now is to invest in growth, and as 0:07:14.440 --> 0:07:16.640 we continue to build on what we think is a 0:07:16.640 --> 0:07:18.840 new category, that's going to be our focus for a 0:07:18.880 --> 0:07:21.280 long time. But we've also said to investors that our 0:07:21.320 --> 0:07:24.600 near term priority is to drive towards cash will break even. 0:07:24.960 --> 0:07:27.200 We have high confidence in the strong economics of our 0:07:27.240 --> 0:07:30.280 business that we can still invest very aggressively while driving 0:07:30.320 --> 0:07:35.320 towards that near term profitability market. So, then, Stewart, how 0:07:35.400 --> 0:07:38.200 much of a priority would you say that profitability actually is. 0:07:39.400 --> 0:07:41.640 I think, uh, I don't want to get you technical 0:07:41.680 --> 0:07:44.280 about it. In sas there's a lot of deferred revenues, 0:07:44.320 --> 0:07:47.000 so accounting profitability isn't that much of a priority. As 0:07:47.040 --> 0:07:49.640 Alan was saying, bringing in more cash than we put 0:07:49.680 --> 0:07:52.120 out on an ongoing basis is a priority because it 0:07:52.120 --> 0:07:55.000 allows us to control our own destiny. The ideal for 0:07:55.120 --> 0:07:57.720 us though, is that we continually find new ways and 0:07:57.760 --> 0:08:00.720 new opportunities to invest to further grow the business, and 0:08:00.760 --> 0:08:02.560 we don't need a lot of free cash flow, but 0:08:03.160 --> 0:08:07.320 just a little bit. Now, Allen, revenue growth is slowing. 0:08:07.440 --> 0:08:11.000 What are some new sources of revenue you're expecting to tap. Well, 0:08:11.040 --> 0:08:12.920 we're very pleased with the revenue growth. I think what 0:08:12.960 --> 0:08:16.080 you're seeing is also we're making great track when customers 0:08:16.360 --> 0:08:20.560 and we've gotten customers today. Our enterprise customers are also 0:08:20.600 --> 0:08:23.640 growing even faster, so we have six customers over hun 0:08:23.840 --> 0:08:25.280 Kane revenue and I think what you're seeing is we're 0:08:25.320 --> 0:08:27.320 scaling so at the base of revenue that we're right now. 0:08:27.520 --> 0:08:29.720 Some of the revenue growth this mathematically will come down, 0:08:30.000 --> 0:08:33.199 but we're very optimizing about the opportunity. We believe it's 0:08:33.200 --> 0:08:35.480 a huge new category to be built and invested behind. 0:08:35.679 --> 0:08:39.560 So we're focused on that now. Stewart, We've charted your 0:08:39.559 --> 0:08:42.040 progress from the very beginning. I went back into our archives. 0:08:42.040 --> 0:08:44.640 The first interview I did with you was inn when 0:08:44.640 --> 0:08:47.000 you were CEO of Tiny Speck and you were making 0:08:47.040 --> 0:08:51.280 a game called Glitch, which sort of became slack in 0:08:52.360 --> 0:08:56.880 Jared Leto crashed our interview. I will never forget that. Um, 0:08:56.960 --> 0:09:02.040 your employees, your users really love the sort of quirkiness 0:09:02.040 --> 0:09:05.560 of Slack, which is an ethos very much inspired by you. 0:09:05.880 --> 0:09:10.080 That said, you are becoming a public company. You're going 0:09:10.120 --> 0:09:12.600 to be doing earnings calls every quarter. How do you 0:09:12.679 --> 0:09:16.320 manage that transition with public investors holding your feet to 0:09:16.320 --> 0:09:19.240 the fire. I think both Al and I have been 0:09:19.280 --> 0:09:21.360 committed and this is not a recent thing, but over 0:09:21.400 --> 0:09:23.120 the course of many years on building the kind of 0:09:23.120 --> 0:09:25.840 internal controls and systems that would allow us to operate 0:09:25.880 --> 0:09:29.040 as a public company. UM. So you know the financial 0:09:29.120 --> 0:09:32.640 business operations side. That again a long time ago, and 0:09:32.679 --> 0:09:35.360 we've been working with the whole company that kind of 0:09:35.400 --> 0:09:38.199 transition in the limited number of ways that we do. 0:09:38.280 --> 0:09:41.040 I mean, the we believe we can keep the same culture. 0:09:41.120 --> 0:09:43.760 We can believe we can keep the same approach to 0:09:43.920 --> 0:09:46.360 serving customers. If you think about our mission to make 0:09:46.400 --> 0:09:49.640 people's working life simpler, more pleasant, and more productive, there's 0:09:49.920 --> 0:09:51.520 a nice humility to it because we do want to 0:09:51.520 --> 0:09:54.160 be of service. So there's also a huge ambition, and 0:09:54.440 --> 0:09:57.520 I think the challenge for us or you know, like 0:09:57.720 --> 0:09:59.600 kind of the what we're going to have to pull 0:09:59.640 --> 0:10:03.280 off is bringing investors along on that ride and help 0:10:03.360 --> 0:10:05.839 them understand what the long term vision is and what 0:10:05.880 --> 0:10:09.000 we can truly do to support companies all over the world. 0:10:10.120 --> 0:10:12.440 Now you're entering the volatile market. We're in the midst 0:10:12.480 --> 0:10:16.240 of a trade war with China. You could imagine in 0:10:16.480 --> 0:10:20.080 an economic downturn that businesses are going to cut budgets. 0:10:20.120 --> 0:10:23.079 They might not cut email, they might not cut Microsoft Office, 0:10:23.120 --> 0:10:25.400 they might cut the nice to haves, and they might 0:10:25.440 --> 0:10:29.040 think that Slack falls into that category. Stewart, how big 0:10:29.080 --> 0:10:32.440 a risk is that? I don't see any real risk 0:10:32.440 --> 0:10:35.280 in that we have exceptional retention, so industry leading on 0:10:35.320 --> 0:10:38.440 both the enterprise side and the SMB side. Um Our 0:10:38.440 --> 0:10:40.720 customers tell us black is the kind of thing that 0:10:40.880 --> 0:10:42.360 they didn't know they needed, but once they have it, 0:10:42.559 --> 0:10:44.720 can't live without it. And if you can't live without Sudden, 0:10:45.080 --> 0:10:46.960 it's not going to be one of the items that 0:10:47.000 --> 0:10:51.599 are cut on a discretionary basis. So Alan would you say, 0:10:51.640 --> 0:10:54.240 you know, how much do these market fluctuations? How much 0:10:54.240 --> 0:10:58.480 are you following what's happening in the global economy. Well, 0:10:58.520 --> 0:11:00.319 we we watched it like anybody, all us, but it 0:11:00.360 --> 0:11:02.280 doesn't necessarily affect the way we are on our business. 0:11:02.280 --> 0:11:04.600 We're building a new category. We have so many things 0:11:04.600 --> 0:11:07.720 to focus on, supporting our customers and building this ambition 0:11:07.760 --> 0:11:10.120 of a new way of working. So we've control we 0:11:10.160 --> 0:11:11.960 can control, and the markets see what they need to 0:11:11.960 --> 0:11:16.720 do now. Stewart analysts say that chat apps are a 0:11:16.760 --> 0:11:20.600 dime of dozen. You've got huge competitors like Microsoft, like Facebook, 0:11:20.640 --> 0:11:24.760 with deep pockets and billions of users over the longer term, 0:11:24.800 --> 0:11:28.280 how do you differentiate yourself? How do you compete when 0:11:28.320 --> 0:11:30.640 even you say in your own risk factors, you haven't 0:11:30.640 --> 0:11:33.720 figured out the optimal price because it depends often on 0:11:33.800 --> 0:11:37.319 what your competitors are doing. At Slack, we say we 0:11:37.400 --> 0:11:40.360 are a competitor aware, but customer assessed, and I know 0:11:40.840 --> 0:11:43.080 it's hard for me to imagine anything that any competitor 0:11:43.080 --> 0:11:45.640 would do that would cause us to change our plans 0:11:46.080 --> 0:11:49.160 um when those plans are all oriented around creating value 0:11:49.240 --> 0:11:52.400 for our customers. So one of the things you want 0:11:52.440 --> 0:11:53.959 to do is put ourselves in the position sets that 0:11:54.000 --> 0:11:56.600 Slack the company becomes more valuable as the world uses 0:11:56.640 --> 0:11:59.560 more software because Slack the product becomes more valuable for 0:11:59.600 --> 0:12:02.200 each of our customers as they use more software because 0:12:02.200 --> 0:12:05.720 of the platform, because of the integrations. Uh, you know, 0:12:05.800 --> 0:12:09.720 there's a whole world out there of other software. The 0:12:09.800 --> 0:12:11.640 number of categories continues to put there for it, the 0:12:11.720 --> 0:12:15.079 number of dollars that companies investment software every year continues 0:12:15.120 --> 0:12:17.040 to go up. So in that kind of market, and 0:12:17.040 --> 0:12:19.000 in a world where we have ten million daily active 0:12:19.080 --> 0:12:21.880 users out of the million plus that we believe would 0:12:21.880 --> 0:12:25.800 benefits from Slock, it's just wide open all right. Shares 0:12:25.840 --> 0:12:29.679 now indicated to open thirty two thirty four dollars a share, 0:12:29.760 --> 0:12:31.760 So so we're getting a little bit higher. This means 0:12:31.840 --> 0:12:36.120 that you know, investors, employees can sell their shares immediately. Alan, 0:12:36.400 --> 0:12:38.480 should we be worried about a brain drain? Should we 0:12:38.520 --> 0:12:42.240 be worried about a talent exodus once employees can sell 0:12:42.600 --> 0:12:47.000 with no lock up. I think employees like investors, they're 0:12:47.000 --> 0:12:49.959 appreciating how big of a category and opportunity this is. 0:12:50.160 --> 0:12:53.079 We estimate this addressable market to be twenty billion dollars 0:12:53.360 --> 0:12:55.800 and we're just getting started here at one where a 0:12:55.880 --> 0:12:59.920 category and a product and a hub that values adoption 0:13:00.000 --> 0:13:03.560 and use er engagement, you know, customer experience as well 0:13:03.640 --> 0:13:05.480 as the thoughtless sort of alluded to which we think 0:13:05.600 --> 0:13:07.760 is going to transform the way people work in the future. 0:13:07.840 --> 0:13:11.880 Here now, Stewart, last quick question for you. You've been 0:13:11.920 --> 0:13:15.080 very focused on building a diverse team. Slack punches above 0:13:15.080 --> 0:13:17.200 its way on women and minorities that I know even 0:13:17.240 --> 0:13:20.920 you admit that that you still have work to do. Unfortunately, 0:13:21.000 --> 0:13:23.920 other CEOs still don't think diversity is a priority. How 0:13:24.000 --> 0:13:26.719 has having a diverse team, having more voices in the 0:13:26.800 --> 0:13:29.920 room helped you get to this moment, helped you improve 0:13:29.960 --> 0:13:33.760 the bottom line? Well, I think that there's a bit 0:13:33.760 --> 0:13:36.360 of an increasing return dynamic. So the better job we 0:13:36.480 --> 0:13:38.920 do the easier it is to take the next step. 0:13:39.200 --> 0:13:41.959 And so UM, there's a lot of early employees I 0:13:41.960 --> 0:13:44.720 think who made really important contributions to the Slack culture 0:13:45.080 --> 0:13:48.280 opened it up UM and brought in people from their network, 0:13:48.480 --> 0:13:51.240 and that has allowed us to kind of continue, which 0:13:51.280 --> 0:13:53.160 reduces some of the resistance because it can be very 0:13:53.200 --> 0:13:55.280 difficult if company gets too big. Is that's something that 0:13:55.320 --> 0:13:57.400 we're we're proud of, but you know, you said, we 0:13:57.440 --> 0:14:00.760 have more work to do. It's uh, that doesn't end. 0:14:01.200 --> 0:14:04.199 We're part of the larger culture, in the larger society UM, 0:14:04.240 --> 0:14:07.560 and we do what we can. Uh. My hope is 0:14:07.600 --> 0:14:09.320 that there are you know, a group of people who 0:14:09.360 --> 0:14:12.480 graduate from SLOCK and go on to start other companies, UM, 0:14:12.600 --> 0:14:15.440 to have careers at other companies and kind of spread 0:14:15.440 --> 0:14:18.959 that way of working on all right, Stewart Butterfield, CEO 0:14:19.000 --> 0:14:21.480 and co founder Slack Ellen Shim the CFO, we're waiting 0:14:21.480 --> 0:14:23.720 for shares to start trading. Thank you both so much 0:14:23.760 --> 0:14:26.800 for joining us. Back to you, Emily Chang, thank you 0:14:26.880 --> 0:14:29.720 so much. That was Emily Chang of Bloomberg Television interviewing 0:14:29.960 --> 0:14:33.040 Slack CEO Stewart Butterfield and CFO Allen Shim who were 0:14:33.040 --> 0:14:36.560 on the New York Stock Exchange floors. The stock opens 0:14:36.720 --> 0:14:40.640 begins to openfor trading. At some point later this this morning, 0:14:40.960 --> 0:14:42.560 we still have man Deep seeing with us Man Deep 0:14:42.600 --> 0:14:45.760 as the senior technology annals for Bloomberg Intelligence, So Manteep. 0:14:45.840 --> 0:14:47.520 One of the things I thought was interesting was the 0:14:47.560 --> 0:14:51.560 discussion around competition. Um. The question, I guess is there 0:14:51.560 --> 0:14:53.920 are some big competitors in the marketplace. How do you 0:14:53.960 --> 0:14:58.720 think Slack is positioned in that space? Sure? So, I 0:14:58.760 --> 0:15:01.280 think when I look at, you know, the comparative landscape, 0:15:01.280 --> 0:15:05.000 obviously Microsoft is the biggest one for Slack, and Microsoft 0:15:05.080 --> 0:15:07.600 is still a hybrid company. It's you know, it's got 0:15:07.640 --> 0:15:11.960 a huge legacy on premise customer base and it's got 0:15:11.960 --> 0:15:14.920 a lot of new cloud offerings. I think what they're 0:15:14.960 --> 0:15:17.400 trying to do, what Microsoft specifically is trying to do, 0:15:17.440 --> 0:15:20.440 is to build their team's product which competes with Slack, 0:15:20.480 --> 0:15:24.160 and Slack will have a tough time displacing a Microsoft 0:15:24.240 --> 0:15:27.320 when it comes to you know, large enterprises. So I 0:15:27.360 --> 0:15:30.520 think Stewart alluded to it that they're gonna keep spending on, 0:15:30.600 --> 0:15:33.080 you know, acquiring new customers. That seems to be the 0:15:33.120 --> 0:15:37.000 path to sustain revenue growth. Here, I would have wanted to, 0:15:37.080 --> 0:15:39.880 you know, hear more around product expansion and how they 0:15:39.920 --> 0:15:42.760 want to move into different areas of software versus just 0:15:42.920 --> 0:15:46.520 focusing on chats, because there are a lot of chat 0:15:46.560 --> 0:15:49.760 companies out there and it's hard to you know, sustain 0:15:49.880 --> 0:15:52.520 your revenue growth just when you're a single product company. Yeah. 0:15:52.560 --> 0:15:55.800 The other thing I heard there which kind of concerned 0:15:55.800 --> 0:15:58.400 me a little bit, is a discussion about profitability. This is, 0:15:58.440 --> 0:16:00.080 you know, this the standard line from a lot of 0:16:00.160 --> 0:16:02.080 these technology companies that they are going to continue to 0:16:02.160 --> 0:16:05.360 invest in growth. And I think what we saw again 0:16:05.840 --> 0:16:09.040 from Uber and Lift is investors are all for the 0:16:09.040 --> 0:16:12.080 top line, but they least have to have some path 0:16:12.240 --> 0:16:14.960 to profitability, a vision of how a company can get 0:16:14.960 --> 0:16:18.200 to profitability, and arguably Uber and Left have not made 0:16:18.200 --> 0:16:20.720 that clear to investors. Do you think investors are going 0:16:20.800 --> 0:16:23.920 to give this company? I pass on this don't worry 0:16:23.960 --> 0:16:26.920 about the profits right now story. I think as long 0:16:26.960 --> 0:16:29.880 as they maintained the top line growth of over fifty 0:16:30.680 --> 0:16:33.440 that's the key here, because the overall cloud market is 0:16:33.480 --> 0:16:36.400 still growing over and we're talking about, you know, a 0:16:36.440 --> 0:16:39.800 hundred and fifty billion plus market growing at this is 0:16:39.840 --> 0:16:42.640 a company with four hundred million dollars in revenue, it 0:16:42.720 --> 0:16:45.880 has to you know, grow at least fifty. As long 0:16:45.920 --> 0:16:49.160 as they maintain that top line growth, it should be okay. 0:16:49.200 --> 0:16:51.400 But I think where they're gonna struggle is we've got 0:16:51.440 --> 0:16:53.680 good comps for Slack. You have a company like a 0:16:53.760 --> 0:16:57.640 Classian that is operating margin positive. You have a company 0:16:57.720 --> 0:17:01.360 like DocuSign that is operating margin positive. Box and drop 0:17:01.400 --> 0:17:04.720 Box are trading at much lower multiples than Slack is. 0:17:05.080 --> 0:17:07.240 So I think there will be a real challenge for 0:17:07.359 --> 0:17:10.720 Slack to make sure investors are able to you know, 0:17:10.800 --> 0:17:13.639 write in that growth story without them having a clear 0:17:13.640 --> 0:17:16.360 path through profitability. Men Deep Seek, thank you so much. 0:17:16.440 --> 0:17:19.399 A man Deep, senior tech analyst for Bluemberg Intelligence, joining 0:17:19.440 --> 0:17:38.639 me here in the Bloomberg Interactor Brooker Studios. Trade back 0:17:38.800 --> 0:17:41.600 on the front, Bernard, and I guess despite some deverished 0:17:41.640 --> 0:17:46.080 comments by President Trump yesterday about trade tensions, remain high 0:17:46.080 --> 0:17:48.679 concerns about what the impact will be on corporate America. 0:17:48.760 --> 0:17:51.160 Now we're actually starting to see some of the leading 0:17:51.200 --> 0:17:54.760 corporations in America kind of voicing their concerns to the 0:17:54.760 --> 0:17:57.199 appropriate folks in Washington. So you get a sense of 0:17:57.200 --> 0:17:59.720 what's going on there. We welcome Sarah How's Actually's a 0:17:59.760 --> 0:18:03.000 retail colms for Bloomberg Opinion, usually based in d C, 0:18:03.119 --> 0:18:06.600 but joining us today in our Bloomberg Interactive Broker Studio. Sarah, 0:18:06.640 --> 0:18:08.600 thanks so much for being with us. So we think 0:18:08.640 --> 0:18:11.760 about some of these big companies, big brands, how are 0:18:11.800 --> 0:18:15.520 they trying to get their story about to the Washington 0:18:15.560 --> 0:18:18.600 regulators about what could really impact their business if these 0:18:18.640 --> 0:18:21.280 tariffs do in fact go through. So so far, they're 0:18:21.359 --> 0:18:25.080 using a pretty traditional playbook. They're using their trade groups 0:18:25.080 --> 0:18:28.720 in Washington, like the National Retail Federation. They're writing sternly 0:18:28.760 --> 0:18:31.800 worded letters to the President that are signed by coalitions 0:18:31.840 --> 0:18:34.520 of big name retailers UM and this week, what we're 0:18:34.560 --> 0:18:37.280 seeing is that they are testifying at hearings for the 0:18:37.320 --> 0:18:39.760 Office of the U. S. Trade Representative, trying to make 0:18:39.760 --> 0:18:42.199 their case in that format. And I'm sort of wondering 0:18:42.240 --> 0:18:44.680 if it's time for them to go off script here 0:18:44.760 --> 0:18:47.440 and try something different, if it's time for these really 0:18:47.480 --> 0:18:50.040 high profile consumer brands to get out there in a 0:18:50.080 --> 0:18:53.119 more individual way and make their case directly to consumers 0:18:53.119 --> 0:18:55.240 that these tariffs are not a good policy. Idea because 0:18:55.280 --> 0:18:58.520 what we've not seen I don't believe is the you 0:18:58.560 --> 0:18:59.960 know what we used to see in years past on 0:19:00.040 --> 0:19:01.760 time maybe would be a you know, full page ed 0:19:01.840 --> 0:19:05.000 in the New York Times or Walsh Journal, or television 0:19:05.000 --> 0:19:08.119 ads or you know, a social media campaign. We haven't 0:19:08.119 --> 0:19:10.800 really seen that yet, have we. That's exactly right, and 0:19:10.840 --> 0:19:13.640 I think that we should imagine the power of Nike. 0:19:13.800 --> 0:19:16.240 We all know it's marketing prowess. Imagine if they put 0:19:16.280 --> 0:19:19.240 together a TV commercial sort of outlaying how this affects 0:19:19.240 --> 0:19:21.919 them and their consumers. Imagine if you walked into a 0:19:22.080 --> 0:19:24.359 retailer like Old Navy and they had a sign ups thing. 0:19:24.640 --> 0:19:26.720 This ten dollar T shirt will be fifteen dollars in 0:19:26.760 --> 0:19:29.480 November if this tariff policy is enacted. I think that 0:19:29.520 --> 0:19:31.800 there's a fear out there that President Trump's brand is 0:19:31.840 --> 0:19:35.520 so powerful that nobody wants to sort of go toe 0:19:35.560 --> 0:19:37.359 to toe with him. But at the end of the day, 0:19:37.400 --> 0:19:40.119 these retailers ought to remember their brands are really powerful too. 0:19:40.160 --> 0:19:42.399 They serve millions of customers every day who have a 0:19:42.440 --> 0:19:45.239 real loyalty to them, and that they should play on 0:19:45.320 --> 0:19:46.960 that and try to get out there, get on the 0:19:47.000 --> 0:19:50.400 Today Show, make their case directly to consumers. Is there 0:19:50.440 --> 0:19:53.320 a sense that GF one or two big brands like 0:19:53.359 --> 0:19:55.880 a Nike or something like that does it first, then 0:19:55.920 --> 0:19:59.600 others will follow. I think that could certainly help. And 0:19:59.720 --> 0:20:03.040 I just think that retailers have to remember that. I 0:20:03.080 --> 0:20:05.760 think that we've just sort of seen Trump has a 0:20:05.760 --> 0:20:09.320 willingness to put them in the center of all sorts 0:20:09.320 --> 0:20:12.000 of issues that don't even relate to trade at this point. 0:20:12.040 --> 0:20:14.760 We saw that most clearly with his threats on Mexico 0:20:15.000 --> 0:20:18.119 right there. That's been averted temporarily, but that he was 0:20:18.160 --> 0:20:20.320 going to put tariffs on all goods coming in from 0:20:20.320 --> 0:20:22.639 Mexico to get his way on immigration. And so I 0:20:22.680 --> 0:20:25.720 think whatever risk they see out there in speaking up 0:20:25.720 --> 0:20:28.520 on this issue, the risk to being put in the 0:20:28.520 --> 0:20:30.919