DON DODGE: Hi.
I'm Don Dodge.
And this is Google Root Access.
Today my guess is Jay Simons, president of the Atlassian.
Jay, we had you here last week to talk about the enterprise
software model and how that worked.
Great show.
Wanted to invite you back again this week
to talk about how Atlassian started, because it's
quite an interesting story.
So, started in 2002 in Sydney, Australia.
JAY SIMONS: Yep.
2002, Sidney, Australia.
I wasn't actually there at the time.
My accent betrays that probably.
The two founders, both engineers, both developers,
and actually the beginning of the company
they were supporting an open source application server
call Orion.
And they were doing technical support for that product,
and actually doing customization for customers
all over the world.
And they, I think at the time, were using an open source issue
tracker, Bugzilla, and became frustrated with it.
And so built their own.
And like most software startups, shared it with their friends.
And their friends-- who were developers in other companies--
said, man, I would love to use that instead of Bugzilla
or Tracker, whatever I was using at the time.
And they said, why then would you
pay for something like that?
Of course I would.
So in the early days, they went from in their network
of people, and they were pretty active in the Java community
at the time, their network of other developers
and other companies and had heard just a resounding need
for something like JIRA.
And JIRA was that first product.
And so they did the famous pivot,
and moved from, effectively, a service and support
company to a software company in the early beginnings.
They had a product that actually had legs.
And so that was the beginning of Atlassian.
DON DODGE: So it started from day one,
charging a subscription for the product, right from day one.
JAY SIMONS: We charged licensing the software.
In the early days, it wasn't available in cloud.
It was just something that you install therein
in your own servers.
And it was licensed.
It was somewhere between $1,000 and $5,000,
depending on the edition.
But it was intentionally priced to be very affordable.
And if you think about where they started,
they started in Sidney.
And they realized actually that most of the market
is an ocean away from then.
And they had a choice to either hire people
in each of those markets and try to represent
the software, the company, that they were trying to build,
or figure out whether they could use the internet
to reach those customers in foreign markets
and other markets.
And they chose the latter.
And it was a pretty methodical approach
to building one brick on top of another
and figuring out how could, A, how could they build awareness
for the company and the product, how could they
reach those markets, and then how could they
enable those customers to try the product themselves
and then buy it if they deem that it
was suitable for the job.
DON DODGE: So many founders today
believe they need to be in Silicon Valley
to start a company.
And Atlassian was started in Sydney, Australia.
Many founders believe that they need
to give the product away or have some type of a freemium model
to get started.
But Atlassian glassy and started with a straight up license.
Do you think you could do the same thing today
in today's environment?
JAY SIMONS: I absolutely think you can.
There's a lot of examples, I think,
of companies that start today without freemium
but are affordable.
And I think you need to think very carefully about pricing,
right?
If pricing is very high, it's a barrier, right?
It's an obstacle that you're going
to have to figure out a way to convince your customers to jump
over with you.
Oftentimes, companies do that with sales.
And sales works to do that, right?
You can understand a customer's paying point
and have a conversation about whether or not
you can solve it, and understand whether or not
they're willing to do a value exchange for what
you want to charge that.
And that works, tried and true.
But you could also very early days in very early beginnings
figure out whether or not you can build a pricing model that
reduces the that friction point or that obstacle
for your customers.
And you need to be careful to make
sure that that model scales in the way
that you want it to over time.
And maybe that's hard, right?
Because it's, in some cases, you are making some assumptions.
And my only advice is be careful about the assumptions
that you make and think about how
you'd want to scale them over two or three
or four years from now, if you're
successful at a lower entry point.
DON DODGE: So Atlassian is really an amazing story,
because you broke all the rules.
You didn't come to Silicon Valley, started in Sydney.
You didn't do a freemium model or give away.
You charged a license right away.
You didn't raise venture capital.
You were able to bootstrap and become cash flow positive.
Talk about that a little bit.
How were you able to be cash flow positive and still grow?
JAY SIMONS: Well, if you think about when the company started,
it was 2002.
So it was right after the dot com crash.
So it was probably very difficult for two
technical founders in Sydney, Australia to raise money
and to begin with.
And so, their option was, well, let's just do it on our own.
I mean, they probably could have tried to come to Silicon Valley
and raise money in an environment that
really wasn't conducive to it.
Or they could just roll up their sleeves and get to work.
And so that's why they chose to do.
So, took out a line of credit on a credit card
and, you know, bootstraps, where they didn't pay themselves
a lot of money.
They worked incredibly long hours.
They built a product that they felt they was something
that they could build a business around.
They validated that with their early customers.
And then they just kept on building the business one
hand after another.
And when they started to make money,
they put the money back into the business versus their own bank
accounts.
They were very frugal.
I think the DNA of the company is
to be very, very conscious about spending
and think about return, and think
about building a business that's going to be here 5, 10, 15, 50
years from now, versus one that you're just
going to build for today.
And I think that DNA, because of our two founds,
it permeates through the business even today.
DON DODGE: And then the fourth accepted
practice, stock options for employees, Atlassian
didn't offer stock options either.
JAY SIMONS: Not until 2010.
And largely that was because in Australia, there's
a different association with equity than there
that's typical than the value Australians actually
are taxed a grant.
And so in some ways, there's a negative association
with equity.
You're saying, hey, here's something
that is potentially not worth anything.
But it has a value today that you have to pay tax on.
And so I'm giving you something that actually
is going to cost you money out of your pocket.
And it's very uncommon there.
And that's just culturally it wasn't really accepted.
And which is why we didn't have it.
DON DODGE: Wow.
So there's four things that startups typically
do in Silicon Valley when they start.
And Atlassian did none of them.
So maybe starting in Australia and starting with that mindset
was actually an advantage that people or founders
in Silicon Valley don't have.
JAY SIMONS: I absolutely think it's an advantage.
I think it was an advantage for us.
Like, it can be an advantage.
I mean. there's tons of companies.
If you look like Rovio is a great company that I like
to use in example, in Helsinki, that built Angry Nerds.
And again I think there are numerous examples of companies
that spring out of whatever environment they're in.
And I think that environment is a petri dish to do new things
and break conventions.
DON DODGE: So eight years of profitability and growth
from 2002 didn't raise any venture capital no stock
options fully licensed and now subscription.
And then in 2010, a big change.
You raise $60 million of venture capital.
That's a pretty big shift.
So what went into that decision?
JAY SIMONS: So we'd just gone through
the 2009 global financial crisis.
And made a couple of big decisions
just to swing for the fences coming out of that.
So when everyone else was downsizing,
we ended up growing by 50%.
And we did this big hiring binge.
When everyone else was worried about maintaining growth,
we actually made the entry point for our products
free at that time.
So we could make it more affordable for companies
in the pension 2009.
And then I thought, we thought, very carefully
about the business that we wanted to build,
and decided that we wanted to build a company that was going
to be here growing and a venerable concern 50
years from today.
We wanted to be the next Oracle, or the Salesforce.com,
or replace those two companies.
And when you think about what that journey entails,
you plot out a couple of gates you want to run through.
And I think one of them is to be a public company.
If you back up from that, to go there
we probably should have an early investor,
somebody's who's going to partner with us over the three
years, ramping up to that point or the years
ramping up to that point.
And so we decided to basically take
an investor and a partner who would help build
the business over the next 3 to 50 years.
DON DODGE: So Atlassian has been contrarian almost
from the beginning.
All of the accepted beliefs of how you build a company,
Atlassian went against the grain almost every time.
And the last example, raising $60 million in 2010
when everyone else was hunkering down
and trying to recover from the financial crisis,
you're out there raising money and hiring people.
So what's next?
JAY SIMONS: Yeah, you know, the concerning thing,
it could another-- what do they say,
they say the toilets spin the other direction in Australia,
and maybe it has something to do with that?
What's next for us?
We're continuing just to focus on growth.
And we announced, I think, a couple
of really exciting products recently, one JIRA Service
Desk, which expands the market that we can support
for collaboration beyond software teams to IT teams.
I think that's an important and big, bold move for us.
We also announced an enterprise Quora confluence questions,
which is an Enterprise-grade Q&A product that I think
takes the pattern that Quora and Stack Overflow have
demonstrated on the internet and provides that to customers.
And so I think there's a number of exciting new product
initiatives.
And we've got 30,000 active customers now,
and I think there's hundreds to millions
more that we could go support.
And that's what we're chasing.
DON DODGE: So another example.
Quora and Stack Overflow are free.
And I suspect that your product is
a paid license or subscription?
JAY SIMONS: It is, although neither of those products
are really used by enterprises.
And so we're a business software company,
where we're taking, I think, great patterns that
exist on the internet or just in open source
or just in commercial source and trying
to make better experiences that are more affordable
and provide better value to customers.
And that's sort of the DNA of the company.
DON DODGE: Wow.
An amazing story.
So thank you very much for joining us.
I want to remind you, if you're a cloud developer,
we're offering a $2,000 credit for Google Cloud.
The details on how you can sign up for that
remain on your screen right now.
Thank you very much for joining us, and see you next time.