How Atlassian’s dual-CEO structure has helped the company thrive

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

Atlassian

In this weekly sequence, CNBC takes a search at providers that produced the inaugural Disruptor 50 record, 10 yrs later on.

In early March, collaboration software maker Atlassian released a blog submit titled, “Atlassian stands with Ukraine,” laying out the company’s options to assistance workers and consumers in the location and announcing it was “pausing the sale of all new software program to Russia.”

The publish was signed by co-CEOs Scott Farquhar and Mike Cannon-Brookes. They went back and forth on the written content and the principal details. But Farquhar did most of the get the job done, releasing up Cannon-Brookes.

Which is 1 of lots of conveniences of trying to keep two men and women at the leading of a enterprise. The atypical construction has helped propel the Australians’ 20-calendar year-old agency into the best tier of the competitive software package field, with merchandise so well recognized that large corporations could possibly discover it complicated to shift away.

In 2013, Atlassian landed on CNBC’s inaugural Disruptor 50 checklist of non-public businesses value viewing, forward of its 2015 Nasdaq debut. The stock has risen nearly 1,000% considering the fact that then, when compared with 124% growth for the S&P 500 over the very same time period.

The duo have experienced the same position at the same firm for 20 yrs, they were being born one particular thirty day period aside, they grew to become mom and dad 3 months aside, they have been most effective adult men at every single other’s weddings, and they individual house following to each individual other in Sydney. “Our stock ticker is Workforce, and so, yeah, which is what we are about,” Farquhar reported.

But they are different individuals. Cannon-Brookes is a extended-haired idealist, who turned an owner of a U.S. basketball staff and tried a takeover of Australian utility firm AGL Energy. His responses are sprinkled with obscenities. Farquhar is cleanse-slash and very careful as he speaks. Early trader Wealthy Wong of Accel phone calls Farquhar much more analytical.

“Mike is kind of the quintessential unreasonable gentleman,” Farquhar claimed. “‘The globe really should perform this way.’ ‘Mike, it would not however.'”

Early VC fortunes

Farquhar and Cannon-Brookes became good friends in the late 1990s immediately after having the identical training course at the University of New South Wales. The technologies bubble broke all-around the time they graduated, and facing a dearth of career prospective buyers, they shaped a small business. To begin with it made available assist for an additional company’s application server. Then it transformed direction and began developing its possess software program. The first edition of Jira, a software for tracking concerns and projects, appeared in 2002.

Within about 5 a long time, a lot of Accel-backed begin-ups experienced embraced Jira. “It was now the typical that you had to combine your computer software with,” Wong said. The enterprise widened its portfolio with the 2004 launch of document-collaboration assistance Confluence and the 2012 acquisition of group messaging app HipChat. Alongside the way, Atlassian produced versions of Jira for diverse styles of workers.

Right now Jira is a market place chief, transcending its standing as Silicon Valley darling and overtaking heavyweights with many years of working experience selling to enterprises. Atlassian controlled higher share than any other corporation in the industry for software program modify, configuration and system administration equipment in 2020, in advance of Microsoft, IBM and Broadcom, in accordance to an estimate from researcher IDC. Atlassian’s earnings in the marketplace grew about 22% 12 months over calendar year, quicker than the overall classification, which expanded just about 15% to $4.8 billion, centered on IDC’s facts.

Section of the momentum derives from programmers obtaining to consider out Atlassian’s program for absolutely free in advance of they fork out for it. The approach goes again to the founders.

“Our publicity to computer software begun with points like video games,” Farquhar said. “Again then, game titles experienced various organization designs. You could invest in your PlayStation types shrink-wrapped. If you appear at Id Software, they arrived out with a shareware product, type of attempt prior to you acquire. We thought that was a wonderful way to offer software program, simply because of study course you want to attempt prior to you acquire. At SAP, there is certainly no seeking. You get to see what it appears to be like, due to the fact it requires that very long to carry out it.” (SAP does present free of charge trials for some of its goods.)

Atlassian was possibly the to start with or pretty early to promote program with a freemium provide, Farquhar said, incorporating that cloud file sharing app maker Dropbox produced it additional well-known. And in the late 1990s Red Hat, which IBM afterwards obtained, gave absent CDs that contains its distribution of the open up-resource Linux functioning technique and permitted folks to download it free of demand.

Lacking a pile of revenue from enterprise capitalists for its initial eight several years, Atlassian skipped the customized of assembling a squadron of salespeople to score bargains. Now, nevertheless, there are a few on staff members who pursue select organization chances, Farquhar said.

Focusing significantly less on advertising challenging and more on offering products individuals in fact want to use has provided increase to a sturdy financial 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 notice of buyers.

“In my record of 33 several years of undertaking this, I have witnessed extra than a handful of organizations that have attempted to do it without an interior salesforce, or an exterior salesforce, both. The point I would say about Atlassian is they are the most thriving at it,” reported Brendan Connaughton, founder and taking care of companion of Catalyst Private Prosperity, which held $91 million in Atlassian stock at the conclude of 2021, its most significant position at the time.

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Like a lot of other cloud stocks, Atlassian is not basically successful. Connaughton reported Cannon-Brookes and Farquhar would come across it much easier to turn Atlassian into an precise moneymaker than its friends, many thanks to its somewhat sparse income group.

A a lot more distinguished element of Atlassian’s 7,000-individual corporation is the group that essentially builds the firm’s wares. Engineering, merchandise and style and design report to Cannon-Brookes. Farquhar supervises legal, human resources, finance, revenue, marketing and advertising and purchaser-help groups. “I am kind of the grandparents,” Farquhar reported. “I go away him to offer with the temper tantrums and the screaming.”

When they speak about accountability, they think about equally skills and pleasure. You will not want someone who’s superior at dealing with a process but does not like executing it, and vice-versa, Cannon-Brookes reported.

Promoting and profits claimed to Cannon-Brookes for 15 years, and engineering at the time reported to Farquhar. And they have each run the entire firm at different times. They have gone on sabbaticals. Very last yr Farquhar took a few months off to caravan with household close to northwestern Australia. “We type of bought to journey unencumbered,” he stated. “I believe other CEOs would have to retire or give up to be capable to choose a break that extensive.”

The structure has contributed to Atlassian’s results, stated Gregg Moskowitz, an analyst at Mizuho.

“I assume it has served, owning two solid executives at the very top who see eye to eye, at the very least on all the critical troubles,” he reported. Other engineering organizations have utilized CEOs in pairs, including Autodesk, Ceridian, Oracle, Salesforce, SAP and Workday. Alphabet’s autonomous-driving subsidiary Waymo recently went the co-CEO route.

The technique has a blended record, Moskowitz mentioned, indicating it failed to perform perfectly at all at handset maker BlackBerry. The connection among co-CEOs Jim Balsillie and co-founder Mike Lazaridis “experienced long gone cold,” in accordance to 1 account, and the two stepped down.

The founder outcome

What’s different for Atlassian is both Cannon-Brookes and Farquhar are founders, claimed Wong, the Accel investor. Their put together awareness helps them move a lot quicker, he stated.

Wong pointed to Atlassian’s 2017 acquisition of task-management application Trello for $384 million, nevertheless the firm’s greatest offer to date. At Trello it was a shock, for the reason that Atlassian’s Jira was viewed as a competitor, stated Stella Garber, who ran marketing and advertising at Trello at the time.

“I believe it took conviction of the founders to say, ‘I know we could have constructed it, but it would acquire us time, and it would definitely develop the organization if we make the decision now and pay what it normally takes to get the acquisition carried out,'” Wong stated.

When there is an difficulty on Cannon-Brookes’ turf, it truly is his determination to make. But when it is really some thing massive, he consults with Farquhar, due to the fact it’s virtually absolutely heading to have an impact on them each. There are lots these examples in and close to the corporation correct now, and it’s natural that they divvy factors up.

“The pandemic and Russia and Ukraine — at the moment Sydney is underneath floods,” Cannon-Brookes claimed. “Put it all collectively, and you will find a ton of matters you have to have to offer with in a progress biz that are not just the products.”

Farquhar mentioned he and Cannon-Brookes had very long discussions about what to do with their group-messaging application Stride, which arrived in 2017 as Slack and Microsoft Teams were attaining momentum.

“It was unusual, essentially, mainly because anyone was speaking about how superior Slack is. We were applying Stride internally,” Farquhar mentioned. “The item was essentially improved. The Slack issue is incredible. It really is truly not as great as what we had. We experienced to make a conclusion.”

In the long run, Atlassian shut down Stride and HipChat Cloud and bought the mental house to Slack. It also bought an fairness stake in Slack, which shot up in price as Slack stock appeared on the New York Inventory Exchange in 2019.

When Cannon-Brookes and Farquhar have been youthful, they could near the place of work doorway and have a discussion with each individual other about a crisis, and for entertaining they could possibly go mountain biking or drink beer alongside one another. The pandemic stopped them from viewing every other in man or woman so often. They have gotten superior at connecting on Zoom, Farquhar explained.

Cannon-Brookes does not have to have to massage what he says to Farquhar. Without the need of prompting, he imagined what would occur if Farquhar were to leave.

“I might be frequently detailing matters, which would sense like I was speaking down to a person,” he mentioned. “‘Good strategy, but let me explain to you what happened in 2012.'”

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