Farquhar and Cannon-Brookes, both 34, who founded the company twelve years ago, did not sell any shares in the latest round of funding, meaning the estimated 1/3 ownership stake each own in the company is worth about $1.1 billion. The selling shareholders in the deal include current and former employees, as well as Accel Partners, which invested $60 million in the company in 2010 at a valuation of $400 million, according to the Wall Street Journal.
What’s driving such a high valuation for the Australian software shop? A unique business model that has fostered rapid growth and a liquid balance sheet — the latter being a distinction many tech companies can’t claim. Atlassian specializes in developing online business software tools like JIRA, a product that helps companies manage the projects and workflow for their development and IT teams. Its services are used by more than 35,000 companies worldwide, including a broad array of heavyweights like BMW, American Airlines, Cisco, Facebook and Citigroup C +0.08%. It boasts positive cash flow and has done so for the past 10 years; its compound annual growth rate for the past five is 40%.
The two founders, both programmers, met while studying at the University of New South Wales in Sydney in the early 2000s. Each did internships prior to graduating and neither came away enamored with the corporate work environment. In 2002, they decided to break out on their own instead. Their first plan — third-party support for a company out of Sweden — was a bust. But the next gambit, crafting software that allows developers to track tasks and bugs in their projects, would eventually become JIRA. Their initial financing method? They opened a $10,000 line of credit on a credit card.
Unlike the model of behemoths like Oracle ORCL +0.77%, or even contemporaries like Workday WDAY +0.25% or Box, Atlassian chose to minimize costs by not investing in sales staff or marketing, focusing instead on research and development. It simply sold their competitively priced products on the website.
“We felt if we could sell something at a reasonable price and sell it on the internet then we’d be able to find a market there. And that’s what worked out,” Farquhar said.
Like many start-ups, early sales were from friends of friends and acquaintances. But the company knew it had broken through when, without solicitation or any human interaction, the credit card information for a purchase from American Airlines came through.
“Then we knew we could scale this,” Farquhar recalls.
It’s been 12 years of rapid growth since, and it now has a $200 million revenue run rate (current revenue levels projected over a whole year). The company has main headquarters in Sydney and San Francisco as well as offices in Amsterdam, Yokohama and Manila. It plans to grow its 800-employee workforce by 30% by June, and its newest outpost will be in Austin, Texas, a city whose funky and quirky ethos meshes nicely with Atlassian’s.
Having a unified vision and culture from day one has helped guide the company’s precipitous growth path.
“From the beginning our goal was to build a long-term company. We want to build a company that will stand the test of time,” says Farquhar. “That’s why we spend a lot of time on company culture.”
Among the cultural mores Atlassian values include “Open Company, No Bullshit” — an emphasis on transparency — as well as a keen preoccupation with never screwing over customers. But perhaps the most important is “Be the Change You Seek,” which Farquhar says is key to building a company that will adapt and thrive 50 years from now.
“The way companies fail is they don’t make changes. People don’t feel empowered to make change,” says Farquhar.
The company has no near-term plans for an initial public offering, a luxury their rapid growth and positive cash flow affords them. But Farquhar says Atlassian will hit the stock exchanges down the road.
“It’s definitely in our future. There are very few companies that stand the test of time that aren’t public.”