What Atlassian’s Co-CEO Said About Today’s IPO
Atlassian, the maker of workplace collaboration software products like JIRA, Confluence and Hipchat, on Wednesday night priced the final IPO of 2015–selling 22 million shares at $21 a piece. Not only was that well above its original offering price range, but the Australia-based company’s stock opened trading on Thursday morning even higher at $27.48 per share, which represents a market cap of around $5.7 billion.
Fortune spoke via phone with Atlassian (TEAM) co-founder and co-CEO Scott Farquhar, who was at NASDAQ headquarters in New York. What follows is an edited transcript of our conversation:
FORTUNE: Very few tech companies have gone public this year, and all sorts of companies have postponed IPOs until 2016. Why do this now?
SCOTT FARQUHAR: We’ve always thought about being a long-term company, and everything we do is very deliberate and considered. This particular date has been in our diaries for 12 months, but we’ve been building toward it for a very long time by doing things like four public company audits. We’re not smart enough to time the market, but hopefully we’ve built a business that can survive at any time.
Atlassian has been profitable almost since inception, which is very unusual in the software world. How did you think about profitability vs. growth opportunities?
We’ve invested huge amounts into R&D for a long time in order to build amazing products, always looking at the long-term horizon. There are a lot of companies out there that maybe grow at 80% or 90% for a year or two, and then hit a brick wall in year three because they haven’t grown their staff the right way or because they milked the customer base too much. We have a slow and steady approach, so that the company lasts beyond Mike [co-CEO Michael Cannon-Brookes] and myself.
What was the question you found yourself answering repeatedly on the IPO roadshow with prospective investors?
It was about our salespeople, since we don’t have any. Now that we have $320 million in revenue and over 50,000 customers, they wanted to know when we need to hire some. Our answer was that the more customers we get, the less we need salespeople. It’s a bit like Amazon (AMZN). In the old-school world to sell books you’d need a store with a salesperson who helped you through the discovery and purchasing journey. Then Amazon builds an automated system to help customers through that entire lifecycle. As we get more and more data on our customers, we can automate more and more options for them–such as what features would be most attractive to have–even if they are first-time users.
Box (BOX) is another SaaS company that went public earlier this year, and Square (SQ) is another tech “unicorn” that priced its IPO just a few weeks ago. Did you learn anything from those experiences?
We looked at everything and tried to learn but I think we really just ran our own process. For us it’s about building long-term relationships with our investors. That’s mostly it.
Did you receive any investor push-back on having co-CEOs, since so many of these arrangements feel to eventually falter?
Not really because we’ve been doing it together for so long. Plus, I think some of them liked that we have four times the CEO bandwidth of some of the other companies that have come through recently.
In your IPO prospectus you break out user numbers for two of your products–JIRA and Confluence–but not for Hipchat. Why the omission, particularly given that many in Silicon Valley think that Slack is eating Hipchat’s lunch?
We don’t break out many of our products by usage, in part because many of our customers use several of them. There’s also a competitive advantage in keeping quiet on certain information. We think we build great products for customers and are very proud of Hipchat. There’s always a new company that’s the flavor of the day and we’ve seen many come and go. Messaging is an enormous market, but it’s only one part of what we do at Atlassian.
You priced above your IPO range, but also opened around 30% higher. I’m sure the bankers are happy, but how did you think about it?
I can’t tell you how valuable our company is or isn’t. That’s up to our investors. For us it’s about the long-term mission, which is why we have more than a dozen staff here who have been with us for more than 10 years. My wife also really surprised me by flying in my kids and parents, which is the best part for me. It’s about the stock price for the financial folks but it’s about celebrating for our staffs and families who have been working so long and so hard on this company. Then on Monday we reset and get back to work.
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