Slack Goes Public at a $20 Billion Valuation: How Much Is Too Much?
Follow James on Twitter @jwangARK
Enterprise software IPOs seem to be happening like clockwork these days, Slack this week graduating to the public markets in a direct listing that valued the company at almost $20 billion. This year, Slack expects to deliver $600 million in revenue, up 50% from last year, putting its valuation at 33 times sales which is exorbitant by conventional measures but appears comparable to its rapidly growing Software-as-a-Service (SaaS) peers like Zoom and Atlassian.
Slack’s namesake product aims to replace email communications with group messaging. While group messaging is nothing new, Slack’s re-interpretation of the format with channels, third party app integrations, and an elusive ‘cool factor’ has made it the go-to communications app among startups and information workers. Slack boasts over 10 million daily active users and almost 600,000 customers paying more than $100,000 a year.
Analysts are expecting Slack’s revenue growth to slow from 50% during the next year. To surprise on the upside, growth would have to re-accelerate. Why, we wonder, might that happen?
One possibility is that Slack extends its success from intra-company to inter-company communications. If it were to become a standard for communications, Slack would enjoy powerful network effects that could withstand the direct competition from Microsoft’s Messages and others. Another possibility is that it evolves into the central hub of workflows, including communication, storage and project management. Integrating with a variety of apps like Dropbox, Salesforce, and Zoom, Slack could morph into a new user-interface (UI) for work orchestration. Both scenarios are somewhat remote possibilities, but they would allow Slack to grow into a much more defensible valuation.
Facebook Releases Whitepaper for Highly Anticipated Cryptocurrency
Follow Yassine on Twitter @yassineARK
It’s finally here. After months of anticipation, the white paper for Facebook’s highly anticipated cryptocurrency was released this week.
Officially coined “Libra”, Facebook’s cryptocurrency is set to launch in 2020. It will be backed by a basket of currencies and government bonds and is the centerpiece in Facebook’s broader mission “to enable a simple global currency and financial infrastructure that empowers billions of people.”
Libra will be built on the Libra Blockchain, which will use a BFT consensus approach and will be structured as a single data structure, rather than a chain of blocks, that records the history of transactions and states over time. It will begin as a permissioned blockchain and transition into a permissionless blockchain within 5 years.
Operation and policy decision making will be governed by members of the Libra Association, which currently consists of 27 Founding Members who serve as validator nodes. These nodes also are responsible for securing the network and validating transactions.
It appears clear that Facebook is making an aggressive attempt to implicate itself into the financial services world. Along with the release of the white paper, Facebook announced the launch of a separate subsidiary, Calibra, which willaim to provide financial services on top of the Libra network. Calibra will start out as the primary digital wallet for the Libra cryptocurrency and will be available in both Messenger and WhatsApp, in addition to being a standalone app.
So what does this mean for Bitcoin? And how does this compare?
Before the creation of Bitcoin, the optionality of a non-government backed money remained limited. Bitcoin, and the proliferation of private/public key cryptography, has opened the playing field for a global battle of monetary systems from both sovereign and non-sovereign entities. Facebook building out its own cryptocurrency may be a compelling indication of this new and growing market for private, non-governmental money forms.
As was first brought up by Erik Voorhees, however, we believe Libra is not a “pure cryptocurrency” albeit labeled one. Its very nature lacks guarantees of borderlessness, unseizability, and censorship-resistance that pure cryptocurrencies provide.
Libra coin could end up being the largest Bitcoin onramp to date. If Facebook allows users to export private keys outside of its closed ecosystem, it opens the door for individuals to experiment with public and private key cryptography. By being an effective on-ramp into the digital asset ecosystem, pure cryptocurrencies like Bitcoin may end up benefiting as people begin to understand what distinguishes pure cryptocurrencies from Libra.
How Will Libra Hit Mass Market Adoption?
Follow Max on Twitter @mfriedrichARK
This week, while many analysts pointed out that Libra is well positioned to scale on the back of Facebook’s 2.4 billion global users, an existing user base alone does not guarantee the mass adoption of any technology. Instead, networks have to incentivize users in some way to join. Facebook has been enabling payments on its Messenger platform since 2015, for example, without breakthrough success. What could be different this time around?
Payment networks are subject to network effects, the existence of positive adoption externalities: every participant joining the network increases the value of the network for all other existing and prospective participants. For this reason, payments networks may have incentivized new participants in different ways to join, as shown below. In the late sixties, for example, BankAmericard licensees, later united under Visa, and banks under Master Charge, later MasterCard, distributed 100 million credit cards to Americans. In China, WeChat Pay’s first Red Envelope campaign tripled its user base from 30 million to 100 million in one month. Recently in Japan, Line Pay waived merchant fees to spur adoption of its mobile payment application while competitor PayPay offered users 20% cash back on purchases. Consumers in India were incentivized to use Digital Wallets like Paytm after its monetary authorities voided the two largest denominations of its fiat currency.
Neither the Libra Foundation nor Facebook’s digital wallet Calibra, have disclosed incentive structures to accelerate Libra’s adoption. Theoretically, merchants could offer lower prices to customers who pay with Libra. In emerging countries, Facebook’s WhatsApp could offer its users low remittance fees as an onramp for Libra adoption. Incentive structures that stimulate adoption will be critical to Libra’s success.
Source: ARK Invest