Slack just raised a whopping $427 million to become a $7.1 billion company -- now, it has to defeat Microsoft (MSFT)

  • Slack, the very popular work chat app, has raised $427 million in venture capital, at a valuation of "more than $7.1 billion." 
  • All told, Slack has raised about $1.27 billion in venture capital — including in a $250 million mega-round led by Softbank in the September of 2017, which gave it a $5 billion valuation at the time.
  • This valuation would make it that much more expensive for a larger tech company to buy it, and thus, at least a little less likely. But it's also been coy about a potential IPO, raising questions about the master plan. 
  • All the while, Microsoft has been reinforcing Microsoft Teams, its own work chat product.

Slack, the work chat app that's become a poster child for Silicon Valley startup success, is on something of a hot streak. 

First, Slack bought the intellectual property to Atlassian's HipChat, which had been one of its chief rivals. Then, no less than Microsoft recognized Slack as a major rival to the Microsoft Office suite in an official regulatory filing.

Now, Slack can add one more to its win column, as it takes in a whopping $427 million in an investment round led by  Dragoneer Investment Group and General Atlantic, with participation from T. Rowe Price, Wellington Management, and others, including its existing roster of investors. 

RELATED: Best US business schools in 2018

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The best US business schools in 2018

20. Emory University (Goizueta) (GA)

Full-time enrollment: 350

2016-2017 tuition: $57,000 per year

2016 acceptance rate: 33.1 percent

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19. Carnegie Mellon University (Tepper) (PA)

Full-time enrollment: 428

2016-2017 tuition: $61,440 per year

2016 acceptance rate: 30.3 percent

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18. University of North Carolina—Chapel Hill (Kenan-Flagler)

Full-time enrollment: 574

2016-2017 tuition: $40,015 per year (in-state); $56,138 per year (out-of-state)

2016 acceptance rate: 36.4 percent

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17. University of Texas—Austin (McCombs)

Full-time enrollment: 521

2016-2017 tuition: $34,296 per year (in-state); $50,296 per year (out-of-state)

2016 acceptance rate: 28 percent

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16. Cornell University (Johnson) (NY)

Full-time enrollment: 580

2016-2017 tuition: $61,584 per year

2016 acceptance rate: 27.6 percent

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15. University of California—Los Angeles (Anderson)

Full-time enrollment: 734

2016-2017 tuition: $52,272 per year (in-state); $55,159 per year (out-of-state)

2016 acceptance rate: 20.7 percent

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14. University of Virginia (Darden)

Full-time enrollment: 678

2016-2017 tuition: $57,790 per year (in-state); $60,108 per year (out-of-state)

2016 acceptance rate: 26.5 percent

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12 (tie). Duke University (Fuqua) (NC)

Full-time enrollment: 896

2016-2017 tuition: $63,200 per year

2016 acceptance rate: 22.1 percent

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12 (tie). New York University (Stern)

Full-time enrollment: 790

2016-2017 tuition: $66,588 per year

2016 acceptance rate: 23.1 percent 

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11. University of Michigan—Ann Arbor (Ross)

Full-time enrollment: 801

2016-2017 tuition: $59,350 per year (in-state); $64,350 per year (out-of-state)

2016 acceptance rate: 26.3 percent

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9 (tie). Columbia University (NY)

Full-time enrollment: 1,326

2016-2017 tuition: $68,792 per year

2016 acceptance rate: 14.1 percent

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9 (tie). Yale University (CT)

Full-time enrollment: 694

2016-2017 tuition: $64,200 per year

2016 acceptance rate: 19 percent

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8. Dartmouth College (Tuck) (NH)

Full-time enrollment: 567

2016-2017 tuition: $66,390 per year

2016 acceptance rate: 22.4 percent

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7. University of California—Berkeley (Haas)

Full-time enrollment: 502

2016-2017 tuition: $56,009 per year (in-state); $57,560 per year (out-of-state)

2016 acceptance rate: 12 percent

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4 (tie). Massachusetts Institute of Technology (Sloan)

Full-time enrollment: 809

2016-2017 tuition: $67,938 per year

2016 acceptance rate: 11.7 percent

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4 (tie). Northwestern University (Kellogg) (IL)

Full-time enrollment: 1,301

2016-2017 tuition: $66,462 per year

2016 acceptance rate: 20.1 percent

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4 (tie). Stanford University (CA)

Full-time enrollment: 833

2016-2017 tuition: $66,540 per year

2016 acceptance rate: 6 percent

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3. University of Chicago (Booth)

Full-time enrollment: 1,185

2016-2017 tuition: $66,540 per year

2016 acceptance rate: 23.6 percent

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1 (tie). Harvard University (MA)

Full-time enrollment: 1,871

2016-2017 tuition: $63,675 per year

2016 acceptance rate: 10.7 percent

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1 (tie). University of Pennsylvania (Wharton)

Full-time enrollment: 1,708

2016-2017 tuition: $67,516 per year

2016 acceptance rate: 19.6 percent

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This investment, in turn, leads to two other figures of interest: Slack is now valued at "more than $7.1 billion," according to a press release. And now, all told, Slack has raised just about $1.27 billion of venture capital. That includes the $250 million mega-round it took in last September at a $5 billion valuation, in a deal led by Softbank. 

Slack is also using the opportunity to tout its growth. It has 8 million daily active users (DAUs), and 70,000 paid teams, up from the 6 million DAUs and 50,000 paid teams it announced in September. Also in September, Slack said it was at $200 million in annual recurring revenue (ARR), though it doesn't have an updated figure to share today.

More money means more questions

All of that said, this funding round raises some questions for the future of Slack. 

This $7.1 billion valuation makes it that much more unlikely that Slack will get bought up by a big tech company. If Amazon, for example, were to revisit its reported interest in buying Slack, it would likely have to pay a big premium over that valuation to seal the deal. Even for a gigantic tech company like Amazon, that would be a hefty price tag. 

At the same time, Slack has so far played coy about a possible IPO, declining to announce any plans one way or the other. With so much money going into the startup, though, some kind of exit seems like it will have to come sooner rather than later.

And all the while, Slack is facing down the continued threat of Microsoft, whose Microsoft Teams product comes bundled with the mega-popular Office 365 productivity suite for businesses. While Slack has its fair share of super-fans and champions, Microsoft wields significant might in this market, and the startup has its work cut out for it. 

Microsoft hasn't taken this lying down, either, and has made moves to make Teams more competitive with Skype — most recently, launching a free version of Microsoft Teams to hook in smaller groups, and hopefully lure them to the paid version.

So while the ability to raise so much cash, so quickly, is a definite feather in the company's cap, it now falls on Slack to show the world that it can take on its much larger competitor...and win. 

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