How Two University Graduates Grew Atlassian Grew Into A $56 Billion Startup

Richard Fang

One of Australia's most famous homegrown startup stories

In 2019, I had the pleasure of seeing Mike Cannon-Brookes, one of the co-founders of Atlassian, speak to a Sydney audience at Fishburners (an incubator here in Sydney).

It was an intimate fireside chat where he recounted his journey of how he built Atlassian as well as some funny stories along the way (like a rant on how they should have beaten out Slack in the collaboration space). Sitting on the chair with his Atlassian cap on, he was asked why he decided to start the company.

He laughed and then proceeded to tell a story of how he and Farquhar (the other co-founder of Atlassian) had met at university and how they both didn’t want to wear a suit to work or get a normal 9–5 job. They also wanted to make more than what Farquhar was offered for a graduate job at PWC at the time (which was $48 500 at the time).

Today Atlassian is worth $52 billion (at the time of writing on 24th November 2020) and one of Australia’s most successful startup stories.

What’s even more amazing is how Atlassian was launched during the bust and where there was a lot of speculation around internet companies. This article will briefly explore their history and their growth engine that has made this startup so successful.

How Atlassian first launched

Like many startups today, Atlassian was built out of a product that was originally a side project for the company.

Because Cannon-Brookes and Farquhar didn’t want to get a graduate job, they started consulting as a third party service company. They soon realized that logging issues were a huge pain with the amount of tracking they needed for all their developer work for all their clients.

They decided to mash together their own issue tracker to help log issues and work on things collaboratively. Both founders never had the vision to be a consulting company, so as soon as they realized what they built had the potential to become its own product, they pivoted immediately into a software company.

“It’s software that powers computers, powers robots; software is the ultimate lever for human performance. Like electricity, it can augment us, enable us, even replace us in many areas,” Farquhar said at the 2014 JJC Bradfield Lecture.

Both founders knew that software was the future in a time when it wasn’t as acknowledged compared to today.

With this in mind, they ended up taking out $10 000 of credit card debt and started the company Atlassian in 2002 with their first flagship product known as Jira.

Atlassian — Jira

Jira was a simple product that helped developers manage bugs, tasks, and features on one platform.

Basically, it was everything developers needed to work on software all in one easily accessible place. Although early versions of Jira were still relatively complex to navigate and pick up, developers loved the fact it had everything they needed all in one product.

This proved to become one of Atlassian’s most successful products to this very day. Atlassian also never had the focus of becoming a one-product-focused company. In only a few years, they built out Confluence, a web-based wiki product, and a sequence of acquisitions of other successful competitors or complementary software soon after.

Atlassian’s goal was to build out a portfolio of successful software, so it was like having “two rocket engines driving us along, not just one.” They focused specifically on the developer market, especially around concepts like teams and collaboration.

How Atlassian’s Growth Engine Worked

Although Atlassian has many moving parts in its growth engine, if you look at it carefully, it boils down to two main components. This has resulted in them not needing a proper enterprise sales force.

“We are not anti-sales; we are pro-automation. We take an engineer’s philosophy to everything that we do. We are really about scaling the business,” Farquhar told SmartCompany last year.

This doesn’t mean that they have no sales team as Atlassian still has humans to get you up and running. However, Atlassian’s growth engine still forms around two focus points.

1. Low Transparent Prices and Massive Volume

In Farquhar’s own words, he recounted how being in Australia actually helped them mold the idea around what would become one of the major parts of Atlassian’s growth engine.

“We know that in order to reach that goal whilst remaining in Australia, we’d have to sell online, at low prices, and in massive volume. So our business model was heavily influenced by geography — and it worked.” — Farquhar

In a similar concept applied by Slack, Atlassian never wanted to be the enterprise that charged exorbitant prices for enterprise software. After all, this strategy usually relies on an extensive sales team and months or even years of a complicated sales cycle.

Instead, they wanted mass penetration with a low-cost point so Atlassian could spread quickly. The plan was to entice users with a freemium plan (which was a 30-day trial at the time) and then get them hooked that they got others to join. With a low price point, teams could easily purchase the product with a credit card rather than going through complicated financing. Even till today, Atlassian has kept their product relatively

This means having a transparent pricing model for all levels, from small to large businesses. For most B2B software sites, enterprise-level pricing usually comes up with a standard “speak to a sales rep” request.

After all, with so many products in every industry, every software provider wants to undercut their competitors. Atlassian, however, opted into the other approach by going wide and far.

2. A focus on building great products and growth experiments

Although having a pricing strategy is great, you still need a great product for this to work. Atlassian’s focus from the very beginning was to create products that could sell themselves whilst incorporating a tight feedback loop with their end-users and product teams.

Compared to other enterprise companies, Atlassian only spends less than 20% of their total costs on their marketing and sales. This is because Atlassian's focus is to create products that people would feel ‘compelled to remark upon.’ Atlassian’s total cost versus other enterprise companies

This means much of the marketing done for Atlassian is through word of mouth and its website. Once users arrive on the website, this is where the growth team at Atlassian comes to play.

From cross-sells to tweaking small elements, Atlassian employs a strategy of experiments across its website to increase conversions and optimize user flow.

These experiments are also applied on the application side as well, where Atlassian’s team focuses on one ‘metric’, delighting the customer. If you want to see more of this action, there is a whole YouTube video here that you can check out.

It’s not going to work for all startups

With Atlassian’s focus on products, websites, and costs, this overall strategy for generating growth won’t apply to all startups.

Jay Simons, president of Atlassian, himself mentioned that having a low touch sales model works for only certain products. It all depends on what you’re selling and, of course, who your customers are. In Atlassian’s case (and Slack), they’re selling their products from the bottom-up, which means the sales cycle is cut short since it’s coming directly from the engineers themselves.

He gives an example that Workday would not execute a growth strategy that Atlassian employs simply because the product requires a top-down sales approach.

This is because the product isn’t a ‘try, buy, begin, and expand model’ but requires a consultative approach to selling the product, which would eventually the system that a whole company uses.

Final Note

As an Aussie, I am proud to see the growth of Atlassian and how the company has helped create an ecosystem of future startups here within Australia.

Atlassian has grown its software empire since 2002 into a mammoth portfolio from JIRA, Trello, Confluence, Bitbucket, and more.

What is even more interesting is how it managed to do all of this while taking minimal VC funding, relying purely on generating early revenue. This is attributed to its operating model, from building great products to having transparent and low prices. Atlassian's ‘wheel of success’

This ‘wheel’ is the engine that helps power Atlassian’s growth to the 50+ billion dollars it is worth today and will continue to do so for future products.

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