[sanderjd]

> people that might not be able to set it up otherwise

And also people who want it, are able to set it up, but would prefer to pay someone else to do it for them. Lots of useful services simply deliver something that people want, could do themselves, but prefer not to. Like and email providers and restaurants.

The valuation "sounds high", but they've shown that they can deliver a product that many users love and many individuals businesses will pay actual money for. I was shocked when I read the amount, but at least they sell a product!

[throwaway5752]

I follow a public company that reported earnings recently, is in a fragmented multi-10-billion segment, has fundamental patents in it's field, and has 9-figure revenue. They have a valuation 1/10 of Slack's. I have no beef with Slack, but the valuation seems completely detached from fundamentals, or reality for that matter. I'm not hating, I hope all the founders & early contributors do great and never have to work again... but it is a high valuation.

[peterjancelis]

Remember that VCs buy preferred equity that can limit their downside (1x liquidation preference at least, maybe a preferred dividend).

The company you follow sells common stock to its shareholders.

[fizx]

Slack's margins have the potential to be absurd. Their market is potentially all businesses. Investors have some downside protection.

[inthewoods]

I'm not sure those two mean real downside protection - but your point is correct - the VCs are betting on the very small chance that Slack is actually adopted by a huge number of businesses. Right now I'd guess it has a fairly narrow adoption among leading edge companies and SF/Valley natives. I'm sure there are exceptions to this - or maybe they truly have moved beyond that core audience and that's what is driving the valuation.

But that's what VCs do - make a large number of bets that will fail and one that blows it out the park.

Their valuation is a reflection of the growth in Slack's business - meaning they have strong enough growth that they can command that kind of valuation on a huge raise. It is also like a reflection on the limited number of companies that have that kind of growth.

But these kind of valuations also create a high-wire act for the companies in my experience. Growth must be maintained at all costs to justify the valuation. They spend like they're going out of style because of this.