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Atlassian story: How two indebted suburban guys from Sydney created a $US 3 billion tech juggernaut

Monday, 28 September 2015 | By Denham Sadler
Its origin story is now famous: the world-leading, billion-dollar software startup that was built out of $10,000 of credit card debt.


Atlassian was started by Scott Farquhar and Mike Cannon-Brookes in 2002 with some pretty simple goals: they wanted to not have to wear suits to work, and earn more than what Farquhan was offered by PwC.


After turning down the $48,500 job at the accounting firm, Farquhar says Atlassian was born into an ecosystem that didn’t really even exist yet.


“There was no technology industry in Australia at the time, nor a startup industry,” Farquhar says in a recent blog post.


“Our university professors disowned us. Our parents looked the other way. Our original goal was to earn more than $48,500 and not to have to wear a suit to work.”


It was supreme confidence in the idea behind the software company and its global potential that led the co-founders to make the decision, and it all came from one simple belief.


“We believed that software would be huge, that it would disrupt every industry.” Farquhar says.


“The world just hadn’t realised it yet.”


And they were right.


The next big step

Atlassian now employs over 1500 people, its products are sold in more than 100 countries, it has $1 billion in sales, is worth over $US3 billion and has set up shop across four continents.


It’s Australia’s great tech startup success story, and it’s just getting started.


The startup has filed the necessary IPO documents for a $US3 billion-plus listing in the US.


After relocating its headquarters to London and hiring a CFO, it became glaringly obvious Atlassian would soon be becoming a public company. The question was just when and where.


With the founders still retaining about 78% of Atlassian between themselves, it’s a huge step for the startup that will likely provide a big boost for them and the employees.


Putting profits over funding

The co-founders met while studying at the University of New South Wales and bootstrapped the company on the back of credit card loans.


It’s a technique that the pair continued to employ across the next decade, turning their back on investment rounds and VC funding.


While many startups take in millions in funding with a hope of one day becoming profitable, Atlassian was making money from the beginning, bringing in about $US1.3 million in 2003.


“Sometimes being able to raise venture money too early is a dangerous thing…I saw a lot of good venture money go into really spurious investments that quickly evaporated,” Farquhar told StartupSmart in 2011.


“I was jaded about the value of venture money at that time. Also, we were lucky enough not to have a snowball’s chance in hell of attracting venture money.”


It was this instant profitability that allowed Atlassian to not rely on external funding. It wasn’t until 2010 that it took in big money, with a US$60 million investment from Accel, and a further $150 million round last year.


“We weren’t venture-backed, so we couldn’t spend two years developing the software. We had to sell something quickly. We produced a simple-to-use product when there was nothing simple to use,” he says.


It’s an attitude that they’re encouraging other Australian entrepreneurs to now embrace.


“The biggest thing preventing people from starting their own thing is, ‘I need to get some more money behind me, or I need to flesh out my idea more’,” Farquhar says.


“No, no, no. Just go and do it, because when I was at university, the biggest downside risk for me was I’d have to go back and live with my parents for a few months. The downside risk is so much lower when you’re young.”


In another break away from the traditional way of doing business, Atlassian employs few, if any, salespeople.


It instead simply lists all relevant product information and prices directly online for all to access. It’s a technique that’s disruptive in its simplicity – there are no discounts and no cold calls.


“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.


“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.”


Software taking over the world

Atlassian has been leading the charge of the software companies that are beginning to dominate the startup landscape.


Farquhar signalled the eventual importance these companies would play early on, saying every company will eventually “be 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.


“Companies now only fit into two buckets: either becoming a software company, or being disrupted by one”


According to Farquhar, the growth and reliance on software means that there’s nothing stopping other Australian entrepreneurs from creating the next Atlassian, they just have to compete against the rest of the world.


“We ‘made it’ from suburban Sydney. That’s the good news,” he said.


“The bad news is that any other Mike and Scott from any suburb in Seattle or Shanghai, Lucknow or London or Hanoi or Helsinki can make it too.”


The IPO is an important, flagship chapter in the story of Atlassian, but it’s by no means the last one. As Farquhar said last year, the Atlassian book still has many pages to be written.


“At Atlassian, we want to be around in 50 years’ time.”


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