5 Reasons Salesforce Was Smart to Buy Slack

Q:  Will Salesforce’s $28B acqusition of Slack be successful?

It should be successful.

Why?

  • Salesforce is good at mega-acquisitions. Salesforce paid $6B for Mulesoft, $15B for Tableau, $3B for ExactTarget … and these are Salesforce’s big M&A winners. They know how to take an established brand and grow it faster, and build or expand a new core offering around it.
  • Slack has already become very enterprise. The majority of Slack’s growth is from larger, enterprise accounts where Salesforce is strong. $100k+ deals are the majority of its growth engine. More here: 5 Interesting Learnings from Slack at $1B in ARR | SaaStr
  • Very high market share already. Yes, Slack competes with Microsoft. But Slack is past $1B in annual revenues with a dominant brand and very high net revenue retention (120%+). Salesforce may not be great at creating brand new things anymore. But it knows how to lean into a dominant market share.
  • Strong support from Salesforce President Bret Taylor and the top. Bret Taylor is President and COO of Salesforce — and Facebook’s ex-CTO. He has the DNA to make sure they don’t screw Slack up. And it’s his deal, and the heir apparent to Benioff.
  • Salesforce will drive up the deal size. Salesforce is very, very good at providing a bigger solution — and then charging more for it. Watch it over time drive up Slack ACVs, most likely.  It looks like Slack has been under some pricing pressure from Microsoft.  That won’t go away, but Salesforce knows how to sell against a cheaper solution.  It’s very, very good at it.

A bit more on how Slack looks now:

Published on January 3, 2021

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