How I Built This with Guy Raz - Slack & Flickr: Stewart Butterfield

Episode Date: July 30, 2018

In the early 2000s, Stewart Butterfield tried to build a weird, massively multiplayer online game, but the venture failed. Instead, he and his co-founders used the technology they developed to create the photo-sharing site Flickr. After Flickr was acquired by Yahoo in 2005, Butterfield went back to the online game idea, only to fail again. But the office messaging platform Slack rose from the ashes of that second failure — a company which, today, is valued at over $5 billion. PLUS, for our postscript "How You Built That," how a peanut butter obsession turned teenager Abby Kircher into a CEO before she was old enough to drive. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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and it's supported by American Express. Go to npr.org slash summit to find out more and to get your tickets. And I hope to see you there. We were sure that this was going to be something that was big, but we went back to our investors, including Andreessen Horowitz. And we went in there and told them our plan. And, you know, we could one day get to $100 million in revenue

you with this business and thereby be a billion dollar business. And like they were just like, you guys have no idea what you're doing. You don't understand what it is to sell into companies. You're going to need all of this expertise. And they were like, good luck with your stupid little thing. From NPR, it's how I built this, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz.

And on today's show, how Stuart Butterfield, first-time. the art of the pivot by turning a failed online game company into Slack, a messaging program now valued at over $5 billion. So you might remember a story we did a while back about Kevin Sistram and Mike Krieger. When they joined forces to build a tech company, they came up with something they called Bourbon. It was a check-in app that was going to take the world by storm. You'd take out your smartphone and declare, hey, I'm on Bourbon and at Starbucks. Anyone there? Well, the problem is there was no one. No one used bourbon. At least not in the way it was intended. But what Mike and Kevin discovered was their small user base really loved the photo sharing feature. That was special. Burbin was a failure, but that cool photo sharing feature, well, they decided to make that their business. And that business is better known today as Instagram. So now, imagine you're working to build a massive,

multiplayer online game, a weird utopian fantasy world like Burning Man, but in cyberspace. Well, that was Stuart Butterfield's big idea. This was going to be his life's pursuit, his great achievement. So he tried it, not once, but twice. And both times, he failed. But something else happened both times. Two entirely different, entirely unintended products were born from those failures. The first one was called Flickr. It was an early image hosting website where you could store and share photos. The second one? Well, if you work in an office, I'm pretty sure you've heard of it or use it.

It's called Slack. And if you don't know what it is, it's a messaging app designed for team collaboration. Slack is one of the fastest growing business apps ever, and it was kind of an accident. But we'll get to that story. What you need to know about Stuart Butterfield is that he had kind of an unconventional childhood, like off the grid back to the land unconventional because his parents were counterculture hippies who decided to live in the remote backwoods of British Columbia in Canada.

Yeah, they had restored an old log cabin that was built around the turn of the last century. Didn't have running water until I was three, didn't have electricity until I was four. It was actually a funny story of my mother's father, who came from Poland to Montreal in between World War I and World War I. too, coming to visit them. And they had a bathtub in the front yard and, you know, just like trying to eat the food that they were growing and didn't have many possessions. And he was like, I can't believe I escaped the Steddle in Poland and sent all of you to university. And then now you're back living in this dump.

Oh, my God. So they were like real live off the land hippies. Wow. My name was Dharma when I was born. Your birth name was Dharma. Yeah, the Hindu and then later Buddhist concept of like the path. the way. And when I was 12 years old, like most 12 year olds, really wanted to be normal. So it changed you to Stewart because for some reason I had the impression that Stewart was the

most normal name you could have. You didn't want to be Dharma? No. I regret it now because Dharma Butterfield is a amazing name. Totally amazing. Stewart eventually went to study philosophy in college. But while he was in school, he also got really interested in computers. And on the side, he taught himself to code in HTML. And so During the summers, he started to make websites for local businesses. But his master plan, his main goal, was actually to become a philosophy professor, until he realized that working in tech might be a more stable job. So he moved to Vancouver, and he got a job at a tech startup called communicate.com.

The guy who founded it had bought in 1993 all of these domains, like vietnam.com and Brazil.com and makeup.com and perfume. Who was this guy? His name was Brian Liu. He's unfortunately passed away since then. But so this is like 98, 99. Owned Brazil.com and Vietnam.com. Yeah, but also like dance.com and electronic.com.

Like, he had hundreds of them really, really valuable. So that was the guy who was buying them all up. And bought them up. I didn't even know you could buy dot com domains in 93. Like that was really, really early. So he's sitting on this, what at that time was like a gold mine. And the way that we thought back then was we would develop one universal e-commerce back-end and then have all these domain names be the front end. And it was the idea was that they were going to have a bunch of websites and they would all basically direct users to this one e-commerce site where you could get anything, makeup or whatever it was.

Or tickets to Brazil or boxing paraphernalia or whatever they had. But no one had anything really to do. No one knew exactly what we were doing. It was really early.com. It seemed like this was incredibly valuable. We're going to have a contest giveaway at BMW Z3, which was like in that James Bond movie. So it was like the hot car at that time.

So that we got people to sign up. What are they signing up for? I don't know. It got worse and worse and worse, like day by day because no one knew exactly what they're supposed to be doing. And the management meetings turned into screaming matches. And so around the end of February, of the year 2000, I quit.

I walked away. I thought I was walking away from like $10 million in equity. And I got bought out for $35,000 on my way out. And, of course, like 10 days later, two weeks later, was the first dogcom crash. And so in the end, I got $35,000 more than I would have had I stayed. Yeah. So what did you decide to do next?

Well, I convinced one of the guys who happened to sit next to me, Jason Classen, who was running a website on the side called Gradfinder, which was a competitor to classmates. So this is many years before Facebook existed. And I convinced him to leave when I had my $35,000. And we went out and raised a whole $50,000 of money from other people and started it up as a real business. This is gradfinder.com. Yeah. And this is a way to find other people who graduated from your college, basically. Yeah. So it's like a giant directory of high schools. And in each high school, you could have a graduation year and people would just sign up and message each other and stuff like that.

We worked on it from like six or eight months, and it got acquired by... Wow. Yeah, so we were lucky. Amazing. By one of these dot-coms that had raised a ton of money, like, I don't know, $150 million. I don't even remember what it was called now. This is like the last gasps. So this is the end of the year 2000.

And they ended up going bankrupt a year later. So when you guys sold Gradfinder when it was acquired, did you walk away with a bunch cash yourself? Yeah, I mean, a bunch of cash, you know, more tens of thousands. I don't even remember exactly what it was, but it wasn't like, you know, millions of dollars. But it was probably a decent amount of cash for, you know, a guy in his mid-20s. Yeah, no, definitely. Yeah.

You know, I took a lot of the next year off. I did consulting work, but relatively little. I guess it was around this time, like 2000, where you met someone and you got married. I did, yeah. In like 99, I started a webloyal. and there was a couple hundred people or so around the world who had blogs, and we all knew each other. And one of the bloggers whose blogs I admired was a woman named Katerina Fake.

She had a website called Katerina.net, and it still exists now 20 plus years later. So, yeah, around that time, we met, and a year-ish later, we got married. And it was an interesting time because, you know, because all of that. of the dot-com era hype had completely dissipated. A lot of companies had imploded, but there's a lot of creativity. So in late 99, I started this competition called the 5K, which was to build the smallest, any website or webpage that could be done in five kilobytes of data. And one of the people who entered the competition was a guy named Eric Costello, who lived in, at the time in St. Louis, and it sparked up a friendship with him.

And by this time, Jason had come back from the Grad Finder acquisition, and we all started working together on a project called Game Neverending, which was an attempt to build a web-based, massively multiplayer game. And it was a never-ending game, presumably? Yep. You never ended, okay. This was you and Katerina, your now wife, and Jason Klausen, who you did Grad Finder with.

Yep. And with this guy, Eric Costello, you decide that you want to create a game, a massive multiplayer online game. Yeah. So there's a whole type of gaming that existed before graphical games took off. And they were the precursor for everything that came after, World Warcraft being the example that most people would know. But we weren't interested in fighting games. We were interested in creativity and play as kind of a pretext for social interaction. So this idea still has a lot of appeal to me. It's a horrible idea commercially. Like, it's just there's not enough people who are interested in it.

But, you know, there was a group who used the prototype and were very enthusiastic and the seeds of this incredible community. And we thought, hey, you know, we built this prototype. People liked it. We can make this into a real project. And what would the game look like? Would you be in front of a screen looking at like a Minecraft-type interface? Yeah. So it was 2002-2003, so the graphics weren't even Minecraft quality.

It was more like there was a map. There's like different objects and you could click on them to pick them up or click on them to do stuff with them. But really rudimentary. So we tried everything to raise some money for this. And there was zero interest in investing in this. Because now it's like the middle of 2002. Yeah. And no one wanted to invest in anything to do with the internet.

Yeah. Well, how are you even going to make money off this? What was the business model? people would pay a monthly subscription. I see. So I put my money into it. Some of us working on it put our money into it. We hired a couple of people.

We raised a couple hundred thousand dollars of friends and family money. And when I say friends and family, I mean, like literally friends and family. And by the middle of 2003, we now been working on it a year, it was clear how complex this was going to be. And would you realize we're never going to be able to finish it for the amount of money we raised. and we were desperate for something else that we could complete in a shorter amount of time. And that thing ended up being Flickr. And I think when we started it, the intention was we'll build this and someone will buy it for like a million dollars. And then we can use that million dollars to finish the game.

Yeah. And of course, that's not what happened at all. Wait, wait, let me go back for a sec. So you've got this idea to build this game. It's very expensive. You just don't have enough money to do it, right? So then you decide. I mean, it leads you to starting up Flickr, which is like a photo-sharing website.

How did that even happen? Well, we had at that time developed a whole bunch of really interesting and relatively novel technology. So we had a game that you could play in a web browser. And despite the fact that it was pretty rudimentary graphics, it was still, from a technological perspective, totally fascinating and new. Yeah. And this story sounds like too good to be true and kind of ridiculous. But a group of lawyers had organized a conference called Law and Virtual Worlds in New York, and they invited all these people.

And I went with Katerina. And on the plane on the way there, I got food poisoning. So when we got to JFK, I was just throwing up and get in the taxi, pull over on the van wick to throw up. And then get to the hotel and open the cab door and throw up all over the carpet. It's like really sick. I couldn't keep anything down, kind of like fever dreams. And the part that sounds apocryphal, but it's, I see.

where it's true is the whole idea for Flickr came to me that night. I literally wrote it out on like scraps of paper in the hotel room while I couldn't sleep in five in the one. You wrote out, you wrote out what? A way to take the interface that we had developed for the game, which let people chat, which let people change locations, which let people manipulate these objects, like to pull them into their inventory and do stuff with them. And instead of the objects, we'll just have photos. So you can upload a photo and then you could do stuff with it. So when I say, stuff, I mean, people could draw a little rectangle on the photo and then make an annotation of that part of the photo.

They could chat about them. They could send them to other people. They could change the title and everything happened dynamically. So like when I did something, you would see what was happening on your computer. So again, technologically, for the time, amazing. Like just mind-blowing, people were incredibly effusive. Then let me just pause for a second to say, this was the first version to flicker, which was not good. and which we quickly changed, and the reason we were successful is because we changed it. And this is, I think, a good point to introduce another character. We've got so many threads going here. So one of the players of the game was, like, early 20s, hardcore, just nerd,

who lived in a tiny village in England and had a job in London. He commuted to London every day on the train for a couple of hours. And he had developed a bunch of stuff to illustrate the social networks inside the game. kind of we didn't have any APIs for him to use, but it turned out had hacked into our internal mailing list when we were working on the game and had been reading all of our messages, which is why he was able to develop all this stuff. He was like just a person who played game never ending? Yeah, like a fan. And his name was Cal Henderson. Cal was such a geek, like one of the nerdiest people I'd ever met in my life.

He was also like a prodigy programmer. And so when I convinced him to start to work. work with us on making Flickr, he was really into it. And on the train to London every day, two hours in, two hours out, he wrote almost all of the guts of Flickr, the way to upload the photos and to process them, to store them, display them. The original payment he got was me buying stuff off his Amazon wish list. So it was like radio head EPs and like, you know, rare vinyl and stuff like that. So here's what I don't get. Everyone's like focused on this game, but Everyone kind of knows that the money's running out.

How did you then convince everybody to pivot? Did you say, hey, guys, you know what? Let's just dump this gaming thing. Let's go all in on a photo sharing site. Like, did anybody say, what are you talking about? Oh, yeah. So I actually forgot about this until a couple of years ago when I was reminded of it. I kind of laid out everything and said, this is the situation.

We're just not going to be able to finish the game. And I let everyone vote. You said to them, you let them vote on whether to actually go through this plan? Yeah, whether to switch our efforts to Flickr and to really pursue that instead of the game. And then I lost. What was the argument you made? How did, I mean, why did you even think that was a good idea? Because it was something that we could complete faster.

Like, we could actually get it out. Right. We would. And at this point, Eric was the one person in the team who had kids. So he was the one person who got paid. We just weren't able to pay anyone anymore. Yeah. So we had this vote.

I lost, or Flickr lost. game one so that I had to call Eric on the side and like, you know, do some what I imagine happens in the Senate, some kind of like horse trading to convince him to change his vote. And that worked. And, you know, that decision was December 2003. And in February 2004, we launched Flickr. We all flew to San Diego for this conference. And were people like super excited about it when you launched?

It was a pretty big deal when it launched. I mean, in that closed community, you know, there wasn't nearly as many people online. You know, this is like probably a decade before the majority of people got smartphones. The internet wasn't, was still perceived as this kind of like weird, creepy place. Like, if you saw a popular image of an internet user, it would be like a really overweight guy in the basement. Yeah, like that guy in the Simpsons. Yeah, exactly. Yeah.

So you guys, so it's like 2004, you put Flickr out there and people, and people, who were on the internet were like, cool, a place to put our photos up online? Yeah. So around that time, Google had bought Blogger, which was one of the early blogging programs, and they didn't have a way to host photos. So they put, you know, in their help materials online, when people said, how do I upload photos? They said, use Flickr. You know, it was like the one standout of that time where the world had kind of soured on the internet.

that kind of rose from the ashes of all that destruction and became like a cool, interesting thing that people could get involved in that was fun about the internet again. And how is Flickr going to make money? Because if all these people are coming onto it, presumably you had to buy like server space, which was a lot more expensive then before like cloud computing.

Yeah. How did you deal with that? We sold what we called pro accounts, which let you, I believe it was, you could see the whole history of your photos, whereas if you didn't buy a pro account, you could only see 200. And that actually went pretty well,

but you're right. But hardware at that time was just, you know, astronomically expensive. And memory storage. You were storing all these people's photos. Absolutely. So every week we would put in order to Dell. You know, UPS would deliver boxes from Dell. And then every Friday night,

Jason and I would go down to where the servers were and look at the screwdrivers and put, servers onto the racks and to set everything up. But because Flickr was really taking off in the public imagination, we actually got some people who are interested in investing. So we actually raised a little bit of money, so we were able to buy the servers, and we were growing really quickly. And we actually had people buying pro accounts, you know, not very many, but we also

didn't pay ourselves very much. So we're covering a bit of the cost through actual usage. And suddenly companies wanted to buy us. like which companies we were talking to Google to Yahoo to I don't know if people remember this anymore but to ask Jeeves oh yes

of course and to some of the other existing photo sharing sites you know fast forward another six months or so now it's Christmas of 2004 so it's about to turn into 2005 and we also had a bunch of venture capitalists who were interested at the same time Yahoo is getting

really really serious so the search part of Yahoo made an offer to buy us. And then over that Christmas, New Year's period, 2004, 2005, we had to choose, do we want to take this money from the investors and build this into something bigger? Or do we want to take the money now from Yahoo? And we got a great pitch from them. And the promise was, you know, we come work at Yahoo, we'll buy the company, we'll give this money, but we'll also give you all of these resources. And we have all of Yahoo's hundreds of millions of users and all of our technology and all of our servers. And you can build this into this great. great and wonderful thing. So that's in the end what we decided to do. What do they offer? It was around 20 million bucks. So 20 million bucks. Wow. You were a rich guy overnight. Yeah. So suddenly all the friends and family who invested in the dumb game a couple years prior were in a good position. And everyone who worked there who had deferred their salaries and kind of sacrificed along the way was in a good position. And the feedback that we got from

our investors was, hey, look, you know, this is going to be a life-changing amount of money. You'll be able to do what you want to do after. And who knows if this opportunity will stay around. So you should just take the acquisition. So smart move. Smart move, for sure. Like 100% of the time they would give the opposite advice today. Yeah, right.

But it was really, yeah, Flickr was like a really singular thing in the internet at that time. I mean, you guys, you and Karina were like kind of internet and more than the internet famous. You were famous after that acquisition. You landed on the cover of Newsweek. Yeah, so I would say still a little bit internet famous because I was in New York and I was flying back to the West Coast when that Newsweek issue came out. What did what do the cover say, by the way? Well, I'll tell you, I grabbed a stack of them at the newsstand inside of JFK and I slapped them down.

It's like, you know, I have like a dozen copies or something like that. And the woman who was checking me out didn't, she didn't look up. And she scanned one magazine and she flipped it over and scanned the other one. And she said, honey, you know all these are the same? And I said, yep. And then she looked up at me, and then she looked down at the magazine. She looked up at me again. And she was like, really, like, her eyes lit up.

She was so excited. And then she read the cover of it and said something like Web 2.0 from Flickr to Myspace, something, something, something. And she was just crestfallen. She was just like, oh, my God. I thought you were going to be someone important. Like, you were going to be a movie star or, like, American Idol contestant or something like I cared about. She just like some Web 2.0, dude. The look on her face was just amazing.

And then she'd just scan the rest of the magazines and checked me out, and that was it. So Yahoo gets a pretty good deal now that we know now in hindsight on this product. You walk away with probably a good amount of cash. Probably not set for life, though, right? No, not so for life. And part of that acquisition, what's called earn out. So it's conditional on the employees staying with Yahoo for a time. How long did you have to stay with Yahoo to fully vest,

get all your money? Three years. And you lasted, how long? Three and a half. So you basically made it. So how were those three years of Yahoo? I think I was never in the Army, but I looked back at that time the way I would imagine some people look back at boot camp, which was it was horrible at the time, but like very rewarding and enriching. And I learned a lot and developed character and stuff like that.

What was horrible about it? Well, at the time we required, it was nine people. So nine people being acquired by what at the time, I think, was like an 11 or 12,000 person company. And suddenly, everything that was just easy, like we would just decide something and then it would be decided became this massive process. Now, when we wanted to get more servers, we had to go to the hardware review committee and you had to make an appointment and you couldn't get an appointment for like five weeks. Meanwhile, the site's going to fall over. Wow. And when we wanted to blog something, you know, like make an announcement publicly or add a future, we would just do it before we required.

And then after we were acquired, there was like, you know, a whole comms team. Yeah. It just took a lot of getting used to. So it was just like, you know, almost all of my energy went into things other than making Flickr a great product. It sounds like you were just counting down the days. You really want to get out. Yeah, I said that. And there was also there was good parts as well.

And I got to say, you know, I used the boot camp monology in a deliberate way. I learned an amazing amount. Some of it was negative lessons, like, you know, don't do this. But a lot of it was positive lessons. And also it was just really eye-opening. You know, it's like I certainly, I learned a lot more than I ever would have learned in any MBA program. Yeah. Just being exposed to, because Flickr was pretty high profile, I had access to all of the executives.

And I could see all these decisions that was involved in all these things that I never would have been involved in otherwise. So when you left Yahoo, was it with a feeling of joy and possibility or was it a feeling of like, okay, I don't know what I'm going to do now? I'd say halfway in between. It wasn't overwhelmingly positive or negative. Because you, I guess, and this is kind of a personal thing, but your marriage was breaking up at that time. Yep, it was. we had only recently had a kid and we didn't work together that closely at Yahoo

but it's pretty challenging to work with your spouse especially in the early days of a startup but this is going back many years now when we first started working on Flickr like out of money and it's not just the business is out of money it's like we're out of money you're out of money and that stress isn't like okay I can leave it at the office and go home to my family which is totally independent

It's the other really interwoven. So I think that was just, it was a difficult time. And by the time that we left Yahoo, like pretty soon after that, it was just over. And I guess you still have to work. You still have to figure something out. So what did you do when you walked out of the Yahoo? What was your plan? There wasn't an immediate short-term plan.

It was definitely to take some time off because that had been a real whirlwind. But it didn't take long for. a lot of the same people who worked on Flickr and had worked on the previous game to decide that we wanted to work on the game again. You want to go back to gaming? Yeah. You didn't learn your lesson the first time around. Yeah, we apparently didn't.

I mean, so the world looked pretty different at that point. So now it's the beginning of 2009. There was at least an order of magnitude more people online. Whereas in 2002, the majority of people didn't have internet access at home. Now the majority did. Computers are way faster. All the hardware was way cheaper. online games were something that were really popular.

And so we figured like, oh, this time we can't fail. Like, all of the conditions are perfect. So we should do this. When you say we, you're talking about the people who worked on the previous game with you, all those guys? Yeah. So there was me and three of the engineers, including Cal Henderson and Eric Costello, and another one named Sergey Morochoff, who's in Vancouver.

And what we decided to do, which was called The Glitch, was completely different than anything that anyone had ever seen before. The game was called Glitch? Yes. So in this game, it was a bizarre, fantastical world, really tried to encourage individual creativity and people could create stuff inside the world.

But in the world, you would milk butterflies in order to get butterfly milk, and you could, like, eggs grew on trees. And the look was kind of like, Dr. Seuss meets Monty Python, meets, like, modern-day graphic novels. So as you moved around the world, the look changed dramatically. So you had a track record with Flickr.

Like, you already had a reputation. You'd been on the cover of Newsweek. You'd worked for Yahoo. So when it came time to raise money, was it pretty easy? Yeah, absolutely. It was very easy for us to raise money. So we started off with like a million and a half dollars. We were able to hire someone.

We were able to afford all the technology we wanted. And as we started developing the game, we had a bunch of really positive early indications. So we charged people money and they paid a lot. You know, like the average person who paid was paying $70 a year. And this is like what, 2010, 2011, something like that? Yeah. And people were already paying for it.

It was that good. Well, it was that good for a very small population. So, in fact, it was really hard for us to get people even to go through the first few minutes of the game because it was just so different and so weird. Most people who tried it were like, what the hell is? this and just pieced out in the first three minutes of gameplay. All right. So you guys launch this thing. There's some early success. You raise lots of cash. And then November of 2012, you shut it down. What happens?

Well, being in business and I think especially being a CEO requires a lot of unnatural optimism. And at some point, it's just that optimism is exhausted. So we had what's called a leaky bucket. So people would come in the top of the funnel. And the funnel is kind of describing like first people hear about your thing, then they go to the website, then they sign up, then they, in our case, play the game a little bit, then they end up paying you on each of those stages. You kind of, some people fall out of the process. So that's why it's called the funnel. The leaky bucket is you get people in the top, but they just fall out. Like they follow out the process too early. Not enough of them make it all the way through. They didn't stick with it. Yeah, they didn't stick with it. And

it was always the next thing that was going to fix it. Like the next game dynamic we added, the next bit of customization, the next, the next thing, the next thing, the next thing. But as we continued to try those things, we just never found that magic formula that would make it work economically. Like, it would have been a fine what people call lifestyle business, but it was never going to become the kind of business that would justify $17.5 million of venture capital. investment. So at what point did you come to the decision to shut it down? Well, so I was, I was losing a lot of sleep in those days. I was up really late one night. And it was like two or three in the morning. I was in bed and I hadn't been sleeping for hours. And I just realized, like, I don't believe this can work. Like, I don't believe it anymore. And I realized right in that

moment, like, there's a saying, if you're thinking about firing someone a lot, you should just fire meaning that like that intuition, if that keeps coming up, it's almost certainly correct. And you wouldn't be thinking that all the time if there was a real shot at making the relationship work. I think it's exactly the same thing with the business. Once I began not to have little doubts, but once at a fundamental level, I was just like, I don't think this is going to work. It's not going to work. So, you know, first thing that morning, I wrote to all the co-founders and then to our board of directors and just said, it's over.

And that definitely was not a unanimous point of view, and there's a lot of kind of contention and argument. I bet. Because we had developed an enormous amount of kind of equity, like a really... Content. You had content. Tons of content. Yeah.

Millions of frames of animation, hundreds of hours of original music. So how did you break the news to the team? I mean, they must have been excruciating. Yeah, it was a horrible experience. And I say we're going to have an all-hands meeting. And everyone, you know, files in and gets together. People have their coffee in the morning and they're chit-chatting. And finally, like, I stand up.

And the meeting starts. And I start to tell them that we're going to shut down the game. And before I could even get, like, the first half of the sentence out, I was crying. And, you know, almost everyone in the room. I had personally convinced that they should come work in this company, that they should accept our stock options, that they should believe in the project, that they should believe in me. And so it's, like, it's human. Is it a real sense that I had failed all these people. Yeah.

That I had an obligation to them. And I was, I had locked eyes with this one software engineer who had just three months before moved. He had an infant daughter, I don't know, like maybe six months or a year old. He was moving away from his in-laws who were helping take care of the kid, moving to a new city with his whole family. And now I was telling him he didn't have a job anymore. When we come back, have Stewart's second. The second failure to build an online game had a silver lining and how the idea for slack was hiding in plain sight. Stay with us. I'm Guy Raz, and you're listening to How I Built This from NPR.

Hey, welcome back to How I Built This from NPR. So in November of 2012, Stuart Butterfield decided to shut down development of his multiplayer online game called Glitch. And he laid off almost all of the employees. Now, at the time, he really didn't know what his next move was going to be, but he decided to do something kind of unusual, which is to help out the people he just fired. This is where I feel glad that we made the decision when we did, because we still, we had raised all this money. We still had like over $5 million in the bank. It was late in the year. We're going to keep paying everyone for several months, so they had a chance to find another job.

We built a website called Hire a Genius. and we had everyone's like, you know, a portfolio, their name and endorsements. We wrote reference letters. We helped people with their resumes. We made introductions. By the end of that process, we had gotten, you know, every single person who worked there who was getting laid off. And there was like 37 of them, I believe. Every single one of them got another job.

And in most cases, they got a better job than the one that they had. And I think that making sure everyone got hired generated an enormous amount of goodwill, like in the community at large. And I think it was very helpful for us down the road when we started slack and people were more willing to give us a chance. Okay, so you were left at the helm of this now rump of a company or non-company. And what was your next move? Well, so the interesting thing about glitch was while it wasn't successful as a business, we were extraordinarily productive. And there was a system for internal communication that we had developed that we didn't. think about as a thing.

Like, it didn't have a name. We never talked about it. It was just how we happened to communicate. And it was all built around the concept of a channel. And you can have a channel that created for anything, for a project, for a functional group, for a topic of conversation. And the channel exists whether you're a member or not.

And it can continue to exist after you leave. And it's kind of an inversion of the typical inter-office communication, which is entirely based on email now. In email, if you join a company that has been, been around for 30 years and has been using email since its inception, you get an empty inbox. So you're completely cut off from the whole history of what's happened before you got there. Right. And almost all of the email, like 99.99% of it, is going into individuals' inboxes and is not

visible to anyone else. And you can be CCed into something that was already going on or someone can forward you a conversation, but it's not accessible. You know, someone else has to give it to you, whereas while we were breaking on the game, We would hire someone new in customer support, and they would have the whole history of all of the conversations the customer support team had had before they got there. They would have the whole history of the topics that the designers were working on. Everything else that was going on was visible to them. But my assumption is that, like, you weren't sitting around going, oh, my God, this internal chat system that we created is revolutionary.

Like, you were focused on glitch, and this thing was kind of cool, and it just made things kind of, it greased the skids. Or am I wrong? Did you actually wake up in the morning like every day and say, oh, my God, this thing is amazing. No, you were right in the first place. We didn't even think about it. I think if someone asked me, what do you do for internal education? I would just shrug my shoulders and said, I don't know, like whatever everyone does. Yeah.

We didn't think about it at all. And it was only once we had decided to shut down the game that we realized like, hey, this system is actually pretty good. We would never work without a system like this again. Like, it's so much better than anything else we had used before. Maybe other people would like it. So at what point do you decide, let's see if we can take this like chat thing that we built and turn that into a business? It's funny. We have these conversations and we had them in our internal communication tool, the thing that predated Slack.

And so there's timestamps. My memory is very different than the reality. My memory is it took us months to decide this. And there's a lot of debate. In fact, it took us like less than a week. The core was there like almost instantly. And so who was left? How many people stayed to see if you could make this new thing work?

So it was myself and the other three co-founder, so that's four of us. And then there's four employees that we kept, one of whom we had worked with back in the Flickr Days, who's a back-end programmer, iOS or mobile engineer, our head of QA, and one designer. So you decide, hey, let's see if we can take this side thing that we've built and see if we can turn that into our business. Were they passionate about this? Because everybody went into this thing to make a game, a video game. Were they like, yeah, woo-hoo, let's make an instant communication tool?

I think we were. You go through a trauma with a group of people, and you really get bound to them. It makes you very close. And so I think we all wanted to continue working together. In fact, we wanted to work with many more of the people that we didn't have the opportunity to keep. The happy story is we ended up hiring back quite a few of the people who worked on the game, including that one software engineer I mentioned, who I had just convinced to move. He's been an early Slack employee for a long time.

They might sound completely different. One's enterprise software that has all this Fortune 100 customers and the other one's an online game. But to me, they're fundamentally similar for two reasons. One is, I just like making software. And I like doing it with these other people. They all like making software as well. And then on the other hand, whereas there was two massively multiplayer games and there's a massively multiplayer photo sharing, Slack is massively multiplayer communications at work. So what did you tell your investors?

Did you just like say, hey, you know, we're just going to shift. We're no longer going to do games. We're going to focus on this communication tool. Is that what you said? Yeah, that's pretty much it. And, you know, none of them wanted their money back. And not for altruistic reasons, but we had already spent two-thirds of it. So there are options where, like, we can get back a third of what we gave you, or they can buy one more lottery ticket and say, keep the money, we'll keep our ownership in the company, and see what you can do.

And that turned out to be, you know, the wise move. Yeah, the best decision any of them had ever made in investing. All right. So you, so at this point, at the end of 2012, was Slack, did you guys call it Slack, this internal communication thing? Yeah. I was really wedded to the name, and it was not really popular internally. What does it come from? There was a bunch of criteria we had.

We wanted to be a regular English word. We wanted people to be able to spell it if we said it. We had to be able to get the trademark, and we had to be able to get the domain. There's the negative connotations that, you know, slacker. Slacking off. But there's also these positive connotations to pick up the slack or to cut me some slack. Yeah, right. And I think that the negative connotations, I felt like because this would be an unexpected and unusual name, it would be more likely to stick with people.

Having said that, we spent the next four months arguing about different names, like dozens of different names. And all of them in the end either ran into like we couldn't get the trademark or we couldn't get the domain name. And Slack, speaking of dot-com registrations, was registered by this guy in 1993, lives in somewhere in the Midwest, I think, Wisconsin. who is an electrical engineer, and there's no more iconic internet thing than this, he had it as a website with pictures of his cats. So it's just like the domain was just sitting there. Slack.com, and you can go in the internet archive and look at his old website with pictures of his cats. And he sold you the domain name?

He sold us the domain name, yeah. So when you pivot from glitch to Slack at the end of 2012, early 2013, was it fully formed? Was it essentially ready to go? No, there was two things. One was the internal communication system that we had built. That was just really jury rigged. But what was as a blueprint for what we wanted to build, it was more or less perfect. So we had that.

We started development completely from scratch in December, 2012, January, 2013. A couple months later, we had enough done that we could start using it. A couple months after that, we had enough done that we could invite some friends to try it. And then suddenly we realized, look, oh, here's a challenge. We had been working like this for years, and it just felt perfectly natural for us. And the advantages of it were just obvious. In fact, so obvious that we were hard to articulate. And we tried to convince our friends at other companies to use it.

And they were like, why would we do that? Right. It's another thing to check. Exactly. And the really hard part of it was, unlike most software, now you can't unilaterally decide to use Slack with your colleagues. Everyone has to buy it. Yeah. I can't send you a message unless you're also using it.

So it has this real challenge at the beginning, especially when no one's heard of it. No one knows anyone else who uses anything like this. It's brand new software from this flaky company that just failed to make it a massively multiplayer game. So who knows how long they're going to be doing this? Why am I going to trust them? And what we imagine would be a really easy sell. We would go and say, hey, you should try this. It's great.

It worked amazing for us. was just received with cold stairs. We'd go back to the same company, like five, six, seven times, and we would show them demos, and we'd try to explain. It was great practice, though. We got much better at kind of refining the pitch and explaining what the value of everything was. Okay, you say this to me in 2013.

I'm your friend. I'm going to say, Stuart, I've got emails coming in, and phone calls and texts and, like, Facebook. I don't need this other thing. This is just going to be another time suck. And then you say, and then I would say, oh, this will be like a huge, boon because you'll start to consolidate all the communication that's happening in all these other channels.

And critically, you'll build this archive. And the archive increases in value over time. So the longer you use it, the more you get out of it. Because you can find the answers to questions that people had had before. It's this resource that's shared across everyone. You have to spend a lot less energy. And then, of course, you would object again. And I would talk to... More more stuff to read. Stuart, more stuff to read. Yeah. So we would go back and forth with this for a while. There's like always a million objections. So it took us a lot, like to get the first three or four external teams using it took us forever. And then finally we convinced a company called Ardeo to try it.

And they were much bigger than us. They were like 120 people. And you guys were at this point, how many? We were still the same eight people. So you guys were just working like dogs on this thing. Yeah. But the more we work, the more we realized, like, hey, this is actually, this totally makes sense.

Like, you know, we probably from the practice of trying to convince people, we had definitely convinced ourselves. We were sure that this was going to be something as big. What's funny is we went back to our investors, including Andreessen Horowitz, which is now like a really big, successful venture capital firm. And this group had a lot of experience in enterprise software, which suddenly we were an enterprise software company instead of a game company. And we went in there and told them our plan and, you know,

our grand ambition, which was, hey, we believe that there's, you know, we could one day get to $100 million in revenue with this business and thereby be a billion dollar business. And, like, they were just like, you guys have no idea what you're doing. You don't understand what it is to sell into companies. You're going to need all of this expertise. You're up against X, Y, Z, different companies, different technologies. And they were like, good luck with your stupid little thing.

But did you think those investors were wrong? I mean, it sounds like they made some good points, right? Well, so by the time we officially launched, it was evident that this was going to be something. The leaky bucket problem that I talked about in the context of the game was completely eliminated. We found that once people started using it, as hard as it was to get people to start, once they started, they almost never stop. And at that point people weren't paying us. They were just using it for free. But we could see that they were getting utilia.

They were logging out at the end of the day, and first thing in the morning, they were right back in there. So you launch in February of 2014 officially. It goes out into the app store or whatever and out into the world? Yep. And we also told all the people who had been using it for free, like, hey, the grace, you know, this is now you're going to have to start paying, we'll give you a nice, healthy credit to thank you for being one of our early testers. And we found the conversion was excellent. You know, like within maybe two weeks or three weeks of launching that officially, we had sold a million bucks worth of luck. A million dollars. How does it work, by the way? What does it cost? It cost $80 per person per year. So you would pay, you would only pay for the money. the people who are actually using it. So if you have a 50-person company and there's 20 people using it, then you just pay for 20 people. But in the beginning, it was like six, seven bucks per user per month, something like that. Exactly. So you launch it and within weeks you have a million

dollars in revenue. Yeah. To be fair, it took us many, many more weeks to get the second million because that was all the pent up demand. But yeah, we were off to the races. Unlike almost any enterprise software ever, people would talk about it. Like they would be in line at the coffee shop and they would say, oh my God, you got to start using Slack. It's amazing. It's changed my life. And they would post to Twitter and say, like, I recommend. And that, you know, no one ever says that about the software that they have to use at work. So it was a completely different experience. This was like as the good of a result as you could possibly hope for. It's amazing. By October of 2014, so this is just two years after you shut down glitch and, like, have to break the news to all

these people, you raise 120 million bucks. It's, it's a, it's a, it's a way. $1.2 billion dollar valuation. I mean, that's, that's nuts. That's totally insane. Yeah, it was completely insane. And, you know, at that same period, we're still growing, like, somewhere between 5% and 10% a week. How are you dealing with that growth? How are you hiring enough people? I mean, how are you getting, how are you getting through the day? It was a pretty mad scramble, you know, and that year, um, we went from maybe 10 or 11. I can't, we hired a couple people at most 12 employees up to about 40, 50. We might have ended that year at 80 people.

And it was breakneck. We had to move offices and we don't have enough desks. People are sharing desks. Gradually, we put some systems into place. You know, we started hiring professionals to manage different parts of the business. And now it's, you know, there's a thousand people. It's amazing.

Yeah. So this has been called the fastest growing business app ever. It went from launch in February 2014. to the latest valuation is like $5.1 billion. That was in September of 2017. It probably is higher now. Those numbers are just staggering. I mean, for something that was just a side project

that was never intended to be the business. Yeah. You know, it feels like all of the years of like sweat and toil and sacrifice, all of the years pressing on with a game, you know, like kind of failure after failure have been. more than rewarded, like rewarded dozens of times over. Because we thought, like, all of the other eight-person software development teams in the world would use this. And that happened, like, not that long after we launched.

And now there's, like, three-star Michelin restaurants using it. And there's, like, the Norwegian Department of Labor and Welfare Administration. There's, like, the Hartford, Connecticut Police Department. There's, like, NASA's Jet Propulsion Laboratory. There's all these enormous companies, there's all these small companies. We never thought it would become this big. Like, even in our grandest ambitions, it was like a tenth of what it is today. Do you think there was a possibility that you would not have discovered Slack,

that this thing hiding right under your nose, you just wouldn't have thought this should be our business? Was there a possibility that could have happened? Yeah, absolutely. Or that, you know, I mentioned the difficulty in telling the team and kind of what that felt like. it was hard not to let that just like crush me because it is so embarrassing. Like it's so humiliating. And it's such a, it was such a hard decision to make, I think partly because what you hear is the never give up in your dreams. You know, resilience, grit.

You got to keep going. It's all about the fight. It's the slog. And I think that's generally true. And I think it's really important to persevere through things that are difficult. But there's also a point beyond which you're just making a mistake. What keeps you up at night now? Anything?

I mean, are there potential competitors? Or are you like, I'm set now? I mean, you are. There are many reasons for you to kind of chill out and relax, right? No, I lose all kinds of sleep. And this is where it gets really interesting. And this is, like, to me, the most fascinating part of the journey. So through a combination of inexperience and probably arrogance,

when we're smaller, I thought, like, my job is to be smarter than everyone and to make all of the important decisions. And if I make all the right decisions and I'm smart enough, then we'll be successful. Because that's the story that we tell after the fact around a lot of companies, that it was like a series of strategic decisions that made all the difference. But what I found is what matters is performance at the level of the organization. Because to the degree that everyone's pushing in the same direction, you're able to achieve something. If people are pushing in opposite directions, then you can put as much energy as you want in, and nothing happens. So, you know, when we were eight people, it's trivially easy for everyone to understand what's going on. You get to 100 people, and that's – suddenly it's hard.

In 2016, we went from 80 people to 320, so we doubled twice. And that meant, you know, we have in all hands. I say, hey, put up your hands. Have you been here for less than a year? And like 75% of the company puts up their hands. It's really difficult when the average tenure is so low. And not only that, but like there's two people or whatever on the Android engineering team. And then they're working their butts off developing the app, but they're also trying to hire the third person.

And the third person starts, and they have all these questions, and they don't know what they're doing. And then meanwhile, you're trying to hire the fourth person. And in that chaos, it can be really difficult to kind of hold it together. And a lot of this has just kind of dawned on me over the first. the last year. And I think it was probably, I feel like as a CEO, 18 months behind where I should be. And those challenges are starting to become clearer and clearer. Let me ask you about one final question about your personal life. So you mentioned that when your marriage broke up, it was sort of, it'd been building, you had financial stress and,

you know, you were worried about this and that. You are now a billionaire, I mean, at least on paper. Does that eliminate stress in your life? Does that mean, that everything's set, everything's taken care of? One nominal correction. We've been around for a long time as a company, and I have four co-founder, so I'm not even a billionaire on paper. Okay, I'm not even a billionaire. Okay, sorry.

Perhaps. But on paper, you got lots of money. Yeah, it certainly makes my life easier. And, you know, there's all that research, and I don't remember where we're at with the latest version of this, but, like, beyond a certain amount of money, it doesn't make your life any better. I really feel like there's kind of, there's three levels of wealth in the world. the first level is I'm not stressed out about debt.

Like people who no longer worry about their credit card bills or their student loans, that's like level one of wealth. Level two is I don't care what stuff costs in restaurants. You know, you're like, oh, I really want this thing, but it's $18. But the other thing is $12, so I'll get the $12 one. There's a level where, like, suddenly it doesn't really matter which, how much you spend on a particular meal. And then the ultimate level of wealth is I don't care what vacation costs. Like, I don't care how expensive the hotel is or which flight would go on. Beyond that, I really don't think it makes any difference.

So I feel incredibly fortunate, and it's great to have all these resources. But I'm just going to give almost all of it away because there's no, I don't get any additional happiness in spending it. And there's a lot of suffering in the world, and there's a lot of inequality. And I think that's a place where not just me, but the whole company can make a difference. Both of your companies, you know, your well-known companies, were the product of pivots. Like you were working on something completely different. Both happened to be games. And then when you realized it wasn't going to work, you shifted first to Flickr and then to Slack.

How do you think you were able to see that? Because it's easy to look back on it with hindsight and say, oh, my gosh, Stuart Butterfield. What a genius. What foresight he had. Is that, do you think that's a fair assessment? Well, I'm trying to remember where I read this, but there's a nice visual, and that's, there's a billion blades of grass on this massive field. And people are playing golf, and every blade of grass says, like, I believe the golf ball is going to fall on me. And someone hits a golf ball, and sure enough, it falls on some blades of grass.

And they say, see, it was me all along. And like, the ball was going to fall somewhere. This is kind of like the, I was on the cover of Forbes magazine when Slack was really successful. if I didn't do this, if Slack wasn't successful, if it wasn't me, it's not like Forbes is just like, okay, well, we won't publish a March issue. No cover this month. Someone was always going to be on the cover. Someone was always going to be successful.

And I try to remain very conscious of that fact. Like there's, we did work hard and we're clever and we're able to call on a lot of experience and I think we did a lot of things right. But there's a real increasing returns dynamics. Like once you start to have some success, the rest of the, the success becomes easier and easier. And you look at Slack is like the ultimate example of this. We were growing really, really quickly, even before we launched. And because of that, the press would write about us. And because the press wrote about us, investors were interested. Because

investors were interested in wanting to invest, we were able to raise all this money. And that got us more headlines. And that got us more interest from great applicants who wanted to come work at the company. And the opposite is absolutely true as well. You know, one stumble and you lose a couple of good employees and now investors are kind of skeptical. You have to scale back your ambitions. Now you're not doing anything interesting. No one writes about you. No one wants to come work at your company. Investors are really not interested in you go to business. So, you know, while I am proud of all that we have accomplished and, you know, there's been an enormous amount of hard work by a lot of people, there is this real tailwind that we have that really just, it makes it all of that stuff

a lot easier. Stuart Butterfield, co-founder and CEO of Slack. By the way, in the early days when Stewart was interviewing job candidates for the company, he would always ask three questions. The first one, what's three times 17? The second one, name three countries in Africa. And the third question, in which century was the French Revolution? Now, it wasn't like you were disqualified if you got the answers wrong, but it was just a way to start a conversation.

Stewart wanted to make sure that people working for Slack were curious. And please do stick around because in just a moment, we're going to hear from you about the things you're building. Hey, thanks so much for sticking around because it's time now for how you built that. And today's story starts in Charlotte, North Carolina. Where about three years ago, Abby Kircher was a teenager with a food obsession. I've always loved peanut butter flavored anything. Peanut butter cups, peanut butter ice cream. I loved peanut butter and jelly sandwiches.

heavy on the peanut butter. But one day, Abby did something that you probably shouldn't do with a food you eat every day. She looked at the label. And I was just like, oh my gosh, this is so much sugar, tons of additives and preservatives. And so it just doesn't feel like it's almost peanut butter anymore. You know, it just feels kind of like a sugar spread. So Abby decided to go cold turkey on peanut butter, but of course she missed eating it. So I was like, I might as well make my own.

You know, there's no reason why I couldn't make my own. So that's when I just whipped out a food processor and just tried it out. This was, by the way, her mom's food processor into which she put some nuts and coconut oil and salt. And eventually it took forever. It turned into a creamy texture. I was like, wow, this is so cool. I got very excited. Then I was like, okay, how do I want to flavor this or sweeten it?

So I threw in some dates, processed that a little bit, and it was so. So good. So good, in fact, that Abby started spreading the nut butter on everything, apples, sandwiches, pancakes, even salad. And she began sharing it with her family and friends. And then, one night, I went into my room and it was quite literally an aha moment and I just ran back into the kitchen and said, Mom, I could start a business. And she just kind of was like, oh, right. Yeah, absolutely. Now, it's a good thing Abby's mom and dad were on board because, Remember, Abby was like 15 at the time. So she needed her parents' help to track down jars and labels and a commercial kitchen to make the nut butter.

But Abby was still making a lot of the big decisions. Like early on, she actually decided to forget about peanuts and to branch out into other types of nuts. I wanted something a little different, and I realized there weren't a lot of pecan and cashew butters out there at the time. So Abby came up with five recipes, each with just a handful of ingredients. It's flavors like date pecan or strawberry cashew and coffee almond. And she and her mom, Anna, set up a stand at a big farmer's market just outside Charlotte. And we would just, you know, call people over. They were all incredibly intrigued by the story and how young I was.

They would always look to my mom and be like, so you started this? And she'd be like, nope. Anyway, they kept selling out at the farmer's market. And people kept asking for more. That was getting hard because they were still packing the jars of nut butter themselves. And how were they doing that? Spoons, believe it or not. Many spoons, many, many hands.

That was the worst part for sure. It just took so long. So a few months later, they got a machine to do the jarring for them. And soon, they were pitching their nut butter at local grocery stores. For a young girl and her mom to walk in there excited about a product and made them excited. And I think that was a huge factor in our growth. Less than two years after Abby started making nutbutters, they were selling in like 300 grocery stores in the Charlotte area. And over time, it wasn't just Abby and her mom doing this.

Her older brother joined the business and her dad actually quit his job to join them as well. Technically, I'm the boss of my parents and brother, yes, which is definitely a learning experience trying to figure out, okay, what are our positions in the business, regardless of our, you know, positions in the business. regardless of our, you know, positions in the family. Abby's now been at this for three years, and her nutbutters have spread to nearly 1,000 stores across the East Coast and Midwest, including some pretty big chains like Wegmans and Lowe's. Now we're set to hit a million dollars in revenue

by the end of this year. Which is pretty crazy because Abby Kircher is still just 18. Her business is called Abby's Better, as in B-E-T-T-E-R. And if you want to find out more about it or hear previous episodes of our show, head to our podcast page, how I built this.npr.org. And of course, if you want to tell us what you're building, go to build.npr.org. And thanks so much for listening to the show this week.

You can subscribe to it at Apple Podcasts or wherever you get your podcasts. And why you're there, please do give us a review. You can also write us at hibt at npr.org. And if you want to send a tweet, it's at How I Built This. Our show is produced this week by Casey Herman with music composed by Rumtin Arablui. Thanks also to Nur Kudsi, Neva Grant, Sanaz-Meshkentpur, and Jeff Rogers. Our intern is J.C. Howard. I'm Guy Raz, and you've been listening to How I Built This from NPR.

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