You probably use one, or two, or three of these productivity apps
Slack raised money in July this year, taking its valuation to an astonishing US$5 billion. A couple of months earlier, messaging app Symphony received a US$63 million funding, raising its valuation to over a billion dollars.
Slack and Symphony are not alone in this high valuation frenzy. Tools like Trello and Asana have all either been funded or acquired at valuations of several hundred million dollars each. Atlassian, the company that owns JIRA, Stride and Trello has itself been having one heck of a run.
While most industry segments see a crest and trough cycle with respect to investor interest, the enterprise collaboration startup ecosystem has managed to sustain interest among investors. A major reason for this is that no company has managed to establish itself as the undisputed leader in this space yet.
As businesses continue to migrate from legacy systems to cloud-based collaboration and messaging solutions, the market is wide open to not only the current market leaders, but also to small and upcoming collaboration tools and services.
But that does not tell you the complete story behind the high valuations. The enterprise collaboration space is also incredibly fragmented, and no company has managed to offer everything that a user needs.
There are task management apps, project management tools, video conferencing solutions and online messaging services, and all these applications work towards enabling better collaboration.
Competitors in the industry specialise in one of the multiple forms of team communication. As a result, it is not uncommon for enterprise customers to make use of more than one collaboration tool to communicate with their team. A fragmented market would mean investors have multiple applications to hedge their bets on, and this could have potentially raised the valuations further.
Also, collaboration startups are an ideal service to serve as a platform business. Platforms are essentially tools and applications that you can build upon. Android, iOS, Facebook and Twitter are all high value businesses because there are other startups and applications who have based their business model over these application. This essentially means the utility of software like iOS or Facebook goes beyond what is inherently available and could potentially include these other added utilities as well.
Take Slack, for instance. The collaboration service has more than 1000 apps in its directory. This not only includes apps that organise polls within the Slack platform, or that provide signup and invoicing notifications within the Slack dashboard, but also includes integration tools for other collaboration tools like Trello, Asana and Wrike.
In essence, when a potential Slack user signs up on Trello instead, it does not necessarily mean the end of the road for Slack — enterprise users can be users of multiple services at the same time, and the sheer spending power of an enterprise user means the valuations are going to stay high.
It has been a long road for collaboration startups since the time they first came to the scene more than fifteen years back. However, we have barely scratched the surface when it comes to the potential that such platforms come with. Until that is realised, the valuations of these companies are likely to keep growing.
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