How the founder of Slack & Flickr turned colossal failures into billion-dollar companies

Stewart Butterfield is the creator of Slack and Flikr. His entrepreneurial life is an example of how pivoting in time allows you to turn a failure into millions.

By considering the stories of these highly successful companies, we can find valuable lessons for anyone considering their own line of business.

Stewart Butterfield may not be a household name like Gates, Jobs or Zuckenberg are. However, almost everyone in the technology industry has heard of Slack and Flikr. One is a messaging app. The other is a photo sharing app.

One thing they have in common, besides being co-founded by Butterfield, is that these billion-dollar companies opened a market that didn’t exist before their existence.

They were also the product of the company’s latest pivots. More specifically, they were born from failed video game companies.

Changing course is rarely easy. But by considering the paths of successful companies like Slack and Flickr, we can find valuable lessons for anyone considering their own line of business.

Have you heard of Flikr, but have you heard of Game Neverending?

Game Neverending was Butterfield’s first video game that focused heavily on a framework that allowed players to share objects and accessories with each other. It was a cutting-edge idea in terms of gaming technology, except in 2004 no one played Internet games.

However, the Internet was becoming popular again and Butterfield soon realized that the video game’s exact interface could be used effectively for photo sharing. Then they turned.

The code behind Game Neverending was suddenly transformed into Flickr, a new photo-sharing app.

As the only photo sharing app at the time, it was the platform suggested by Google, Blogspot, and almost every website that supported photos.

After just one year, Flickr was purchased by Yahoo for approximately $35 million. Flickr grew at an unprecedented rate, all because the company wasn’t stuck just in video games. They saw a market opportunity and did not hesitate to execute the definitive pivot story.

It may be a cliché, but it’s true.

Game Neverending, Butterfield’s first attempt at a video game, was a failure. However, when the original Flickr team finally left Yahoo in 2009, they all decided to… start another video game company.

Welcome Glitch, a mission-based multiplayer video game. Unlike anything else on the market, Glitch’s focus was a persistent world experience that differed from typical combat games. This time, since internet gaming was more prevalent, they were able to raise over $17 million from venture capitalists and attract software developers from other big tech companies.

As they say, if you fail, try, try again. Or, rotate first and then try again.

I’m sure you’ve heard of the sunk cost fallacy. It is the act of continuing a pattern of behavior because of previously expended resources (i.e., if you have already devoted time and money to a business venture, you reason that you cannot give up now). Combined with the current “quitters never win” mentality, it’s a dangerous practice that almost all of us are guilty of.

Stewart Butterfield was able to turn failures into two great companies because he was willing to give up. In the end, Glitch spent over $10 million on development. When Butterfield realized that his customer base was not broad enough and his product was too niche to succeed, instead of standing out, he closed his second video game company.

By shutting down Glitch before all resources were exhausted, it had enough capital to effectively support its previous employees and fund Slack, which ended up being a huge success.

“It would have been a good lifestyle business, but it was never going to be the kind of business that would justify a $17 million venture capital investment.” –Stewart Butterfield, at Glitch

It’s important to draw the line between not giving up when obstacles arise and knowing when the smartest decision might be to pull the plug and allocate your resources elsewhere.

I’m sure you’ve heard of Slack. The billion-dollar messaging app that almost every corporation uses as its primary form of communication, especially during the pandemic.

Fun fact: Slack was never intended to be a product. It was simply a messaging platform that Butterfield’s team developed for internal communication when he worked at Glitch.

When Glitch finally closed, the co-founders realized what an amazing product they had right under their noses. They suddenly realized that the messaging platform they were using for company communication was actually much more effective than everything else on the market.

Introducing the definitive pivot. Two weeks after Glitch was dismantled, Butterfield’s team took the company back. Except for this time, it wasn’t the video game, but rather its internal tool was at the forefront of the focus.

Stewart Butterfield tried twice to create a blockbuster video game. Twice he failed.

Both times, he found new value in his failed ventures. And these pivots made him billions of dollars richer.

By now, you may be wondering: how can I emulate Butterfield’s business skills? Here, some lessons from the founder himself.

  1. Follow your intuition

“If the intuition keeps coming up, it’s almost certainly right and you wouldn’t be thinking that all the time if there was a real chance to make that relationship work.”»

Stewart Butterfield

This is not a small doubt. Things go wrong and, as expected, we worry. This is when we have a fundamental doubt. When deep in our hearts, we don’t believe that what we do will work for anyone.

The reality is that when we stop believing in our dreams, that is when they stop existing.

  1. Don’t underestimate the good of good will

When Butterfield made the decision to close Glitch, he had to lay off thirty employees, many of whom left other plush jobs to work for him.

Her final act with the company was to write glowing letters of recommendation, provide resume guidance and/or interview preparation, and help establish professional connections for all of its laid-off employees.

When Glitch officially closed, all of its former employees were employed

Both Butterfield and his former employees harbored a lot of goodwill in the tech community, which was a big help when Slack was getting started.

You can call it karma. You can call it smart business decisions. Never underestimate the good of good will.

Putting in a little extra work to help someone else can change your life. It may even pay ten times more for you.

  1. Consider what wealth means to you

Despite his many statements on business, communication, and software, Butterfield’s thoughts on wealth have stuck with me.

“I believe there are three levels of wealth in the world.
First level: I’m not stressed about debt
Level two: I don’t care what things cost in restaurants.
Maximum level of wealth: I don’t care how much vacations cost
Beyond that, I don’t think it makes a difference.”

Stewart Butterfield

Everyone wants to be a part of a tech startup these days because the potential financial rewards are monstrous. Despite being the co-founder of a billion-dollar company, Butterfield firmly believes that once you reach a certain level of wealth, more money doesn’t improve your life.

“I give it away. I don’t get more happiness from spending it.”. Stewart Butterfield, on his personal wealth

Too often, companies we love begin to lose quality as they increase in popularity. In the initial stage of any business, product quality is a necessity to grow a customer base. However, once a customer base exists, priorities often change and values ​​are readjusted so that profits are the primary focus.

Butterfield’s approach to “have fun building cool software” instead of filling their wallet it played a role in their success by turning two failures into innovative software products that broke the market.

  1. When all else fails (or before something fails), follow your passion

Stewart Butterfield was a small-town country boy (I mean a small town with no electricity or running water) who earned a master’s degree in Philosophy.

However, he decided to get into game development, right after the dot-com crash, because it was what he loved.

The number one piece of advice given to anyone thinking about a new venture is: make sure you’re passionate about it. Because the reality is that startups are a lot of work, no matter how far you’ve come.

Building a business is not a step-by-step guide. There is no perfect recipe for success.

But if the Slack and Flickr stories prove one thing, it’s that every trip is different. If startup success was black and white, everyone would have a successful startup.

You can’t learn unless you fail. You cannot succeed until you have learned. Failure is the path to success. There may be some speed bumps, unexpected turns, and last-minute turns along the way.