In 2009, Stewart Butterfield had already lost one company. Flickr, the photo-sharing platform he co-founded, had been sold to Yahoo for what seemed like a good outcome but ultimately faded into irrelevance under corporate management. Undeterred, Butterfield founded Tiny Speck and set out to build a massively multiplayer online game called Glitch. The game was imaginative, unusual, and deeply ambitious. After three years and millions in venture capital, Glitch launched, failed to reach the scale needed to sustain itself, and shut down in 2012.
Most founders would have taken a long break. Butterfield did something else. He looked at the internal communication tool his team had built to run the game studio, and he saw something more valuable than the game itself.
The Before: A Studio in Search of a Business
When Glitch shut down, Tiny Speck had roughly 45 employees, a pile of investor money that had not yet been spent, and a powerful sense of what they had just failed at. What they also had, though they didn’t fully recognize it yet, was a communication platform they had built for internal use: a system that combined messaging, file sharing, and topic-based channels in a way that made remote collaboration feel dramatically more fluid than email.
The tool had been built to solve Butterfield’s own problem: how do you coordinate a distributed team working on a complex, real-time creative project? Email was too slow and too siloed. IRC was too technical and too crude. Existing enterprise tools were expensive and designed for large corporations, not small creative studios. So they built their own. And it worked.
The Edge: Solve Your Own Problem. Then Tell the World.
The insight that turned Slack from an internal tool into a $27.7 billion business (when acquired by Salesforce in 2021) was deceptively simple: if this tool is solving our problem this effectively, other teams must have the exact same problem. The decision to pivot from game studio to software company was not a retreat. It was a recognition that the company had accidentally built something more valuable than what it set out to build.
This happens more often than founders realize. The most durable products frequently emerge from solving a problem the founder experienced personally. The difference between the ones that succeed and the ones that stay internal is the founder’s willingness to recognize the opportunity and reorient the entire company around it.
Butterfield knew how to do this. He had done it before with Flickr, which also began as a side feature of an unreleased game and was eventually recognized as the actual product.
How They Executed It: From Internal Tool to $27B Platform
1. They Used Their Existing Network for the First Wave of Beta Users
Butterfield had credibility in the tech community from Flickr. When Slack opened its beta in August 2013, Butterfield wrote a blog post asking other companies to try it. The response was significant: around 8,000 companies signed up for the beta in 24 hours. The product’s distribution started with the reputation of the founder, not a marketing budget. This is the value of a track record: it collapses the trust-building phase that most new products have to grind through.
2. They Positioned Against Email, Not Against Competitors
Slack’s marketing from day one was built around a simple enemy: email. Not “we are better than HipChat.” Not “we are different from Microsoft Teams.” The positioning was: email is broken for how teams actually work, and Slack is the fix. This gave every potential user a common reference point and made the value proposition immediately legible. You did not need to understand the competitive landscape. You just needed to hate your inbox.
3. The Product Was Designed for Viral Adoption Within Organizations
Slack spread through organizations in a specific pattern: one team would adopt it, and other teams would see them using it and ask to join. This was not accidental. Slack’s pricing model (free up to a threshold, paid per active user) meant that the incentive was to get more people on the platform. The product was designed to spread within a company like a network, not to be purchased by IT departments as a top-down decision. Slack reached $1 million in revenue within its first few months of public launch.
4. They Were Obsessive About Onboarding
Butterfield is famous for writing an internal memo before Slack’s launch that urged the team to be genuinely customer-obsessed: not in the abstract “customer-first” way companies put on posters, but in the specific, practical sense of making every part of the onboarding experience feel like the product already understood what you needed. The first hours of using a new tool are make-or-break. Slack invested heavily in making that experience exceptional.
The lesson here applies directly to your own business. Before you scale, understand your customers at a granular level. The market research process that reveals how your customers first encounter your product is often where the biggest improvement opportunities hide.
5. They Raised Capital Strategically and Used Failure as Leverage
When Glitch shut down, Butterfield returned the remaining capital to investors rather than spending it. This was unusual and earned significant goodwill in the venture community. When Slack needed to raise, Butterfield had a reputation for integrity in failure: a rare commodity that translated into strong investor relationships. The lesson is that how you handle adversity is part of your professional brand. Investors remember.
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Lessons Entrepreneurs Can Steal Today
Lesson 1: Your Internal Tools Might Be Your Real Business
If you have built something to solve your own operational problem and it works well, ask yourself: does everyone in my industry have this problem? If the answer is yes, you may have a product hiding inside your process. The most authentic products come from real pain, and founder pain is the most credible starting point.
Lesson 2: Position Against a Feeling, Not a Competitor
Slack’s “email is broken” positioning gave them a universal enemy that every professional could relate to. Find the thing your customers are frustrated with, tired of, or resigned to. Position against that feeling. It is more powerful than any feature comparison.
Lesson 3: Network Effects Are Built Into Product Design
Slack was more valuable with more users. This was a design choice, not an accident. Before you finalize your product, ask: how does this become more valuable to existing users when new users join? Products that answer this question well tend to grow differently than those that don’t.
Lesson 4: How You Handle Failure Is Part of Your Brand
Butterfield’s decision to return capital when Glitch failed created goodwill that paid dividends when Slack needed support. Your reputation in failure is as important as your reputation in success. Do right by the people who backed you, and they will back you again.
Lesson 5: A Pivot Is Not a Failure. It Is Information.
Glitch gave Butterfield the team, the technology, the investor relationships, and the internal tool that became Slack. Nothing was wasted. The game failed. The company did not. If you are in the middle of a business that is not working, look carefully at what you have built in the process of trying. The real product might already be there.
The Takeaway
Slack is one of the clearest examples in business history of a product that was found rather than invented. It existed inside a failed game studio, waiting to be recognized. The lesson is not that you should set out to build internal tools. The lesson is that you should pay close attention to what you build in the process of building something else, and have the flexibility and courage to pivot toward whatever is actually working.
Stewart Butterfield failed spectacularly, acted with integrity, and kept his eyes open. The $27 billion outcome was not luck. It was the compounding result of those three things.
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