How Slack Made Other Startup CEOs Wealthy: Term Sheet

June 21, 2019, 1:14 PM UTC


Slack killed it.

On its first day of trading, the company’s shares opened at $38.50, 48% higher than its expected price, giving it a market cap of $19.5 billion. That’s nearly triple its last private market valuation of $7.1 billion.

Yesterday, I noted that Accel had a big windfall thanks to Slack’s public market debut. But I read an interesting story in Forbes that talks about how Slack’s surprise winners are other startup CEOs. Before the company pivoted into the Slack we know today, it was called Tiny Speck (which made video games that ultimately failed to catch on.)

Before co-founders Stewart Butterfield, Cal Henderson and two former Flickr colleagues went to raise money from VCs, they first gave a call to their friends. Those friends were influential tech founders: LinkedIn’s Jeff Weiner; Stripe’s Patrick and John Collison; Squarespace’s Anthony Casalena; Twitter’s Biz Stone; Yammer’s David Sacks; and Jeremy Stoppelman of Yelp. According to Forbes, they all took stakes in the early rounds of the company.

And now, their bet on Butterfield & his fledgling Tiny Speck has paid off handsomely. Each $25,000 they invested would now be worth more than $40 million. The beauty of the direct listing is there’s no “lockup” period like in a traditional IPO, so its shareholders can immediately sell their shares.

From the story:

“It’s Silicon Valley’s greatest strength and Achilles heel,” says Margaret O’Mara, a professor at the University of Washington who has studied the modern history of Silicon Valley. “You have people who are winners from the previous generation picking winners from the next. And by their mentorship, they give these companies a leg up. The virtuous cycle, or vicious cycle, depending on how you look at it, goes again and again.”

She calls it “virtuous or vicious” because it’s a double-edged sword. On the one hand, you increase the founder’s chances of success thanks to all the mentorship and money. On the other, investing in circles keeps the concentration of wealth and power in the same hands. If you’re an outsider with a great idea but few influential connections, it makes it that much harder to break in.

‘A RAINY DAY:’ I interviewed Brex co-founder Henrique Dubugras on a panel at Fortune’s Brainstorm Finance conference in Montauk yesterday. If you live in San Francisco, you’ve likely seen the company’s ads everywhere. Brex issues corporate credit cards for tech companies and allows entrepreneurs to get a corporate card quickly, with higher credit limits, no personal guarantee, and instant approvals.

My question was: What happens when the market turns & the party stops? What implications would this have for Brex given that the two-year-old company has never had to weather a recession or financial crisis of any sort.

There’s a contingency plan though, Dubugras said. He’s raised more than $300 million in venture capital funding, and he notes, “We’re setting some of that aside for a rainy day, so you can have money to pay back everyone.” Watch the full interview here.


Druva Inc, a Sunnyvale, Calif.-based provider of cloud data protection and management solutions, raised $130 million in funding. Viking Global Investors led the round.

Unily, a U.K.-based digital workplace platform, raised $68 million in funding. Investors include Silversmith Capital Partners and Fairview Equity Partners.

Procurify, a SaaS-based spend management solution, raised $20 million in Series B funding. Investors include Information Venture Partners, as well as, Runa Capital, HarbourVest Partners, Manulife, and BC Tech Fund managed by Kensington Capital.

Rhumbix, a San Francisco-based mobile platform for smarter construction sites, raised $14.3 million in Series B funding. Blackhorn Ventures and Tenfore Holdings led the round, and were joined by investors including Greylock Partners, S28 Capital, South Park Ventures and Glynn Capital.

CoHive, an Indonesia-based co-working space company, raised $13.5 million in funding. Stonebridge Ventures led the round.

Engage3, a Davis, Calif.-based company that helps retailers manage their price image through competitive data, data science and AI-powered software solutions, raised $12 million in Series C funding. The March Fund led the round.

Ockam, a San Francisco-based serverless platform for IoT developers, raised $3.2 million in seed funding. Investors include Core Ventures, Future Ventures, Okta and SGH Capital.


Comet Therapeutics, a Cambridge, Mass.-based biotech firm, raised $28.5 million in Series A funding. Canaan and Sofinnova Partners co-led the round.

Axial Biotherapeutics, a Boston-based developer of gut-targeted therapeutics for neurodegenerative diseases and neurodevelopmental disorders, raised $10 million in funding. Investors include Taiho Ventures LLC.

Tangen Biosciences Inc, a Branford, Conn.-based molecular diagnostics company, raised $9 million in Series A funding. Connecticut Innovations led the round, and was joined by investors including VC23, Axiom and Leading Edge Ventures.


HOP Energy LLC, which is backed by Delos Capital and Shorevest Capital, acquired Kosco Heritage Energy LLC, a Kingston, N.Y-based distributor of heating oil. Financial terms weren't disclosed.

eSolutions Inc, a portfolio company of Francisco Partners, acquired Practice Insight, a Houston, Texas-based provider of integrated electronic data interchange and revenue cycle management workflow solutions for healthcare providers. Financial terms weren't disclosed.

Construction Resources, a portfolio company of Monomoy Capital Partners, acquired United Materials Inc, a Florida-based importer and distributor of surfacing materials. Financial terms weren't disclosed.

FoodChain ID, a portfolio company of Paine Schwartz Partners LLC, acquired Decernis LLC, a provider of technology and content solutions for compliance, safety, and risk management. Financial terms weren't disclosed.

Pamlico Capital agreed to invest in Digitech Computer LLC, a provider of revenue cycle management and technology solutions for Emergency Medical Services transport providers. Financial terms weren't disclosed.


Trainline, a U.K.-based rail and coach tickets seller, raised 951 millions pounds ($1.2 billion) by floating 56.5% of the business. Baillie Gifford invested. Read more.

AMTD International, a Hong Kong-based financial services firm and investment bank, filed for a $200 million IPO. It posted revenue of $92.1 million in 2018 and profit of $66.9 million. AMTD Global Markets and Tiger Brokers are underwriters. Read more.

Dermavant Sciences, a London-based Phase 3 biotech for dermatological diseases, postponed plans to raise $100 million in an IPO of 7.7 million shares priced between $12 to $14. It has yet to post a revenue, and posted losses of $42.7 million in 2018. Roviant backs the firm. Jefferies, SVB Leerink and Guggenheim Securities are underwriters. It plans to list on the Nasdaq as “DRMT.” Read more.


UnitedHealth Group Inc. agreed to buy Equian LLC, a health-care payments firm, for $3.2 billion. The seller was New Mountain Capital.


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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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