I woke up this morning to rumours on the grapevine that Amazon might be trying to bag the cat in a 9 billion dollar bag. Could it happen?
Let’s start with the 🐘 (elephant) in the room first. How much sense does it make for Amazon to acquire Slack?
Well. That’s a tricky question. One that cannot possibly be answered in black and white — and that is what has been fuelling all these rumours.
And things got even more spicy because of the fact that the story was released by one of the more trusted and credible sources when it comes to information dissemination — Bloomberg.
TWO SIDES OF THE COIN
There are two sides to this story. One side displays all indicators which have been the contributing factors to different tech startups getting acquired in past and why it makes sense for Amazon to acquire Slack. It even touches upon the possibility that the deal may not make that much sense for Slack as it does for Amazon.
When you read that last line (from the wired article), did anyone else remember Snapchat, Facebook’s repeated attempts to acquire it at extravagant valuations — only to get turned down over and over again by Spiegel?
On the flip side you have rationalisation, and more importantly — history and past indicators for both the companies.
The question is — which side wins this tug?
WHY THE DEAL DOESN’T MAKE SENSE FOR SLACK?
This is one of the easier questions to give a quick response to.
Slack has been the poster-child for internet startups for a few years now. Pivot, Unprecedented user growth and retention, revenue, and more money than they know what to do with — this story has it all.
Slack believes it has the capability to turn itself into the next Microsoft, and that is a reason good enough to want to hold on to your seats.
WHY AMAZON WOULD WANT TO ACQUIRE?
No need for me to even try to cite reasons for it. Let us just look at some media reports.
Amazon is a serious force to contend with when it comes to the cloud infrastructure, but when it comes to having access to the average part of your corporate workforce, Amazon does not have enough of an offering for anyone beyond your programmer in the need of some computing power. With a messaging and collaboration app, that could change for Amazon.
But does Amazon really need that?
- Look at Facebook Workplace. Quite a late entrant into the market, and yet it has clients like Royal Bank of Scotland.
- Slack has an impressive clientele. But I am not really sure if they have the reach — depth in all these companies. After all, Slack is a system designed to cater to “teams”, so companies that Slack claims to have on its roaster — it is completely conceivable that as few as a small single team is using Slack for their internal discussions.
- Businesses (including Slack btw) today run on AWS. Amazon already has access to almost everyone of any significance out there. Even if Amazon wanted to skip the dev-effort needed to get a product up and running, there are countless competing systems out there that fit the bill. (Some of them actually better systems than Slack)
I don’t see much of a value of Amazon or Microsoft acquiring Slack. Just look at Microsoft. If was always said that if MS just positions and integrates Microsoft Teams with the whole gamut of MS suite (more specifically — just MS Office), that’s all that Microsoft needs to do. And Microsoft has done it in past with MS Communicator. So they have seen how well it works. If businesses are already getting a communication app — that looks, feels and smells like Slack — businesses will think twice before paying for such a service.
& now, why I think — — — — NO DEAL!!!
I’ve said it over and over again (as have many others), it would be extremely rare that you would come across someone as ruthlessly competitive as Jeff Bezos. The guy is a frigging dominating one-man machine. He wins, and he does so as a habit. But one of the many other things he’s known for — he doesn’t really go for overvalued acquisitions.
Did I hear someone whisper Flipkart? _wink wink_
Flipkart used to be the leading e-commerce player in India before Amazon entered the playing field and there were speculations far and wide that Amazon might scoop it up when it would enter India. Much to the dismay of the founders and specially the investors, that didn’t happen.
Secondly, I don’t really feel very comfortable believing in coincidences. And this smells more and more rotten with a strong stench of coincidence.
If I remember right, I’m pretty sure there were similar rumours of a Slack and Microsoft love affair just over a year back. That, ultimately, didn’t seem to materialize.
Now, it’s not uncommon for business deals to fail — even at the last stage. But if you factor in the fact that Microsoft launched its own team communication and collaboration app months later (among other factors), the story gets interesting. After all, the only reasons why Microsoft would be trying to buy out a company like Slack:
- They didn’t have their own system and it seemed like a better alternative simply bagging an established company as compared to building it ground up.
- They wanted the existing client base of the company they are trying to acquire. Slack does have an impressive client roaster. Teams at a good number of fortune 500 companies are on slack, and many of them are actual paying customers.
But I really don’t think either of these would have been applicable.
- Microsoft already had a product in making that could fit the bill.
- As far as having business cred is concerned, Microsoft has more than enough of that in the hand. Slack may have had millions of active users, but Microsoft has much more traction — both in depth and width.
And then there were the contradicting reports.
So, Business Insider reported that Microsoft was considering an $8bn bid — something that didn’t eventually happen. Recode on the other hand mentions quite clearly that Slack did receive an offer from Microsoft and others. (“And others” was a nice new addition)
Forget about the media reports. I have also heard from credible inside sources at MS that such a deal was never even under consideration — at least nowhere close to the desks of the senior management.
[Good lord. “Credible sources”. I sound like Trump.]
And then, there was the newspaper ad late last year when Microsoft hadn’t even released Teams.
What is happening right now appears to be on similar lines, with only two apparent differences:
- Now, its $9bn instead of the $8bn that was doing rounds last year
- This time its Amazon instead of Microsoft and others
Interestingly though, the post-money valuation for the funding cycle has remained the same. The news last year alleged about an interest from MS at $8bn, while Slack was in the market trying to close down on a round at an expected post-money valuation of $5bn. Unfortunately, that didn’t happen and the funding closed at slightly less than $4bn. This time, Slack is again looking to get fresh cash infusion — at $5bn post-money.
It wouldn’t be completely ludicrous if this whole thing later revealed out to be an elaborate scheme at the end of slack in an effort to drive its valuation up and smoothen the final stages of any fund raising dialogue. Companies have done far more, for far less to gain than the $500Mn Slack is looking to raise right now.
BUT WAIT. I’VE SEEN AMAZON ACQUIRE EXPENSIVE BUSINESSES
Of course they do. Take the one on the table right now — Whole Foods. Acquiring the ‘offline’ chain of retail outlets makes sense for Amazon because it aligns perfectly with its foray into the space of grocery shopping and automating the whole experience — something that Amazon has been experimenting with for a while now.
Building an offline network of that magnitude, and with good presence — it takes time, it is expensive and it is not easy. Makes sense for Amazon to simply scoop someone up.
Slack does not have that advantage. And as I said earlier, if skipping on the dev cycle is the only concern, Amazon would happily get similar service that it can scoop up for a tenth of the price.
The real question right now, or questions to be more accurate:
- If there is any truth to the rumours, does the cost benefit matrix look healthy enough for Amazon to be giving it two serious shakes?
- If it is a deliberate hoax at the end of the company to drive the cost up, how many times can slack keep on doing the same thing over and over again before the investors get wiser to see right through the facade.
And one additional question I personally have — do they even need this money??
So. Is this indeed an hoax or there is some fire underneath all this smokescreen? Fuck if I knew. Maybe you know something I don’t.
That’s it for today. See you tomorrow.
I am Abhishek. I am here... there.... Everywhere...