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How Atlassian’s dual-CEO construction has helped the corporate thrive

Atlassian’s founders and co-CEOs, Scott Farquhar, left, and Mike Cannon-Brookes.

Atlasian

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In early March, collaboration software program maker Atlassian revealed a weblog submit titled, “Atlassian stands with Ukraine,” laying out the corporate’s plans to assist workers and clients within the area and saying it was “pausing the sale of all new software program to Russia.”

The submit was signed by co-CEOs Scott Farquhar and Mike Cannon-Brookes. They went forwards and backwards on the content material and the details. However Farquhar did many of the work, releasing up Cannon-Brookes.

That is one in all many conveniences of conserving two individuals on the prime of an organization. The atypical construction has helped propel the Australians’ 20-year-old agency into the highest tier of the aggressive software program business, with merchandise so well-known that huge firms may discover it troublesome to maneuver away.

In 2013, Atlassian landed on CNBC’s inaugural Disruptor 50 checklist of personal firms value watching, forward of its 2015 Nasdaq debut. The inventory has risen nearly 1,000% since then, in contrast with 124% progress for the S&P 500 over the identical interval.

The duo have had the identical job on the identical firm for 20 years, they have been born one month aside, they grew to become mother and father three months aside, they have been greatest males at one another’s weddings, they usually personal property subsequent to one another in Sydney. “Our inventory ticker is TEAM, and so, yeah, that is what we’re about,” Farquhar mentioned.

However they’re completely different individuals. Cannon-Brookes is a long-haired idealist who grew to become an proprietor of a US basketball crew and tried a takeover of Australian utility firm AGL Vitality. His feedback are sprinkled with obscenities. Farquhar is clean-cut and cautious as he speaks. Early investor Wealthy Wong of Accel calls Farquhar extra analytical.

“Mike is sort of the quintessentially unreasonable man,” Farquhar mentioned. “‘The world ought to work this manner.’ ‘Mike, it does not but.'”

Early VC fortunes

Farquhar and Cannon-Brookes grew to become associates within the late Nineteen Nineties after taking the identical course on the College of New South Wales. The expertise bubble broke across the time they graduated, and dealing with a dearth of job prospects, they shaped a enterprise. Initially it provided assist for one more firm’s utility server. Then it modified course and began constructing its personal software program. The primary model of Jira, a software for monitoring points and tasks, appeared in 2002.

Inside about 5 years, many Accel-backed start-ups had embraced Jira. “It was already the usual that you just needed to combine your software program with,” Wong mentioned. The corporate widened its portfolio with the 2004 launch of document-collaboration service Confluence and the 2012 acquisition of crew messaging app HipChat. Alongside the best way, Atlassian launched variations of Jira for several types of employees.

Right now Jira is a market chief, transcending its standing as Silicon Valley darling and overtaking heavyweights with a long time of expertise promoting to enterprises. Atlassian managed higher share than some other firm out there for software program change, configuration and course of administration instruments in 2020, forward of Microsoft, IBM and Broadcom, in accordance with an estimate from researcher IDC. Atlassian’s income out there grew about 22% 12 months over 12 months, quicker than the general class, which expanded nearly 15% to $4.8 billion, primarily based on IDC’s knowledge.

A part of the momentum derives from programmers attending to check out Atlassian’s software program free of charge earlier than they pay for it. The technique goes again to the founders.

“Our publicity to software program began with issues like video games,” Farquhar mentioned. “Again then, video games had completely different enterprise fashions. You possibly can purchase your PlayStation ones shrink-wrapped. In the event you have a look at Id Software program, they got here out with a shareware mannequin, kind of strive before you purchase. We thought that was a good way to promote software program, due to course you need to strive before you purchase. At SAP, there isn’t any making an attempt. You get to see what it seems to be like, as a result of it takes that lengthy to implement it.” (SAP does provide free trials for a few of its merchandise.)

Atlassian was both the primary or very early to promote software program with a freemium provide, Farquhar mentioned, including that cloud file sharing app maker Dropbox made it extra fashionable. And within the late Nineteen Nineties Crimson Hat, which IBM later acquired, gave away CDs containing its distribution of the open-source Linux working system and permitted individuals to obtain it freed from cost.

Missing a pile of cash from enterprise capitalists for its first eight years, Atlassian skipped the customized of assembling a squadron of salespeople to attain offers. Now, although, there are a number of on employees who pursue choose enterprise alternatives, Farquhar mentioned.

Focusing much less on promoting onerous and extra on delivering merchandise individuals really need to use has given rise to a strong monetary profile. Atlassian enjoys the fifth widest gross margin of all 76 constituents of the WisdomTree Cloud Computing Fund, at 83%.

That standing has caught the eye of buyers.

“In my historical past of 33 years of doing this, I’ve seen greater than a handful of firms which have tried to do it with out an inside salesforce, or an exterior salesforce, both. The factor I might say about Atlassian is that they’re probably the most profitable at it,” mentioned Brendan Connaughton, founder and managing accomplice of Catalyst Non-public Wealth, which held $91 million in Atlassian inventory on the finish of 2021, its largest place on the time.

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Like many different cloud shares, Atlassian is not really worthwhile. Connaughton mentioned Cannon-Brookes and Farquhar would discover it simpler to show Atlassian into an precise moneymaker than its friends, due to its comparatively sparse gross sales crew.

A extra outstanding function of Atlassian’s 7,000-person group is the group that truly builds the corporate’s wares. Engineering, product and design report back to Cannon-Brookes. Farquhar oversees authorized, human assets, finance, gross sales, advertising and marketing and buyer assist groups. “I am kind of the grandparents,” Farquhar mentioned. “I go away him to take care of the mood tantrums and the screaming.”

After they discuss duty, they take into account each expertise and delight. You do not need somebody who’s good at dealing with a job however does not like doing it, and vice versa, Cannon-Brookes mentioned.

Advertising and gross sales reported to Cannon-Brookes for 15 years, and engineering as soon as reported to Farquhar. They usually’ve each run the complete firm at completely different instances. They’ve gone on sabbaticals. Final 12 months Farquhar took three months off to caravan with household round northwestern Australia. “We kind of received to journey unencumbered,” he mentioned. “I believe different CEOs must retire or stop to have the ability to take a break that lengthy.”

The construction has contributed to Atlassian’s success, mentioned Gregg Moskowitz, an analyst at Mizuho.

“I believe it has helped, having two sturdy executives on the very prime who see eye to eye, at the very least on all of the essential points,” he mentioned. Different expertise firms have employed CEOs in pairs, together with Autodesk, Ceridian, Oracle, Salesforce, SAP and Workday. Alphabet’s autonomous-driving subsidiary Waymo not too long ago went the co-CEO route.

The technique has a blended historical past, Moskowitz mentioned, saying it did not work effectively in any respect at handset maker BlackBerry. The connection between co-CEOs Jim Balsillie and co-founder Mike Lazaridis “had gone chilly,” in accordance with one account, and the 2 stepped down.

The founder impact

What’s completely different for Atlassian is each Cannon-Brookes and Farquhar are founders, mentioned Wong, the Accel investor. Their mixed information helps them transfer quicker, he mentioned.

Wong pointed to Atlassian’s 2017 acquisition of task-management app Trello for $384 million, nonetheless the corporate’s largest deal so far. At Trello it was a shock, as a result of Atlassian’s Jira was considered as a competitor, mentioned Stella Garber, who ran advertising and marketing at Trello on the time.

“I believe it took conviction of the founders to say, ‘I do know we may have constructed it, however it will take us time, and it will actually increase the group if we make the selection now and pay what it takes to get the acquisition completed,'” Wong mentioned.

When there’s a problem on Cannon-Brookes’ turf, it is his resolution to make. However when it is one thing huge, he consults with Farquhar, as a result of it is nearly definitely going to have an effect on them each. There are a lot such examples in and across the firm proper now, and it is pure that they divvy issues up.

“The pandemic and Russia and Ukraine — for the time being Sydney is underneath floods,” Cannon-Brookes mentioned. “Put all of it collectively, and there is plenty of issues that you must take care of in a progress biz that are not simply the product.”

Farquhar mentioned he and Cannon-Brookes had lengthy conversations about what to do with their crew messaging app Stride, which arrived in 2017 as Slack and Microsoft Groups have been gaining momentum.

“It was bizarre, really, as a result of everybody was speaking about how good Slack is. We have been utilizing Stride internally,” Farquhar mentioned. “The product was really higher. The Slack factor is wonderful. It is really not so good as what we had. We needed to decide.”

Finally, Atlassian shut down Stride and HipChat Cloud and offered the mental property to Slack. It additionally purchased an fairness stake in Slack, which shot up in worth as Slack inventory appeared on the New York Inventory Alternate in 2019.

When Cannon-Brookes and Farquhar have been youthful, they might shut the workplace door and have a dialog with one another a couple of disaster, and for enjoyable they may go mountain biking or drink beer collectively. The pandemic stopped them from seeing one another in individual so usually. They’ve gotten good at connecting on Zoom, Farquhar mentioned.

Cannon-Brookes does not must therapeutic massage what he says to Farquhar. With out prompting, he imagined what would occur if Farquhar have been to go away.

“I would be continually explaining issues, which might really feel like I used to be speaking all the way down to somebody,” he mentioned. “‘Good concept, however let me inform you what occurred in 2012.'”

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