Messaging startup Slack creates US$80m fund to invest in other startups

[SAN FRANCISCO] Slack Technologies, a Silicon Valley darling that's raised more than US$300 million, wants to give some of that money back. The startup, which runs a popular corporate chat service, is forming an US$80 million venture fund to invest in other startups.

Stewart Butterfield, chief executive officer of Slack, said his company is contributing more than half of the total fund. The rest will come from some of Slack's own backers. The fund will invest about US$100,000 to US$250,000 in smaller startups building applications that work with Slack's messaging service, Mr Butterfield said.

While Slack has been valued at US$2.8 billion, it's unusual for such a young company to fashion itself as a corporate investor. The company's main product, which lets businesses create chat rooms, share files, and send animated GIFs, is just two years old. Mr Butterfield has talked publicly about how easy it's been for the company to raise capital-so much so, apparently, that it's committed more than US$40 million to investing.

Corporate venture has been driven primarily by larger companies. The most active players are tech titans, such as Google, Intel, Salesforce.com, and Qualcomm. In 2014, corporate venture accounted for 11 per cent of all venture dollars invested, the most since 2000, according to the National Venture Capital Association.

Traditional corporate venture firms often use investments as a way to explore potential acquisitions, but Slack may take a different approach. The company, which has made two acquisitions in its lifetime, isn't focused on developing a list of companies to buy one day, Mr Butterfield said.

"We can't preclude the possibility that we would ever acquire someone we invest in, but that's not the point," he said. "Hopefully, we actually make some money on our investments." Instead, Mr Butterfield said the purpose of the fund is to show that viable businesses can be built on Slack's platform. "It could be something that would replace a wiki, or allow you to check on your 401(k) status in the form of a bot, or something that we haven't imagined at all," he said. The Slack fund's backers include Accel Partners, Andreessen Horowitz, Index Ventures, and Kleiner Perkins Caufield & Byers. Bloomberg LP is an investor in Andreessen Horowitz.

The Slack fund has already made three investments: Awesome, which makes a tool that organizes Slack activity; Small Wins, a productivity software maker; and Howdy, which develops a toolkit for building chat bots. Bloomberg Beta, the venture capital arm of Bloomberg LP, is an investor in Howdy.

Slack also said on Tuesday it would release an app directory to guide users through the 150 services they can integrate into their chat rooms. The company said it has more than doubled its daily active users since April to 2 million and has almost tripled subscribers, who pay a monthly fee to access more features, to 570,000.

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