It’s been nearly three years since Australia’s most successful tech company, Atlassian, made its debut on the Nasdaq.
For the most part, it’s been a stellar run to-date for its co-founders, Scott Farquhar and Mike Cannon-Brookes:
Just yesterday, that run saw the pair took out the equal top two spots in the 2018 Financial Review Young Rich List for the seventh year in a row. Last year they topped it with a combined wealth of $6.08 billion.
This year, that’s blown out to $14.2 billion, more than 14 times the combined wealth of the next two names on the list.
Atlassian makes software that makes life easier for IT workers. Developer tools, collaboration software in the form of chatrooms and boards, incident management systems. A lot of what you need to know about its company ethos lies in its Nasdaq ticker – TEAM.
Every year, it holds a conference for people who work for, and with, Atlassian in its mission to serve the largely unheralded people that keep our connected lives running smoothly. It’s called Atlassian Summit, and we got an invite to this year’s event, held last month.
It was a unique, and enjoyable, experience at a gathering that really had very little appeal for people who only need to know their smartphone this year is faster and takes better photos than their smartphone did last year.
Over three days, and partway through it all, Farquhar found time to sit down with Business Insider for a chat about things such as post-IPO life, dealing with shareholders, his hopes for the Sydney tech precinct and living in Australia’s second-most expensive private residence.
Obviously, we had an elephant in the room to deal with, being that we shared an unusual surname that’s actually not at all “like the guy in Shrek”.
If we’re related, there’s about 200 years of breeding separating us now. Scott admits he hasn’t got around to researching his origins, but knows his family is “pretty much” from around Brisbane since the time they arrived.
All I know about my lot is they took the direct ship from Glasgow, Scotland, to Scottsdale, Tasmania, around 1830. And I stopped Googling my name earlier this year when the results shifted in favour of the unfortunate murder of a much beloved English schoolteacher who I shared a full name with.
Scott says he’s surprised at how many Scott Farquhars there are online as well, and we got off the subject.
(As a side note, I spent three days wandering from booth to booth chatting with the hundreds of vendors and developers at Summit 2018 that work with Atlassian, and not one took an interest in my surname. Not so much as a “So are you related?”)
While Farquhar says “it’s harder to walk down the show floor these days”, it certainly doesn’t stop him, or Cannon-Brookes, from mingling. I almost missed Cannon-Brookes as he strolled past on the way to the opening address, and only registered it in time to grab a quick snap as he entered:
The next day he was drifting from booth to booth with his kids in tow. Farquhar and I spoke a little about that.
Everyone’s been telling me what great guys you and Mike are.
Scott Farquhar: Oh, that’s nice. Who have you been talking to? We paid them all.
The hardest part about growing Atlassian is you don’t have a personal connection with every employee. When you’re small with your first 100-150, you know everyone really well, then you get a couple of hundred and you might sort of pass them in the hallway and go to the effort of making sure you know their name.
We’re about 2500 now and it’s just impossible to meet and know and have a personal connection with every one of them.
It struck me at the keynote when you got up on the stage, as the room filled up… do you ever feel it’s growing out of your reach? Do you still get a vibe for it like, whoa, look what we’ve built?
Scott Farquhar: Ha, really? Most people were sitting there thinking how much they like the flamenco dancers.
Look, every year it gets a little bit bigger and every year it challenges you a little bit more. It’s harder to walk down the show floor these days – a couple of years the first people wanted a selfie, which is a weird experience to have people want to take a photo with you. But they’re also milestones along the way of some journey.
But I don’t think there’s going to be too big a vibe if you think we’ve got big ambitions and they’re only going to be fulfilled if we have great people working for us and organising those people to do the same thing.
Farquhar and Cannon-Brookes registered Atlassian as a business name in 2001. In those early startup days, they ran the business on a credit card out of an office in Kent St, Sydney.
They didn’t even know what they wanted to sell, but they were convinced it would be software, as it was clear to them that software could be sold easily, and cheaply, over the internet, without sales teams.
The first five or so years were the classic startup tale. Long hours, small apartments, squeezing a ton of work out of a handful of employees, and letting off steam with Friday afternoon jam sessions, margheritas and late-night poker games.
Cannon-Brookes handled product management, design and strategy, sales and marketing, and Farquhar focussed on engineering and business operations.
What do you miss most about those old days?
Scott Farquhar: Again, that personal interaction with everyone in the company. It’s more a stage of life thing now, I’ve got young kids now, so you’re not working back till 10pm.
An old chairman of the board is now Governor of North Dakota, and he used to say “These are the good old days.” What he meant was “These are the good old days right now.”
I’ve always remembered that, because some people go ‘Oh yeah, okay, well the good old days were three years ago’ but actually, in three years’ time, now will be the good old days.
When was the last time you played poker with Mike?
Scott Farquhar: I never… I try not to. I’m terrible at poker. The poker nights still happen, I just don’t turn up to them any more.
Because what I used to do was I’d turn up and put $20 down on the table, and basically I just walked away. I’d buy like three hands, and I’d be gone, because I’m a terrible liar.
It’s a good skill to have in life, I guess, but not in poker.
Being an international company, you don’t get as much time to hang out personally, but still… we were best men at each other’s weddings a few years ago and we still catch up.
It’s often in random places in the world. You know, I can catch up here in Barcelona. It’s 2 in the morning after all the celebrations have finished and we’ll probably catch up some work topic.
Sorry, I don’t mean to drift…
Scott Farquhar: No, it’s okay, take it whichever way you want.
But you’re in a unique position, really, because you’re living the dream of what every startup wants to be.
Scott Farquhar: It’s the cake-eating competition, and the prize, if you win is you get more cake.
Right. And there’s a challenge there, I guess, to stay the person you were?
Scott Farquhar: I’m interested to see what the challenge is. It’s harder because you’ve got to do things at scale. Where I normally want to sit and chat with every vendor out there for an hour and hear every single one of their stories, at a practical level, you can’t do that anymore.
I guess that at every stage you’re just changing the way you work.
Do you still get to put your hands on the tools?
My team probably would say I’ve probably put too much hands on the tools at the keynote over the last couple of days…
In terms of writing programs anymore, no I don’t. I can’t write programs anymore, unfortunately.
Every time I try, it’s very frustrating. It’s not a craft you can pick up and just decide to do it for a couple of hours without doing it for a few years.
I’m still involved in the building products and the direction of strategic stuff we’re doing, my team would probably say I’m too detailed … but a part of me thinks that’s a good thing. You can’t run a company that does what we do without being somewhat close to the details.
One thing that set Atlassian apart was a determination to cap growth in proportion with demand for the product. Atlassian’s second hire, director of developer relations Jonathan Nolen, described it as a “very un-Silicon Valley” approach.
That’s not to say the company was risk-averse; just a matter of timing the risks appropriately. President Jay Simons told us that in the wake of the GFC, after 638,000 Australian businesses folded and the rest were laying off staff to survive, Atlassian went on a hiring spree.
In 2009, Farquhar and Cannon-Brookes both got married, and finally, in 2010, Atlassian accepted its first serious round of funding – a $US60 million deal with Accel Pertners in 2010. The acquisitions began with code collaboration service BitBucket.
In 2012, they both hit the top of BRW’s Young Rich List and in 2015, 14 years since inception, Atlassian finally made its IPO on the Nasdaq.
You’ve always been, as a company, very mature about the way you scale, at a “sensible” gradient. But in the last couple of months or so we’ve seen the Slack and InVision partnerships, and OpsGenie acquisition. That’s a huge month for a company that takes careful steps, so how comfortable have you been with that?
Scott Farquhar: Yeah, but we’re large enough now that… I mean, they’re all big decisions; none of them we take lightly. But they’re all well-considered and I think when they come out in the press it all looks like wow, but these things are months in the making and more than that.
So maybe the hastiness, or intensity of that is more a reflection of when we announce it rather than when the work gets done.
Has Atlassian’s approach to growth changed after the IPO?
Scott Farquhar: I don’t think the IPO made much of a difference to be honest. It probably takes about a week per quarter, in terms of my time, to meet with, deal with the quarterly earnings calls and so forth, so that’s one in, like, 13 weeks.
Apart from that I don’t think it’s been a big change for us.
You’ve been able to stay true to a long-term growth strategy? Because you hear a lot about companies when they IPO bemoan the fact that they’re kind of slaves to the quarterly report.
Scott Farquhar: I think we’ve got a couple of things in our favour. One is I think we’ve always been a sort of, very straight line business. We didn’t have big enterprise sales, we never have to, you know, try to get that one deal across the line that would make or break that quarter. As a result we’re quite well suited to become a public company because one, quarterly earnings is not a big deal for us.
Two is, for better or worse – and the statistics seem to show it’s for the better – Mike and I still own the majority of the voting stock at Atlassian so we’re not worried about missing a quarter and getting fired from our job. Which I think allows us to have much more perspective than other CEOs.
Farquhar and Cannon-Brookes got a taste of that investor pressure just this week.
Atlassian reported revenue of $US267.3 million. Analysts polled by Bloomberg were expecting $US260 million, a 37 per cent increase on a year ago. But even thought they beat expectations by 3%, some investors were left disappointed.
“While they guided up, they didn’t guide as much as people had hoped and expected,” Joel Fishbein, Jr., a software and cloud technology analyst at BTIG, told Business Insider. “The operating margins are a little bit less than what Wall Street had expected.”
Result: the stock dropped 14%, falling from $US81.89 on Thursday evening to $US70.18 the following day.
As the company gets bigger, and you continue to have that large stake, do you still feel confident that you’re always able to make the right calls?
Scott Farquhar: I think of it in terms of alignment. So are you aligned with all the other stakeholders?
Because that’s the most powerful thing. If you’re aligned, you’ll do all the right things together; if you’re not, no matter how much scaffolding you put around it or, anything around two people, whether it’s a deal or a contract or whether you’re a shareholder and I run Atlassian, it’s all about alignment.
So Mike and I have the ability to set the direction for Atlassian… and if you’re a shareholder that wants to hold our stock for two or three months, or a year, we’re probably not as aligned as we would be if you were a shareholder that also takes a longer term view on what we do.
We’re unabashed about that. We tell people we take a long-term view and that’s what we do.
From the outside, the quarter was notable for a couple of big changes at Atlassian. One, a partnership with Slack which would see it sell the IP for its popular work chat tools Stride and HipChat to its Silicon Valley rival, caused a few wobbles within Atlassian’s notably rusted on fanbase.
And just before the most recent earnings call, it announced it had revamped Jira, its oldest and most well-known software product.
Where would like to be in five years’ time, as a company in the hierarchy of tech companies?
Scott Farquhar: I have really thought about the hierarchy of tech companies. Technology is an interesting business, where it changes so much. Like, there was four banks in Australia 20 years ago, where in technology, the landscape changes a lot.
For us, the mission is to unleash the potential of your team, so it’s all about the customer success.
We’ve got 125,000 customers and we set a goal of 100 million active users of our product. That’s our big goal.
We’re going to set a timetable around that’s going to have a big impact on the world if 100 million people use our product.
Could you do now what you did 15 years ago now in Australia? Do you think innovation is still in the same place as it was back then?
Scott Farquhar: No, it’s completely changed.
For better or worse?
Scott Farquhar: Oh, for better. A lot better. Back then there was no VC industry to speak of, there were no tech incubators, there were no startup meet-ups or anything like that. There were no small medium or large technology companies at all really in Australia, so we were lucky to be one of the first and there’ll be plenty to come later.
You know, now, if you want to start a startup in Australia you can probably find some ex-Atlassians that worked for us a few years ago that can help you with your startup.
Not all startups are going to succeed. That’s the whole reason you do startups; some of them will fail, some of them will succeed, but the whole world kind of moves forward because you learn from that.
Some will get big before they fail, some won’t – that’s just the life cycle.
As of this month, Farquhar and Cannon-Brookeses’ team had grown to more than 2700 employees. Atlassian’s market cap is now north of $22 billion.
If it were listed on the ASX, it would be in the top 20, ahead of established local giants the likes of Brambles and Suncorp – and hunting down Rio Tinto.
But the past two years since IPO have also brought a more subtle change to the leadership group. Farquhar and Cannon-Brookes have started to find time to be, well, Farquhar and Cannon-Brookes.
For Cannon-Brookes, his peel off has been in the form of getting a little more political. Especially on social media, where he’s been particularly vocal about the shift in Australia (but particularly the non-shift) to renewable energy, and recently appeared before a Senate committee to give his views on automation and the future of work in Australia.
Farquhar has his own non-Atlassian agenda.
In August this year, the NSW government announced it would partner with Atlassian to develop land around the heritage listed power station on the adjacent Eveleigh site as a new technology innovation hub.
Farquhar joined NSW Premier Gladys Berejiklian and Minister for Trade and Industries Niall Blair for the big reveal, with Berejiklian touting promises of Silicon Valley cool and 10,000 jobs.
“Fifteen years ago there was no technology precinct or technology industry in Australia,” said Farquhar at the launch. “As computer science graduates the best we could hope for was working at a bank or a consultancy organisation… and Mike and I weren’t up for that. So with a healthy dose of naivety we started out on our own.”
Sydney, he said, was finally “open for business for technology” – just a couple of years later than he would have liked.
In 2015, the NSW government rejected a bid by Atlasssian to take control of the Australian Technology Park (ATP) in Redfern, choosing instead to sell it to a consortium led by the Commonwealth Bank.
Farquhar, at the time, was devastated at what he said was a “huge missed opportunity” for the state government to get behind a significant hub for technology workers in Sydney. Now, he has a once-in-a-lifetime opportunity to change their futures.
You’re taking a personal interest in the Sydney tech precinct. What kind of a stake do you hope to have in that?
Scott Farquhar: There’s definitely a selfish reason for that, but where my selfish reason overlaps with what I think is the best thing for Australia, I think things are good. So our selfish reason is for us to bring talent in from overseas , they come to Sydney and… where is technology in Sydney?
It’s dispersed everywhere, it’s hard to find. And they go okay, if it doesn’t work out with Atlassian, where do I go for another job? Do I have to pack my family up and go back overseas?
So for us, having a vibrant technology ecosystem allows us to bring more people with the skills that we think we need to help build a great company and a great technology industry in Australia.
Why has it taken so long to sell that message to the government?
Scott Farquhar: I can’t speak for the government on how things move, but I do know we’ve had great support from all levels of government, actually, around what we’re trying to do. I think the wheels of government move slower than anyone in business would like – I think anyone would like – but having dealt with people in government, it does seem like there’s a lot of the system versus the individuals who are trying to do the right thing.
What’s your ultimate vision for that precinct?
Scott Farquhar: A couple of things. One is that it becomes the epicentre for technology in Sydney – hopefully Australia. And what does that mean? Okay, it means that we have community outreach, so kids’ schoolbuses can turn up and learn about technology, we have vibrant startup hubs and coworking spaces. We can have conferences and seminars in the evening where people can learn from each other.
It’s a place where companies can grow up with other technology companies. And so, if things work out with the government, we’ll move into the precinct, be the anchor tenant and attract a whole bunch of other… there’s a lot of startups we hope to move across from where they are today.
When you’re setting expectations, bricks and mortar does take a lot longer to build than companies, right, if you want to build an office tower it takes f..king years to do that, or repurpose buildings, so it will take a while to come to fruition.
And it also will mean we get another precinct in Melbourne, right? Because obviously they have to get one if Sydney’s got one.
Scott Farquhar: Maybe, maybe. But they’ve actually done pretty well with precincts because they’ve got the medical precinct, the biotech precinct. They’ve done really well with that.
And now, 17 years, 2700 employees, 125,000 customers and $22 billion later, it’s time to lock it all in.
In 2014, when the Australian Federal Court approved Atlassian’s proposal to establish a holding company in England and Wales, there was consternation in the tech sector that the company was abandoning its roots.
Those fears were stoked again when the company ignored an ASX listing in favour of the Nasdaq in 2015.
But just a month ago, Cannon-Brookes made the biggest commitment to Australia anyone could ask for, when he and his wife Annie laid out “close to $100 million” for the country’s most expensive home, the Fairwater mansion on Sydney Harbour.
Which just happens to be right next door to Farquhar, who 18 months earlier bought the (now) second-most expensive residence in Australia, Elaine.
In many ways, it marks a new era for Australia’s most successful tech industry duo. But Farquhar says work has just begun, in more ways than one.
Do you get to spend a lot of time in Sydney?
Scott Farquhar: Yeah, I spend about three weeks a month in Sydney.
In that magnificent house of yours?
Scott Farquhar: Yeah, well… that’s a work in progress. (Laughs)
Is it? Are you used to living there yet?
Scott Farquhar: Well, we’re living there, but it’s got… It’s beautiful land but the house itself needs a lot of work. The owner hadn’t lived in it for 25 years, so it really hasn’t been maintained in quite a while.
Did you buy it because you wanted it or just because it was a sensible idea?
Scott Farquhar: (Laughs) I don’t know if anyone would say spending that amount of money on a house is a sensible idea!
There’s a couple of things. I want to, firstly, I want a family house for my family. Like everyone, you want to build somewhere where you can say “this is home” and that’s real important for me and my kids will hopefully go to school nearby. And that allows us to be… you either live close to work in my mind or you live close to school, so we chose to live close to the schools.
We also wanted to save the land, because they were looking at subdividing it into small pieces and there are not many people, I think, that could afford to keep it one landholding, and that’s what we want to do.
Maybe somewhat romantically I guess, rather than waiting for the state to do that.
But over time we have to work out what do we do with this old house and make that into a house that kind of will fit into the site.”
And you’ve got to try to keep life as normal as possible for your kids.
Scott Farquhar: I think… yes. Yes, we do.