Atlassianrevenue & market cap

[00:04] Hello, everyone. My guest today is Jay Simons. He's responsible for all revenue generating activities at Atlassian, including customer success and retention, operations, and marketing. He joined in 2008 as vice president of sales and marketing to lead at the Atlassian's pioneering efforts to develop a high velocity, low touch sales model. He's overseeing the company's global expansion introducing of its starter license program, a disruptive approach to premium where the company donates all proceeds to charitable cause. It's also [00:31] growing worldwide customer community and programs. In 2011, Atlassian introduced its cloud based offering Atlassian On Demand and evolution of its fast growing SaaS platform. He's now president of the company. Jay, you ready to take us to the top? [00:44] I'm ready. It's a long way. [00:45] We're excited. So I'm sorry. I'm excited to have you on. So I wanna touch on a few things here. You know, you joined first. You've been with them, you know, the company for over a decade. You joined first as in sales. You're now president. I wanna pick up actually right at the Trello acquisition. So you mentioned with these guys, know, you're running into them, a 100,000,000 active users, you both shared the same goal. Why did that [01:05] deal make a lot of sense for you guys? [01:08] A couple reasons. Think first of all, the the two companies shared the same mission of, you know, really changing teamwork and unleashing the potential of what people are trying to do together at work. And I think had very similar cultures and then there was like just good products fit in the portfolio. If you think about what Trello is, Trello is sort of like a digital whiteboard where you can kind of rearrange cards on it. And at [01:29] one end of the opposite spectrum is Jira, a product of ours that is very structured to manage collaborative project tracking and management. And then the other end of that spectrum is a product of ours called Confluence, which is just a blank page teams can write on. So I think it kind of fits snuggly in between, structured, very unstructured to help people do different things. [01:48] This was January 2017, right? [01:52] Yeah, about a year and a half. [01:53] So you and your team and your board, you put together the pro formas. You say here's what I think it's gonna look. Here's what the crossover is gonna look like. How is it panning out? Is the pro form a becoming true? Is it generally working how you expected? [02:05] It is. You know, the integration with Trello inside of Atlassian I think is now if you ask Trello and Atlassian, it just feels like they've always been here, which I think is a is a, you know, a good signal for an acquisition in terms of performance. Like we've exceeded our expectations. You know, we we signaled to the street what we thought our revenue expectations was and we're in front of that and it's good. Yeah, things are [02:29] great. [02:29] I'm gonna force you to to roll the circle over, roll the ball over and show me the dead patch underneath. What what was one one surprise, even a little surprise, one surprise you didn't expect after the acquisition, whether it was the integration or the cross selling or whatever? [02:43] You know, one was Trello famously was a remote first company and Atlassian wasn't. And Atlassian is a very distributed company. We have offices in now seven different countries around the world, but being distributed is very different from being remote. And there's a lot that we had to learn and we were much bigger. There were a people when we acquired them a year and a half ago, and we were sort of roughly, I don't know, 1,800, 1,900 [03:07] probably. And so to bring on board a company that has a very remote first culture is used to they had pretty hard rules around when you joined a Zoom or when you joined a meeting and there were maybe five people in a room, everybody went to five different places and joined a Zoom from five different locations. And so the people that were outside of the office were on equal footing to the people that were. And that [03:29] required us to kind of change and recalibrate how we think about connecting to people that are remote and people that are in the office. [03:35] So did you adapt that principle across your 1,800 folks, or did you kind of force them to kind of stick in your system? [03:41] We did. It's a little bit of of meeting in the middle. Yep. And and I think, like, we've learned new habits around embracing and connecting to remote teams. I'll give you another example. Like, we have a ritual called Ship It, which is basically a quarterly hackathon. Ship It's for us, even though we had people that worked remote, we're really in an office centric tradition. And, you know, after acquiring Trello, we had remote ship it's like a [04:05] remote only ship it. We used to do or we we still do an annual end of year, you know, a little bit of an annual end of year, let your hair down day. And again, that was an office specific thing where people do scavenger hunts and a whole bunch of things, and we plan those now for remote participation where everybody that's remote can participate almost as a kind of a single team. So there's been a I [04:26] think a lot of learning on both sides. [04:28] I wanna go in because I think your brain is uniquely positioned to speak about the freemium model. You know, you led sales marketing, you know, this is your model, and a lot of people struggle with the freemium model or they think they have one, but they don't actually because of some some loops they haven't recognized yet. So wanna talk about in a second. Let's work backwards though. So today, what's the last reported run rate you guys [04:44] are at? [04:45] Our last quarterly revenue was just shy of $250,000,000. [04:49] $2.50. Okay. Good. And that's that's quarterly? Quarterly. Yeah. Okay. So take me take me back. I believe it's what 2,008 when you're joining in a low touch sales model. I don't think you're you're doing an inside sales approach with quota and trying to sell big ACV things. You're more like a no touch $20 a month kind of thing. Is that true? And if so, what were you as your first focus coming in that first year? [05:12] So when I joined, we were just a little over 20,000,000 in annual revenue, and you know, the model was very oriented around low touch. I mean, was a little bit higher touch kind of in the beginning, and and you part of my job was to continue to figure out how to remove friction from the customer path. So even when I joined, there was basically a team, we called them product advocates, we still have them today, that [05:33] were a little bit more of a customer success team, but their orientation was if you're trying Atlassian's product, we'll tell you, hey, if there's anything that we can do to make this easier for you, answer questions that you're not finding the answers to on your own, let us know, we'll bend over backwards. Now that team did a lot of can I schedule a demo, can I do X, can I do Y? [05:52] Like a $30 a month kind of account. [05:54] Yeah, I mean ASP, I think ASP at the time was probably like $1,800 annually. And so, you know, we re instrumented that. We thought, man, it's like, it's super high calorie actually to do a demo just for an individual customer, even if they're worth more than $1,800 annually. And we started to do things like, let's record the absolute best demo we could possibly give, and anyone that wants it, we'll just point them online. And again, this [06:19] is a little bit more common today, but we try to figure out how can we automate a lot of this kind of higher calorie, higher intensity human touch, and make it really easier for the customer to get that stuff on their own. And that's the part of the model we've continued to scale ten years later. [06:38] That's a huge nugget in terms of just taking your top salesperson who gives the best demo with the highest conversion rate and just automating it and removing the rest of the folks'touch there. I wanna dig in here because the biggest what I see a lot of people going from like 20 to 30 to $40,000,000 in ARR where they've got a, you know, a monthly ARPU under a $100 a month, they just actually the CEO gets [06:57] a dopamine hit, right, from doing these demos. It feels really good. It's really difficult to remove it from the process and they just resist, resist, resist. Beside, you know, you just gave one great example, doing the recorded demo. Are there can you point to any other examples you guys did to remove human touch from, again, a low ASP sale? [07:15] RFPs is another one. Know, like we've been selling into the enterprise for a long time and you know, you often get a lot of repot a lot a lot of requests for, hey, help me fill out this, you know, this RFP document or this questionnaire that I basically have to provide to my boss to justify the purchase or just the adoption of this particular technology, we would say we don't do that, but we've taken every RFP [07:35] question that we've ever been asked to submit and we've compiled basically an answer to all of them And we'll let you basically copy and paste. You can search for whatever the thing your RFP is trying to answer, like what we do with security or what we do with scale or whatever the question is. The best answer we could possibly give is right there. You can copy and paste it in yourself. Now listen, early on, some customers [07:56] actually didn't like that. They were like, Well, you're right, your competitors are gonna fill this out for me. And we had to have the fortitude to say, We're basically just not structured to do that at scale. We're trying to win thousands and thousands and thousands of customers. You're important to us, but if you need somebody to fill out a document as part of the process, we might not be the right fit for you. And that might [08:17] be a deal that a customer wins. Now, we had a couple of things in our favor. We had great product at the most affordable price point competitively, and that actually does a lot of work. And so customers when they look at, man, this is a great product at the best price. Okay. It might be worth me filling out the RFP if that's a, you know, requirement on my side. [08:36] Yep. Walk me through. So going from 20,000,000 in AR when you joined, did you guys get to right before you you were promoted to president? Do you remember AR around that time? [08:46] I mean, we've we've have have pretty consistently as a company grown somewhere between 3550% over the last decade. Really steady, durable growth, but we were never really a triple, triple, double, double, maybe in the first handful of years when you go to a couple 100,000, the first million to the next million. But then we quickly stabilized into, you know, a pretty steady flywheel that basically grew in that consistent band of 35 to 50. [09:14] So let's talk about the flywheel. I would say, usually I ask really specific questions about CAC payback. I don't think that's a good use of our time. I think what's more effective question for you is Malcolm Gladwell wrote the book, write ten thousand hours, you're an expert. There's a lot of people arguing the reason an Amazon or Facebook are becoming very monopolistic is because they can run the most tests at one time. 10,000 tests and win. [09:37] So what I wanna ask you is how did you scale your testing velocity in your marketing channels, you know, at that, you know, twenty twenty million in AR up to a 100,000,000 in to to quickly pick winners and losers and then launch new experiments? [09:51] A lot of work and and and a lot of effort. I mean, you know, it's sort of easy. Like, we started really early on, I think, as a company in marketing doing, you know, experimentation and AB testing in sort of all channels that most of your listeners would just head nod around. We were maybe a little bit later stage in adopting and building growth experimentation muscle where in product as a modern SaaS company, have the ability [10:13] to ingest thousands and thousands of either existing or potential users or tire kickers and figure out what are the tweaks that we can make in product or in funnel or part of the experience that's gonna increase yield or increase lift from all these people that we're trying to ingest. And I would say, we probably ran headlong into that endeavor about six years ago. [10:36] You're talking like viral coefficient, K1 factor, like invites sent out, that kind of thing? [10:41] All of that stuff. And then just in product when we're building a feature and we want to expose that feature to some segment of our customer base to figure out what is the impact of that particular feature. We rearrange the onboarding experience. What's the impact on activation? I think a lot of young SaaS companies don't necessarily have the capacity to throw a bunch of energy and resource and time at fixing that, especially if they're growing. If [11:07] you're kind of growing gangbusters and you have a bunch of people that are coming like the dial turning to figure out how do we really tune this for maximum yield, that probably doesn't come to later, and so I think we were in that bucket. But then you actually we built basically an experimentation framework that was deeply embedded in product, And the first operators of that in product were marketers. Like marketers that were deeply technical where you [11:28] could say, hey, product has basically built a set of features and capabilities in the product. We're gonna have the latitude and the ability now with the way we built our experimentation framework to kind of tweak them, to say, I'm going to take this feature and sort of expose it in a slightly different way, or I'm going to rearrange the onboarding experience for this particular cohort and then measure what happens next. And by the way, we had [11:50] an agreement, we had a pact with product where if we every experiment we would run twice, if we produce the same positive yield twice, we had basically blood pact that said, okay, that gets written that way for everybody. [12:02] Now hold on. So I love that rule. What cohort would you you probably said at minimum, it has to be exposed to this kind of cohort, this volume of users or this many on boards. What was that? [12:13] It was a sample size that would be statistically significant. [12:18] 5% of new onboards per month. What was that actually? Do you know? [12:22] Probably varies by experiment, but I, you know, I would say it was in, it was in, you know, the thousands of users. And so like, as a percent, it would be single digit percent. [12:30] Yeah. Let's shift to so help me understand when when you're thinking about going public, what was the month by the way and year? [12:38] December December, I think it was one of the last IPOs at 2015. [12:41] Yeah. But they're nothing like they're nothing like the holidays to, you know, be a forcing function on this kind of stuff. So late twenty fifteen, I assume be because of your role you were involved obviously aggressively in the going public conversation. There's a lot of people maybe not back then but today they're saying there's so much money in the market. We can really IPO but actually you know provide liquidity to early folks but stay private. Why [13:00] did you decide that that was not an option for you and and really going public was the best? [13:04] Well, we'd already provided liquidity. So so, know, maybe somewhat unusually for the company. Mean, Atlassian I think is one of the best bootstrapping success stories of all time. I mean, the first time that we raised primary capital was when we went public in 2015, thirteen years after founding. We did two we did two secondary rounds. We did a secondary round in 2010 with Excel, and then we did a secondary round with T. Rowe Price [13:27] in 2013. And so we'd sort of already basically allowed employees to participate in liquidity in the company. I think going public was really about operating as a best in class company, and we were ready. We basically had onboarded an institutional investor and T. R. Price to understand what institutional investors going to ask us and how will they operate with us as sort of a shareholder in the company? What are the kinds of things they'll push us [13:53] on or wanna understand more deeply? Because they're a representative sample of everybody that we're about to expose ourselves to, And then we operated as if we were a public company for a couple of years, so we were ready. And then I think we had we felt like we have a big market we're still growing into. We've got great durable growth. We've got a business model that I think is a huge advantage in terms of how we [14:15] operate and what we're trying to do, and there was little downside. Think it exposed the company to new audiences and there's a you know, a rigor and a discipline of operating as a public company that I think on the whole is good. [14:27] Want to quickly focus on churn as we wrap up the last few minutes here. You know, at this at the price point that we were talking, right, sub you know $100 ish per month, people would say, let's say SMB space, know, nine out 10 actually go out of business, churn is really difficult and frustrates the heck out of a lot of founders. [14:43] What what what enabled you to get churn so low, you know, two or three things, and then I want to compare you a bit to Constant Contact which was much smaller than you today, but they were in the marketing space and they could not figure out churn, and I wonder if the fact that you're in the DevOps space, does that fact make you so much more stickier? [15:00] Well, we're in the team collaboration space. And if you if you look at our products, one thing that makes us sticky is they quickly become systems of record. Like Jira is a system of record for what people need to do and who needs to do it when it needs to need to be done by. Confluence is a system of record for content that is created as part of sort of like the knowledge corpus of a business [15:19] or a team. And so it's it's and it becomes part of your work flow. The way that you create and share something or the way that you create and manage a project is sort of in these products. And I would say that the churn, there are dimensions of churn. Certainly churn is gonna be higher for really small companies and small teams, but remember, we're serving we talk about serving the Fortune 500,000, which includes really, really, really [15:41] big companies and really, really small ones. [15:46] Like any company, you work on figuring out cohort by cohort by cohort, what's gonna actually improve retention. And it could be different things you know within different segments of your customer base. You know one thing that we've shared publicly is retention at a logo level for companies that spend $50 or more with us is 98%. Like it's reducing And that's [16:07] logo or revenue retention year over year? [16:09] Revenue retention is gonna be north of a 100%, but you know, logo retention, the companies that actually use our product from year to year, it's 98% of them that basically return if they spend more than $50. And with our products, we start at a team level, and so we can land inside of a big company at a very small unit. But because we're collaboration software, there's sort of a viral effect where one user invites another user, [16:34] one team invites another team, and the more teams that get invited, the stickier we become, which is part of like what all of our growth momentum or our growth motion is, how do we get people to invite their colleagues? How do we get people to share more? How do we get people to create collaboratively? Because that just is gonna increase retention and expansion. [16:50] Yep. Jay, last last question before we wrap up with the famous five. You're a public company. You have public markets. You have cash on hand. Obviously, acquisitions are an interesting way to grow. Do you typically have any active acquisition talks going on? Not the companies, but just in general, do you? [17:06] I mean, I would say if you look at our history, we've done, you know, Trello was the eighteenth acquisition in our fifteen years. And so, the short answer would be yes. I mean, think we built M and A as a muscle really, really early on. I think the third product in maybe 2005, three years into the company's history, the third product that we added to the portfolio was acquired on top of two organic products that we've [17:31] built. And so if you look over our history, there's a pretty pretty regular cadence of basically building, you know, organically and adding inorganic growth and technology into the portfolio. [17:41] You're talking Bitbucket, SourceTree, HipChat, all these guys? Yeah. Yeah. Yep. Very good. And a follow-up question on that, you know, your public company, people play arbitrage. I've seen public CEOs do this all the time. It's hard to resist, you know, negotiating a price on a company where you're paying an AR multiple that you know once it's part of your company, the public markets are gonna pay a premium for that AR over what you paid, just pure [18:03] financial arbitrage. How do you resist the urge to fall for those traps? And then, how do you know when to give into that urge because you know the product is such a strategic [18:10] Well, I mean, we're we're we're not just looking to buy revenue. I mean, we're looking in some cases to buy, you know, technology that's additive to our strategy, companies and cultures that are additive to our strategy. And mean, the public markets are gonna do what the public markets are gonna do. I think we're gonna value what we think we can do with a product or a company or a technology or a market opportunity and basically value [18:33] it accordingly. The market is gonna you know inform some of that stuff. What happens in the public market after we gobble something or add something to the company is is out of our control. [18:43] Very good. Jay, let's wrap up with the famous five. Number one, what's your favorite business book? [18:48] Man, the most recent favorite business book is Measure What Matters by John Doerr. We're a big consumer and producer of OKRs, and so that was really relevant. [18:57] Number two, is there a CEO you're following or studying, preferably an undercover one most people don't know about? [19:04] I mean, I would say Ben Thompson of Stritecari might be an odd categorized CEO, but technically he is one. And the guy just basically spouts wisdom. [19:14] It's one of the only blogs that I read. I totally agree with you. Number two, is there a is there a favorite online tool you've got for scaling your business besides one of your own? [19:25] I'm I'm consuming a lot of [19:27] Redash. Redash? [19:30] Yeah. Redash. What is that? It's, you know, data visualization, data reporting. [19:35] Interesting. [19:35] And so it's just, you know, we we look at a lot of data here. [19:39] Number four. How many hours of sleep are you getting every night? [19:42] Six. [19:43] And what's your situation? Married, single kiddos? [19:45] Married, two girls, 13 and 10. [19:47] Oh, wow. You got a full house. And how old are you, Jay? 45. Last question. What do you wish your 20 year old self knew? [19:56] That the that the model the model is the business. [20:01] Guys, I don't think we could have ended on a better note coming from a guy that really says we want to focus on system of record companies. He says the model is the business. The system is the business. Makes a lot of Jay joined first focused on sales and marketing over a decade ago. Now president of Atlassian again walked us through how they ran experiments early on cohorts, know blood oaths they had with their product team [20:22] in terms of moving products to the front of the line, how they thought about acquisitions now as a publicly traded company, again, they think about growth and scaling and all the different metrics they're checking out. Jay, Simons, thank you for taking [20:31] us [20:31] to the top. [20:32] Yeah. Thanks, Nathan.