The Atlassian IPO

Ben & David venture to the land down under (and reunite in-person!) to tell the story of the granddaddy of all bootstrapped tech success stories, collaboration software company Atlassian. How did two plucky college grads from Sydney, Australia go from just trying to escape working for the man to becoming two of the top 10 wealthiest people in the entire country, all without raising a dollar of venture capital? We dive in. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Topics Covered Include: How Atlassian founders Mike Cannon-Brookes and Scott Farquhar met in college at the University of New South Wales in Sydney, Australia, and their decision to bootstrap a startup as an alternative to finding a “real job” after graduationAtlassian’s “no sales” model, and the resultant efficiency of their sales & marketing spend relative to other SAAS companies Organic product growth and acquisitions over the years, starting with Jira and later adding Confluence, BitBucket, HipChat / Stride, Jira Service Desk and TrelloRapid revenue growth and the decision to continue as a bootstrapped company, only raising secondary capital prior to going publicThe IPO in November 2015 and subsequent stock performance (spoiler: it’s been good) The Carve Out: Ben: Phil Knight’s memoir, Shoe Dog https://www.amazon.com/Shoe-Dog-Memoir-Creator-Nike-ebook/dp/B0176M1A44/ref=tmm_kin_swatch_0?_encoding=UTF8&qid=&sr=David: Bruce Springsteen memoir, Born to Run https://www.amazon.com/Born-Run-Bruce-Springsteen-ebook/dp/B01BNSK4V2/ref=sr_1_1?ie=UTF8&qid=1510010902&sr=8-1&keywords=born+to+run+book

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

  The other thing I was thinking about is do we want to do any follow-up on Alaska Virgin?

• 0:05David Rosenthal?

  Yeah, people hate follow-ups.

• 0:07Ben Gilbert?

  Yeah. People, yeah, people definitely hate hot takes. I think they also hate follow-ups.

• 0:11David Rosenthal?

  Yeah, I don't think we need to.

• 0:13Ben Gilbert?

  All right. Actually, maybe I'll just use this for the teaser quote. It didn't go well.

• 0:28Ben Gilbert?

  Welcome back to episode 47 of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:34David Rosenthal?

  I'm David Rosenthal.

• 0:35Ben Gilbert?

  And we are your hosts. Today, we are covering the Atlassian IPO. And normally, we're hesitant to do episodes on such recent news unless we're like, actually on the scene, week of, can like, be the, you know, one of the first takes you hear on it. And otherwise, ultimately, we don't have enough, enough to reflect on to make a kind of recent, a recent IPO or a recent acquisition, something that we should cover on the show. However, there's so much interesting story behind Atlassian, and there's already been so much data to go off of in the last, what, two years?

• 1:10David Rosenthal?

  Two years.

• 1:11Ben Gilbert?

  Two years since the IPO.

• 1:12David Rosenthal?

  Hard to believe it's been two years.

• 1:13Ben Gilbert?

  Yeah, yeah. In fact, when I was writing this little intro, I was like, in the last couple of quarters since the IPO, but really, really been two years that we, we want to talk about it, and we think we have a good story to tell. Before we move on with the show, David, it's great to see you in person.

• 1:28David Rosenthal?

  Yeah, it's great to be here, Ben. Great to be on the show. So as I think most people know at this point, we've been doing most shows remotely, because I actually, earlier this year, moved to San Francisco. And I've been living there and working on something new, more to, more to come on that later this year or early next year. But, but yeah, this is actually our first in-person episode of 2017.

• 1:55Ben Gilbert?

  Yeah.

• 1:56David Rosenthal?

  It's good to be back.

• 1:57Ben Gilbert?

  You look very similar to how you looked in 2016. Haven't aged a day.

• 2:01David Rosenthal?

  I appreciate it. I appreciate it. Well, it's good to be back in person and good to be back in Seattle. Look forward to being back often and doing more in-person Acquired episodes.

• 2:12Ben Gilbert?

  Sweet. All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you prove that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 2:33David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 2:54Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 3:16David Rosenthal?

  In half! Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 3:34Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you.

• 4:02Ben Gilbert?

  And listeners, if you are not in the Slack, we're about to cross 1,000 members. You can go to acquired.fm in the little sidebar, or on mobile down at the bottom, you can join the Slack. David, you ready to take us in?

• 4:16David Rosenthal?

  Let's do it.

• 4:19David Rosenthal?

  So Atlassian, this has been a much requested episode, pretty much for the whole life of Acquired. We're excited, as Ben said in the preamble, to dive in. And I think this is, actually, I was going through all of our episodes in preparation for today. And I think this is the first company that we're going to cover on Acquired that's been bootstrapped and gone, quote unquote, "all the way." We've certainly covered other bootstrapped companies in the past, but none of them that have gone on to be kind of lasting, independent, large, public companies without taking any venture capital along the way.

• 4:55Ben Gilbert?

  Yeah, it's pretty crazy. I mean, be it for actual necessary reasons, or because that's the de facto way that people build companies these days. Everyone just takes a round every 18 to 24 months. And that's often driven because your competitors are doing that, or be it some, some timing reason why it needs to grow, grow, grow. But it's kind of funky seeing a company go all the way the old fashioned way.

• 5:17David Rosenthal?

  Yeah.

• 5:18Ben Gilbert?

  And not quite. I mean, there's a round from Excel.

• 5:20David Rosenthal?

  Well, now, they did. So, Excel invested and T. Rowe Price invested before they went public, but both of those were only secondary shares sales. So, none of, none of those dollars went to the company's balance sheet. The company never sold any shares to investors. It was only individual people, shareholders, both the founders and employees, that sold along the way.

• 5:39Ben Gilbert?

  Wow.

• 5:40David Rosenthal?

  So, we'll get into it, but this is, I think this is going to be a really interesting counterpoint to sort of the current, you know, wave, if you will, of companies that, that are out there right now in sort of the steroid era of startups with, with companies raising so much money. And here's Atlassian, which is now a almost $11 billion public company, one of the most successful tech IPOs of the last couple of years, and never raised a dollar.

• 6:07Ben Gilbert?

  Amazing. Amazing.

• 6:09David Rosenthal?

  So getting into it, Atlassian was founded in 2002 by Mike Cannon-Brooks and Scott Farquhar in Sydney, Australia. I'm remembering back to our PA semi, semi episode where we were joking about, about Australia. And I said that because Authentic was, was founded in Melbourne, Florida, and you thought it was Melbourne, Australia.

• 6:36Ben Gilbert?

  Uneducated host over here. But I, it's funny, I was listening to the most recent earnings call today to, to prepare. And it's just awesome hearing them jump on the phone in the Australian accents.

• 6:46David Rosenthal?

  Oh, so good. And, and I think, I think I commented in, in response to that, that Melbourne, Australia, and all of Australia probably had a much more robust tech scene than, than Melbourne, Florida. And, and indeed it does. There, there are quite a number of companies in Australia now. And Atlassian really is, is kind of leading the way. So Mike and Scott, they meet in, in college at the University of New South Wales in Sydney, where they were classmates in a, in a sort of scholarship program, major, a little different than the, the US system there. They were, had a scholarship into a very prestigious major there, which was in business and information technology. And they became close friends.

• 7:31David Rosenthal?

  I think there were about 40 or 50 people kind of in their class. They became close friends, even though they came from super different backgrounds. So, so Scott grew up in a, you know, very kind of lower middle class family. And Mike, actually, I believe his father was the head of Citigroup in the investment bank in Australia.

• 7:51Ben Gilbert?

  Oh, wow.

• 7:52David Rosenthal?

  Super cool. So very different. But despite that, they became really good friends. And so they were in, in university, kind of in the late 90s, early 2000s. It was the dot com, you know, go, go, go years, even in, even in Sydney, Australia. So Mike, he of course, being that, that timeframe and being in business and, and technology, you know, this prestigious major in, in Australia, he started a company while he was in school. And it was called the bookmark box. And of course, this was, this was in kind of 1999, 2000. Scott wasn't involved. And so he had an exit. He sold the company to a dot com fellow dot com startup called Blink.com.

• 8:33Ben Gilbert?

  Wow.

• 8:34David Rosenthal?

  Only, only back in the late 90s. But this was in the year 2000, but before the crash. So he had a, had a successful exit as like, I don't know, sophomore, junior in, in college.

• 8:47Ben Gilbert?

  Serial entrepreneur.

• 8:48David Rosenthal?

  Serial entrepreneur. So, so he had this experience and, and he and Scott were good friends. And, and most people in their program, you know, would go and work for consulting firms or, or investment banks, like Mike's, Mike's dad and other, you know, well paying, you know, prestigious jobs right after graduation. And they decided, especially Mike, having had this entrepreneurial experience, this was like the last thing in the world that they wanted to do when they graduated. So they kind of made a pact and they said, if we can do something that enables us not to have a job like that, but still earn the same amount of money per year. And the going rate apparently, very specifically was, was $48,500

• 9:30David Rosenthal?

  a year in salary. If they could earn that and not have to work for the man, for McKinsey or whomever, they would be, they would be happy for the rest of their lives.

• 9:40Ben Gilbert?

  It's funny. I, I mean, number one, duh, like who doesn't? Number two, I remember making that exact same pact with my business partner. We made this app in college called Seize the Day and it was getting a bunch of downloads on the App Store and we were getting revenue from iAd. I think I've probably talked about this on the show before. And I remember looking at our numbers and thinking, what multiple of this would it need to be for us to get the same jobs that we would get at like a Microsoft or something? And like, you know, in, in my case, they never got there. I think we were at like a quarter of what it needed to be or something. And then we both got jobs, but I love that line of thinking.

• 10:17David Rosenthal?

  Totally. Well, and clearly though, you just didn't stick with it long enough because as it turned out, Mike and Scott, they fell pretty far short of their goal. They only paid themselves apparently 15. Thousand dollars a year for the first two years versus versus forty eight. So like just about a quarter.

• 10:34Ben Gilbert?

  And they they financed it on like ten grand of credit card debt.

• 10:37David Rosenthal?

  Yeah, so they they they didn't raise, as we've said, didn't raise a dollar. They had credit cards. They took out debt. They got to about ten thousand dollars in debt before they were able to turn a profit. But Ben, if you had stuck with seize the day a little longer. So Scott and Mike now are, I don't know if they are the wealthiest, but they are like among the, you know, kind of top ten wealthiest people in Australia.

• 10:57Ben Gilbert?

  I blew it.

• 10:58David Rosenthal?

  You totally blew it. But now you're now you're a co-host of Acquired, so.

• 11:03Ben Gilbert?

  What could what could you ask for?

• 11:04David Rosenthal?

  What more could you ask for?

• 11:07David Rosenthal?

  So they they decide they're gonna start a business and Mike's case started another business together in pursuit of this this goal of forty eight thousand five hundred dollars per year. And they they decide on a name for the business. They're inspired by the Greek myth, the the mythical Titan Atlas who holds up the heavens. And they they take that as inspiration. They want to support their customers like Atlas holds up the skies. And so they call the company Atlassian.

• 11:36Ben Gilbert?

  I like it. I mean, I I've liked the name. I've liked the logo.

• 11:39David Rosenthal?

  It's a good name. I always wondered like the logo kind of looks like a man and apparently it looks like man, the old logo, not the new logo, but the old logo. I always wondered like, what is this? What's the deal with this? Apparently, it's supposed to be Atlas.

• 11:51Ben Gilbert?

  Yeah, I was, I mean, all the new branding stuff is really nice and really poppy and really, you know, fresh and clean. Their old logo was like so clearly identifiable. Like, I hate when companies have like a a refresh that takes some of the personality away from the brand.

• 12:06David Rosenthal?

  Yeah, so.

• 12:08Ben Gilbert?

  Not a design podcast. Moving on.

• 12:09David Rosenthal?

  Moving on. So they start the company in late two thousand one, early two thousand two, and they launched their their first product, Jira, which is still, I think, their their biggest product.

• 12:19Ben Gilbert?

  Beloved by by product managers worldwide.

• 12:22David Rosenthal?

  Beloved by product managers worldwide. I assume many, if not most, folks listening to the podcast right now have used Jira.

• 12:29Ben Gilbert?

  Yeah, there's.

• 12:31David Rosenthal?

  Or maybe using Jira right now.

• 12:32Ben Gilbert?

  I used to follow some like parody product management Twitter accounts and stuff and that I I think people just people like know the the Jira interface in their sleep and they have like both happy dreams and nightmares about filing tickets.

• 12:45David Rosenthal?

  So they launched it in April 2002. As we're alluding to, it's kind of, it's an issues and bug tracking tool used mostly by software developers and product managers, although it's now expanded to many more use cases than that. But there was just kind of one problem when they launched it, which was that since Mike's first company, the dot com bust had happened, it was now nuclear winter. And here they are, two recent college grads in Sydney, Australia, that are starting a software company, an enterprise software company, no less, where they're trying to sell to other businesses. And usually the way you do that is you hire salespeople. But the thing about salespeople is they cost money. And, and so the way traditionally

• 13:29David Rosenthal?

  that you do that, and you hire the salespeople before you have the money is you raise money from venture capitalists, or angels, or whatnot. And then you use that to build your sales force. Well, there's no way that any VC was going to give money to these two kids, college kids in Sydney, Australia. And they didn't even try.

• 13:47Ben Gilbert?

  And not to mention, you know, even if you could do a pay for performance basis. So we, we had Scott Dorsey on the, on the show for the exact target episode. And he mentioned that a lot of their, their early salespeople were working 100% for commission. You, you kind of have to have an expensive product to make that work, too. The thing about Atlassian, and we'll get into this, is super approachable pricing, very generous trial periods, pay as you go thing, a thing where you sign up with your own credit card, kind of democratization of who's buying and tying the buyer to the user. And like, it's in many cases, it's a little different now, but in many cases, it's just not that expensive. So even if you're paying salespeople on a performance basis, still a long road.

• 14:32David Rosenthal?

  Yep. Well, and let's not forget what we're, we're talking about dollar wise in the company right now. Like their goal is to pay the two of them $48,000 a year. They only pay themselves $15,000 a year. That means they're making like $30,000. Like, how many people are you going to be able to hire if the entire, you know, sort of capital balance of the company is, is $30,000?

• 14:54Ben Gilbert?

  Yeah. Great point.

• 14:55David Rosenthal?

  A lot, but they're scrappy and they have to innovate their way out of this. And so what they decide to do is something that was fairly novel at the time, but not 100% novel. They decide to just sell the software on the internet. So rather than having people sell it, anybody can just come and sign up and, and it's in the cloud. It's, it's SaaS and that's not, you know, like I said, it's sort of leading edge, but Salesforce is around at this point. The concept of SaaS exists. They, they hosted on their website and you can buy Jira from Atlassian on the internet.

• 15:29Ben Gilbert?

  And this is a little bit of a flash forward to, to later in the show, but I was looking through the S1 and the, the term SaaS only appears four times in their S1. And it, I think three or maybe all four of the four times it refers to external partners. So it's interesting to sort of think about Atlassian doesn't view themselves as a SaaS company, or at least they don't refer to themselves that way in their, their communication to investors. I was sort of trying to figure out what is that? Is it that they feel that they pioneered the category, so they don't need to say that they're part of the category? Or is that, that they want to, you know, sort of look at their numbers differently than a quote unquote, typical SaaS company would look at numbers?

• 16:14Ben Gilbert?

  Or is it, you know, they also have this booming on-prem business where they're installing stuff on servers for companies? They, they predated the modern era of SaaS in many ways.

• 16:23David Rosenthal?

  They did, they did, but so my hypothesis on this is I'm going to, I'm going to borrow from our coffee series here, where we, we did the Starbucks episode and then our last episode was on Blue Bottle. And we talk about waves of coffee, you know, the first wave of coffee is Folgers and the second wave is Starbucks. And the third wave is Blue Bottle and these artisanal hipster, you know, coffee shops. I think Atlassian is the third wave, was the first company of the third wave of enterprise software. And so if the first wave is kind of, you know, Microsoft and Oracle and SAP, you know, sort of these big on-prem software selling licenses upfront, you know, you come and you install it and they have a huge sales force and it's really crappy software.

• 17:05David Rosenthal?

  Where honestly, you know, but CIOs buy it and it's a heavy sales process. The second wave is SaaS, right? And that's that's Salesforce. And they they changed the business model to a subscription basis instead of paying upfront for the license. And it's delivered via via the internet instead of on prem. But at the end of the day, I mean, let's be honest, right? Anybody who's used Salesforce like it's still kind of crappy software. And I think, you know, Blue Bottle and and the like, the third wave coffee shops would make the argument that that Starbucks, the second wave. Like, yeah, you go drink it in the store. You don't make it at home like Folgers, but it's still pretty crappy coffee. Like, it's all about.

• 17:47Ben Gilbert?

  Same product, different means of delivery.

• 17:49David Rosenthal?

  Different means of delivery, right? Business model innovation, but the product is still not that great. And Blue Bottle would say, like, what differentiates us is the coffee is really good. And I think Atlassian, like their culture and what they've tried to live up to, and I think what has led to their success is the this product has to sell itself. We don't sell the product. There are no humans that sell this product. There never have been. There are various flavors of people that market and help deliver it. Especially now that they're much bigger, but they don't sell it in a traditional way. And that means that the product has to be so good that people will buy it anyway.

• 18:26Ben Gilbert?

  Yeah, that is a really interesting insight that the transition to as a service happens in two steps and one is the business model and the way that it's billed. And then the second is, you know, the product actually being very different and the product being delivered as a service. I worked on Office for iPad and Office for Mac and on Office for Mac, we had this big release where we turned it into part of Office 365. So it was Office for Mac as a service. And like, literally all that was different was the subscription stuff. And I'm like, but it's still the same bits that get shipped in a CD or DVD before. Like, it's it's still desktop software that now just stops working if you stop paying on a monthly basis.

• 19:11Ben Gilbert?

  And the initial iteration of Adobe Creative Cloud is sort of the same thing. The bigger incumbents are sort of moving toward more true service, you know, product as a service rather than the typical old product that is just billed as a service. But, you know, in thinking about sort of low end disruption theory, that's really where the magic happens of product as a service. The product is fundamentally different than the old sort of products.

• 19:38David Rosenthal?

  Yep, yep. You gotta remember, these are, these are, you know, Scott, Mike or two kids right out of college. I don't think they necessarily planned all this. Like, this was their only option, right? If they wanted to pay themselves the salary that they wanted, they had to sell their product. And they couldn't afford any salespeople. And even if they could, they're in, you know, Sydney, Australia. They're not going to go sell to, you know, Ford and Boeing and Tesla and all their clients now. They have to make a really good product that people are just going to buy themselves over the internet. And sort of unwittingly, they really, they really were the first company of this third wave, if you will, of enterprise software that now includes Slack, that now includes GitHub, that have the same selling motion. We just make a really great product.

• 20:21David Rosenthal?

  We're not going to go out and like, take you to a steak dinner to convince the CIO to buy this. It's going to be adopted organically by teams and grow within accounts.

• 20:33Ben Gilbert?

  Let's put a pin in that steak dinner and come back to it.

• 20:36David Rosenthal?

  Put a knife in the steak dinner, a fork in the steak dinner.

• 20:38Ben Gilbert?

  Yep.

• 20:39David Rosenthal?

  So, that's how they start going to market. And the thing is, it actually works pretty well. So, within that first year, 2002, even though, even though Mike and Scott are only able to take $15,000 each out of the business to pay themselves, it actually grows pretty amazingly. So, they do a million dollars in revenue in that first year. Now, of course, they're paying R and D, they're hiring people, they're hiring engineers, they're hiring product folks, and they are doing marketing. They're not doing sales, but they are doing marketing to drive demand and awareness to their website for folks to buy the software. So, it does a million dollars in year one, and even today, so this was 2002.

• 21:22David Rosenthal?

  If you're a SaaS company and you launched the product in the beginning of the year, in April, and then you do a million dollars in that year, like, that's pretty darn impressive.

• 21:32Ben Gilbert?

  Yeah, but let's just say Sees the Day wasn't there.

• 21:35David Rosenthal?

  Okay, okay. So maybe you did make the right decision coming to Acquired instead. And it really just, it grows from there. So in 2004, they released their second product, which is called Confluence, and that's a content collaboration software for Teams. So sort of similar to SharePoint. You can see they really start to try and build the, the low end, better product if they will, you know, disrupt it to a lot of the Microsoft suite.

• 22:00Ben Gilbert?

  Yeah. And in many ways, the thing they were competing with here, and they even referenced this in their investor materials, is they compete with open source. And I remember making a decision in 2008 at Cisco, whether we were going to buy Confluence or whether we were going to just use MediaWiki and the, the engine that runs Wikipedia and use that open source piece of tech. And ultimately, there, there's enough, I remember even in 08, as an intern, there was enough value creation from Confluence as a real sort of enterprise-grade, professionalized piece of software, where it was worth paying for over the open source MediaWiki.

• 22:34David Rosenthal?

  Hmm, interesting. So you weren't really comparing it against SharePoint?

• 22:37Ben Gilbert?

  Mm-mm. No, we didn't think it was going to be a thing we were going to pay for at first. And then it was just so much better than the free stuff we were evaluating that we did it.

• 22:46David Rosenthal?

  Interesting. And, and you were at, at Cisco?

• 22:48Ben Gilbert?

  Cisco.

• 22:49David Rosenthal?

  At the time, right? Like, I mean, that's a big company. And, and what's super interesting and, and is interesting about Atlassian and their whole sales model is they don't have to compete head-on with the Salesforce's and the Oracle's and the Microsoft's, because of course, you know, those like Cisco, I'm sure is a huge Microsoft and Salesforce customer.

• 23:11Ben Gilbert?

  Totally. But the intern was making the buying decision on whether we were going to use Confluence because like, it was a self-serve thing. It was below the amounts that, you know, I had to check with lots of authorization for. I just asked my direct manager and he's like, "Oh yeah, sure. We can, it's really easy to do." It was the first time that employees were really empowered to make their own buying decisions. And we, we'll get to this in tech themes, but this is when sort of BYOD, the bring your own device era was coming into full swing. And for the first time, the buyer and the user of software and the enterprise was actually being coupled. So this, this, this old era of, yeah, you know, if you're making B2B software, you just have to make it good enough for the buyer, not good enough for the user. Like you actually did have to start making it good enough for the user.

• 23:56David Rosenthal?

  Yeah, and this is a really good point and it's worth spending a minute on. Steve Jobs had a great quote about this. We'll try and link to it in the show notes. At one of the, one of the All Things D conferences that he did with Kara Switzer and Walt Mossberg. And, and I think Kara asked him like, hey, you know, why, why doesn't Apple do enterprise? Like, why do you only do consumer? This is back in 2009, 2010, before Apple did do more in enterprise. And, and Steve says, you know, this is the thing about like in consumer, it's the quality of the product that wins because each individual person is making their own buying decision and they are the user. So you have to make a good product and people vote kind of with their feet and their wallets. Either they buy it or they don't and we get that feedback.

• 24:40David Rosenthal?

  But in the enterprise, you're taking the CIO to a steak dinner, you know, and convincing him to buy this whole suite of software, but, or him or her. But they don't use the product. The users are stuck with it. And Ben, what you're identifying and what Atlassian really latched on to is software got so cheap and distributed so easily that it was individual users who are now making the decisions.

• 25:04Ben Gilbert?

  Total transformation.

• 25:05David Rosenthal?

  Total transformation. So, okay. So 2004, they launch Confluence, their second product. And they keep growing. A couple of years later, they're on, being in Australia, they're on a fiscal year end in June, not in December. So in the

• 25:20Ben Gilbert?

  It's because all the times, it's like, you know, times are upside down, seasons are upside down.

• 25:24David Rosenthal?

  Yeah, exactly.

• 25:25Ben Gilbert?

  Got it.

• 25:26David Rosenthal?

  Actually, I think, I think most of, I believe most Australian companies do June 30 fiscal year end.

• 25:33Ben Gilbert?

  Huh.

• 25:33David Rosenthal?

  I could be wrong there.

• 25:34Ben Gilbert?

  Microsoft actually does too, or at least did when I was there.

• 25:37David Rosenthal?

  Yeah, that's right. That's right. I think they still do. And so by fiscal year end, June 2006, so four years after the company's founded, they're doing 15 million in revenue, which is really nice scaling. Continue growing. 2010, they acquire products called Bitbucket, which is also very interesting. And the, the parallels between Atlassian and Slack and GitHub, as we, we mentioned, are, are very, very apt. And Bitbucket is a competitor to GitHub. So they acquire that. They offer, they add that to their product suite. In 2012, they acquire HipChat. And this is before Slack, but HipChat was really Slack before Slack.

• 26:20Ben Gilbert?

  Man, it's making IRC better, giving it a nice little web interface.

• 26:24David Rosenthal?

  Now, of course, the Yammer guys would argue that Yammer was HipChat before HipChat before Slack.

• 26:29Ben Gilbert?

  Yammer was Facebook and Twitter mashed together for the enterprise. Like, this is chats, you know, synchronous communication, baby. It's the way of the future.

• 26:38David Rosenthal?

  So they add that to the product portfolio. 2013, they launch another product, Jira Service Desk. So this is really for IT departments and other service-oriented groups that are taking in tickets and responding to them.

• 26:52Ben Gilbert?

  And this is like a Zen Desk or a Help Scout or something like that.

• 26:56David Rosenthal?

  So they really, you know, Alaskan kind of becomes this suite of all of these modern, you know, bottoms-up enterprise software packages, if you will. And along the way, like, as we've said, they just keep growing and growing. In 2010, back in 2010, they do do the first secondary sale that we talked about in the beginning of the show. Excel, the venture capital firm, buys $60 million worth of stock from the founders and employees. None of that goes to the company. Company doesn't issue any shares.

• 27:27Ben Gilbert?

  Still, still an amazing investment by Excel.

• 27:30David Rosenthal?

  Oh, incredible, incredible investment. And I believe, if I remember right, from the IPO prospectus, Excel owned about 15% of the company.

• 27:40Ben Gilbert?

  Yeah, it's, I've actually got the little graph right here. It was 15.21. Just thinking about what that means, the company is doing so well that it puts the founders in a position where they can say, "Look, we would love to give you some shares." The company actually doesn't need any of your dollars to grow right now. Like, we're not going to plow that back into the business because everything is humming along so nicely and the growth rates that we want, we're getting just without any, you know, investment capital. But you can have some of our shares.

• 28:11David Rosenthal?

  Yeah. And then the founders, you know, talk about this quite a bit. You know, part of it was was getting some liquidity for themselves, but also part of it, too, was having some sort of signifiers of professionalism on board as they're starting to sell to, again, not sell with salespeople, but be part of and have accounts with large organizations, thinking like, "Who are these guys?"

• 28:32Ben Gilbert?

  Right.

• 28:34David Rosenthal?

  And, and you know, having Excel, one of the, you know, best VC firms in Silicon Valley behind them helped a lot.

• 28:41Ben Gilbert?

  Yeah. And you have to imagine too, the psychology behind that, like obviously the founders, so at IPO, the founders, Scott had 39% and Mike had 39%. Still a ton of skin in the game. So that's not really a concern, but having a bunch of liquidity from all your hard work, the psychology of it, I mean, it has to free you up to think bigger because you're no longer playing not to lose. Not that they were playing not to lose before, but like there's very little about you that's playing not to lose. You kind of never have to work again. Your life is good. At this point, it's all about like really go big or go home. Like how, how big can we carry out our vision and stay true to our principles? And it gives them sort of that breathing space to, you know, see how, how big their original vision

• 29:26Ben Gilbert?

  can become.

• 29:27David Rosenthal?

  Yeah. And, you know, to your point about incredible investment by Excel, if you, if you do the math on that investment, they valued the company at $400 million. And, and a few years later, well, five years later, in 2015, they'd go public, we'll get to this, ultimately had a four and a half billion dollar.

• 29:45Ben Gilbert?

  And now it's north of 10.

• 29:47David Rosenthal?

  And now it's at almost $11 billion. So great, great investment by Excel. They do also then raise another almost $200 million from T-Ro Price in 2014. But again, it's not raising. They were buying, I believe that was, was mostly from employees. And that was, I believe T-Ro bought about 6% of the company. So that implies a over $3 billion valuation. So again, for Excel, even in just a couple of years, they're getting marked up from 400 million to over 3 billion. But, but it's merited by, by the growth of the company. So fiscal year and 2013, so June 30th, 2013, they do just shy of $150 million

• 30:28David Rosenthal?

  in revenue. The next year, 215 million in revenue. And then 2015, so the fiscal year ending right before they go public, they do over 300 million in revenue, 320 million. So just incredible growth. The flip side of that, which is. Interesting because you just so rarely see this in Silicon Valley companies these days. But I think is really a heritage of how the company was built and grew. They were profitable and not just like marginally profitable. But in in that last fiscal year before they went public, they generated almost $100 million in operating cash flow. I mean, I don't know.

• 31:08Ben Gilbert?

  What private company today is generating $100 million of profit?

• 31:13David Rosenthal?

  I mean, I know a lot of private companies that are generating negative $100 million in operating cash flow right now. But really, really impressive. So November 2015, they do file to go public in the US. And really, we'll get into narratives here in a minute. But it's really, in a lot of ways, a coming out party for them with the investor community. I mean, they were somewhat under the radar, but these numbers are incredible. And even more so, again, because of the heritage of the company and their their sales model. Their only spending when when all this comes out in their IPO prospectus. They're only spending about 20% of revenue on sales and marketing to grow that fast.

• 31:58David Rosenthal?

  I mean, your average SaaS company is spending anywhere from 50 to over 100% of annual revenue on sales and marketing, just trying to grow not even as fast.

• 32:08Ben Gilbert?

  Yeah, I mean, it really speaks to the the quality of the product. And it speaks to the audience that they're speaking to. I heard literally three times in the last week, an engineer tell me, if I have to pick up the phone and call your sales representative, I'm not buying your service. And it's so funny thinking about how that was just the expected norm for so long. We're seeing a return of it again in a lot of particularly analytics companies that are that are moving to a more enterprise sales model. But like for this demographic, you know, especially the the engineering demographic, like that's that's not how to win them over. Being really easy to integrate with without any human interaction is a really great way to win them over.

• 32:51David Rosenthal?

  And what's really, you know, for a number of years. Especially since Atlassian's been public and people have realized, hey, this this model of no traditional sales can work. Part of the knock on it by people who are advocates of a traditional sales model is, well, exactly what you said, Ben. Like this works for this demographic.

• 33:15David Rosenthal?

  Will it work for other demographics? No, you probably still need to do the steak dinners and whatnot. And and we're knocking steak dinners here that, you know, that can be a very viable way to build a company too. And there it is important to build relationships with the people you're selling to. But with Slack emerging in the last few years and Slack penetrating teams of all types in every type of organization. You know, they have the Atlassian type sales model here. There are no, there are no sales reps going around for Slack to the New York Times or whomever is, you know, are their big customers.

• 33:48Ben Gilbert?

  Yeah, very few. In fact, I think Slack actually may have more than Atlassian, but I think Atlassian still has like actually none.

• 33:54David Rosenthal?

  Yeah. Pretty crazy. One thing they do have is a channel and and I actually don't know if Slack does as well. But the the channel is is super helpful because some customers, especially large ones, just aren't going to buy software unless they do have someone they can talk to. And so what Atlassian said is like, okay, great, we're not going to do that ourselves. But we will work with third party value added resellers who can effectively be that synthetic sales touch point for for buyers who need that. So they have invested a lot in that and and that does take both marketing dollars and and people headcount within Atlassian who help empower the channel to make those sales.

• 34:34David Rosenthal?

  So so it's unfair to say that there is absolutely zero sales effort, but it's just not the same traditional. Like we have a sales force with, you know, territory managers and reps and a VP of sales in the same way that, you know, Oracle or Salesforce or or, you know, any other enterprise or SaaS company does.

• 34:52Ben Gilbert?

  Yeah, if I had to foreshadow a little bit later of my sort of open questions. I think it's a risk to the business that, I mean, most of their revenue comes from Jira and Confluence. Those are mostly aimed That engineering organizations or product management organizations. You know, there's probably a saturation point on those where you have to start trying to sell all this suite of other products that integrate really well and generate significantly more of your revenue mix from those other products. And those don't sell themselves as well as these products do. So I think, you know, the margin that we're seeing from from Atlassian probably decreases in the coming years as they have to start adding more of these other products to the mix.

• 35:34David Rosenthal?

  Interesting. Well, and certainly their other product lines have more competition than Jira does, which is a big part of it, too. And when you have competition, then you may need to sell more.

• 35:46Ben Gilbert?

  Yep.

• 35:47David Rosenthal?

  Or put more effort into sales, so to speak.

• 35:51Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

• 36:05David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 36:19Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 36:29David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 36:46Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise, the workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 37:02David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 37:19Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 37:28David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. Well, to wrap up the history and facts, November 2015, as we said, they file to go public. December 10th, they priced their IPO at $21 a share or for just about $4.4 billion market cap. That translates to, so again, nice, nice return for Excel there. And, and the founders, you know, are billionaires officially at that point. And then on the first day of trading, they close up at $27.48, so almost $6 billion market cap.

• 38:12David Rosenthal?

  Really incredible. And since then, well, a couple of things have happened. So one, they've always been an acquisitive company themselves. They acquired Trello and added that to their product suite in January of 2017.

• 38:25Ben Gilbert?

  And, and this is worth pointing out. So they, they sold about 10% of the company. They raised 462 million in the IPO. They bought Trello for 425 million.

• 38:35David Rosenthal?

  Interesting.

• 38:36Ben Gilbert?

  An interesting, you know.

• 38:37David Rosenthal?

  Now, again, they're generating cash though, too. So like,

• 38:40Ben Gilbert?

  Totally.

• 38:41David Rosenthal?

  They have really all options at their fingertips.

• 38:43Ben Gilbert?

  Yep.

• 38:44David Rosenthal?

  Recently in September 2017, you know, we've mentioned Slack quite a bit and HipChat. And HipChat was, was Slack before Slack, as Elasian would, would have it. They're actually, they've completely reimagined HipChat. They've renamed it Stride. And they're trying much more directly to compete with Slack.

• 39:04Ben Gilbert?

  Built from the ground up.

• 39:06David Rosenthal?

  Built from the ground up.

• 39:07Ben Gilbert?

  And with more, more features than Slack, David. Did you know you can assign tasks? You can do lightweight project management. There's,

• 39:15David Rosenthal?

  Which is true.

• 39:15Ben Gilbert?

  There's,

• 39:16David Rosenthal?

  And makes sense, given Jira and,

• 39:18Ben Gilbert?

  Yep.

• 39:18David Rosenthal?

  Their heritage. It is attractive, but on the other hand, like, The stickiness for these products, like how many teams who have started on Slack now are gonna switch like?

• 39:29Ben Gilbert?

  Yeah, not to mention network effects of non, like outside your organization. It's super easy for me now to add another Slack to my life. There's zero chance I'm gonna also have, what is it?

• 39:42David Rosenthal?

  Stride.

• 39:42Ben Gilbert?

  Stride running on, in addition, like

• 39:45David Rosenthal?

  What is it again?

• 39:45Ben Gilbert?

  I have nine, yeah, that's, that's, that's Slack's marketing message right there. What is it again? Try Slack.

• 39:51David Rosenthal?

  Yeah.

• 39:52Ben Gilbert?

  Or you, you know, stick with Slack. But no, honestly, like I've, I've nine Slacks. I'm not gonna have nine Slacks in a stride.

• 39:57David Rosenthal?

  Yeah.

• 39:58Ben Gilbert?

  There's no way.

• 39:59David Rosenthal?

  You're not gonna keep another app open.

• 40:01Ben Gilbert?

  Also, can we get more creative on the names? Like five letters starting with S? And I mean Slack's guilty of it too, because they in many ways were replacing Skype. So, and you know.

• 40:11David Rosenthal?

  Yeah, well, it is, it's kind of a low blow, right? Like

• 40:15Ben Gilbert?

  Kudos to Microsoft for Teams.

• 40:19David Rosenthal?

  Indeed. Kudos to Microsoft. So despite the struggles in the chat communications, part of their product suite, the company has pretty much killed it, like a last year.

• 40:32Ben Gilbert?

  Continued 50% year-over-year growth. Uh, this most recent earnings call that I was just listening to, their stock price jumped 25% after the earnings call last week, this few days ago.

• 40:45David Rosenthal?

  Well, it was a few days ago and, and as we said, now the company is valued, uh, their market capitalization is almost $11 billion, uh, which is really incredible.

• 40:54Ben Gilbert?

  Casual.

• 40:54David Rosenthal?

  For, you know, not having keep casual, just casual, you know, add, add another couple of Bs to the bank account, literally for the founders. But again, zero venture capital.

• 41:03Ben Gilbert?

  Amazing.

• 41:05David Rosenthal?

  Pretty incredible. Well, I think we've talked about the narrative around the IPO or at least alluded to it quite a bit, but to, to switch to that, I, I think this is our first narrative section where I would argue that the narrative when the company went public was like, wow. Here's this pretty amazing company in Australia that is showing up all these venture-backed companies in Silicon Valley and has built a really innovative new way to sell enterprise software. And I think that's true.

• 41:38Ben Gilbert?

  Yeah. And to illustrate that, their S1 was incredibly straightforward and did not, there was nothing hiding in there behind, "Well, we only have to show XYZ, so we're only going to show XYZ." They had a full cohort analysis in their S1. And that, I mean, that's not, cohort analysis is like a newer way to evaluate businesses, and that's not mandated by the SEC. But you can see revenue growth by cohorts since their founding date in the S1. And you can see a lot of things in their S1 where they've just got an organically really great business and they're just telling the story.

• 42:19David Rosenthal?

  Yeah.

• 42:19Ben Gilbert?

  And honestly, I think you look at Blue Apron and you look at some other IPOs recently, it's a little confusing reading the IPO because you're not actually sure, even after you read 50, 60 pages about the business, including risks and including all their financials, how is the business doing? It's quite clear when you read Atlassian's, it's doing great.

• 42:37David Rosenthal?

  Yeah. And this is, you know, when I said a minute ago that this is our first narrative, what I meant was it kind of matches up. Like what Atlassian was telling people was the same thing that people in the press and in the investor community were believing when they, when they read the S1. And in practice, over the last two years, has played out. And compare that versus some of the other ones we've looked at. We haven't covered the Blue Apron IPO, but we covered the Snap IPO.

• 43:04Ben Gilbert?

  Yep.

• 43:04David Rosenthal?

  And the jury is still out. But there was a huge disconnect between Snap positioning themselves as a quote unquote "camera company," that being their narrative, and the investor community saying, "Wait a minute, Instagram just kneecapped your growth."

• 43:19Ben Gilbert?

  Yeah. And in the opposite direction, we, you know, this is, this IPO happened within a month of the Square IPO. Square also had an incredibly solid fundamental business on their hands. If you look at, if you go back and listen to that, that Square episode, one of the- The insights that David and I sort of uncovered from talking to some friends there is Square has a 30% return on marketing spend, basically on every single cohort. Every cohort is revenue churn neutral. So they basically, you know, can can just keep spending money, getting additional customers and some of those drop out, but the other ones make up for the ones who dropped out. Yeah, I mean, extremely predictable business. And the story that was spun in the press

• 44:04Ben Gilbert?

  about that IPO, about it being a down round, about a lot of the external factors of the business, like, just, just didn't pay attention to how solid that business was. And when you look at the ensuing days since that IPO, the couple of years that have gone down by, it was a great stock to buy. And the business kept doing exactly what it was doing before the IPO, after the IPO. And yet, every story in the press was that the sky was falling.

• 44:30David Rosenthal?

  Yeah. And I mean, I know you guys hate, hate follow ups. So this is not an official follow up. But since the Square-

• 44:36Ben Gilbert?

  You give a guy some survey feedback and he takes it way too far.

• 44:39David Rosenthal?

  Takes it way too far. But since we, we did our, our episode on the Square IPO, which is still one of my favorites, because this dichotomy between the, the narrative at the time of the sky is falling for Square and the, the reality that it was a great business is, it's like the opposite of what you would expect. Square has killed it even since the episode. I mean, they're now trading, I think they're up after earnings today, I think close to $35 a share. And remember, they IPO'd at under 10.

• 45:06Ben Gilbert?

  Wow.

• 45:07David Rosenthal?

  Yeah, crazy. Well, I think that probably does it for narratives.

• 45:11Ben Gilbert?

  For narratives, yeah. What, what would have happened otherwise?

• 45:13David Rosenthal?

  Yeah. Okay. So, well, here's a question. One also that we've talked about on this show quite a bit is relevant in the tech world right now. So I hesitate even to ask it because I think companies should go public. But why did they go public? They, they didn't need to. The founders owned the company.

• 45:32Ben Gilbert?

  Yeah. So the, the quote that they gave to a, a news outlet was that Atlassian will use proceeds from its IPO for corporate purposes, including capital expenditures and potential acquisitions.

• 45:44David Rosenthal?

  Like Trello.

• 45:45Ben Gilbert?

  Like Trello. Um, that, that many people are speculating they overpaid for. There's a great case to be made for why they bought it. They spent about the same amount of money on Trello that they raised in the IPO. Their cash balance, uh, after the IPO was hovering around, um, five to 700 million for, for the, the quarters after the IPO. So, you know, the IPO did add a material amount of cash to their war chest to do things with. I guess it gave them option value in an increasingly competitive landscape to be a lot more acquisitive. They haven't been as acquisitive as they could have been and Trello to date hasn't meaningfully added to their business. I mean, it's added a lot of users. I don't know how the cross-sell is going. I don't know.

• 46:28David Rosenthal?

  Yeah.

• 46:29Ben Gilbert?

  You know, if they're starting to monetize Trello at all, but, or, or more than they were. But I think it bought them option value and it was pretty cheap option value for, you know, a little over 10% of the company.

• 46:40David Rosenthal?

  Yep. Now, uh, again, to play devil's advocate though, now they're a public company. Now they have to report every quarter. But I do think like, as we've been saying all episode, this is a really good company with very solid fundamentals and very predictable growth and, and customer, um, you know, retention and behavior and acquisition. If you have a good company, uh, there's kind of nothing to be afraid of, of going public, right?

• 47:06Ben Gilbert?

  Yeah. Gosh, I forget who's, who said this. It might've been Zuckerberg. I think it was Mark Zuckerberg. The, uh, discipline forced by going public is a really good thing for your business.

• 47:15David Rosenthal?

  Yep. Yep.

• 47:16Ben Gilbert?

  And it seems like Atlassian had their house in order beforehand, but they got the benefits that come with going public and, and, um, having to report.

• 47:24David Rosenthal?

  And in that easier to make acquisitions, both for cash and stock.

• 47:28Ben Gilbert?

  Yeah.

• 47:29David Rosenthal?

  But I think also like there's, you know, I wonder if in listeners that have listened to multiple episodes of, of ours probably know where we fall on the spectrum here, but people in Silicon Valley recently, over the last few years have been. Very, very negative about the public markets, saying it's all short-term focused. You know, the stock market is a voting machine, not a weighing machine and whatnot. But I think if you look at, you know, the IPOs that we've covered on this show, the Facebook IPO, the Square IPO, now the Elastian IPO, and on the other side of the ledger, the Snap IPO, I think you could make a strong argument that the public markets are actually a weighing

• 48:10David Rosenthal?

  machine for tech companies in a way that the private markets right now seem to be a voting machine.

• 48:17Ben Gilbert?

  I would say we certainly haven't covered a company yet that has IPO'd where the short-term outlook of the public markets shot down their share price and hurt the company without the company's product having the majority of the blame there.

• 48:37David Rosenthal?

  Yeah, well, Square, but I think Square was, the Square IPO was a fault of positioning and really Goldman, as we talked about.

• 48:48Ben Gilbert?

  Yeah, yeah, but I guess, I mean, post-IPO.

• 48:50David Rosenthal?

  Yeah, post-IPO, no.

• 48:52Ben Gilbert?

  You could imagine a scenario where I would say, I don't want to take my company public because the public markets will lose faith, everything will actually be great at the company, we'll have to do stupid stuff to keep the stock price up. If we want to have a long view, we won't do the stupid stuff and then our stock price will drop and thus employees will be undercompensated, we won't be able to, you know, hire well, we won't be able to, we will have, you know, all sorts of problems that arise from a low stock price, but we haven't seen it. Well, we haven't covered it yet.

• 49:25David Rosenthal?

  Not to say that it doesn't happen, but, you know, we have a number of data points now, including the Amazon IPO. I mean, talk about a company that, you know, was able to innovate, probably arguably more so than any other company in history as a public company and be very long-term focused for years and years not generating a profit. We have a lot of data points on this show that being public, exactly to your point, Ben, can enforce a discipline and a rigor on companies and management teams that you're not going to get otherwise.

• 49:58Ben Gilbert?

  Yeah, I think the only thing that would have happened otherwise is maybe they wouldn't have bought Trello, but I still think they probably would have. They had twice as much money in the bank as they raised in the IPO. Question on, do they need to be more acquisitive? Like, one thing I was thinking through as I was reading the criticism that Atlassian's highest selling products are floor engineers, so they can be sold in the self-serve way. Like, are they saturating the market? Like, do they, do they need to branch out because there's not much more growth left in their core, core businesses?

• 50:34David Rosenthal?

  Well, it's interesting. They, they certainly now position themselves as a, as a company that makes products for teams.

• 50:43Ben Gilbert?

  Their NASDAQ ticker is Team.

• 50:45David Rosenthal?

  Is Team, yes. And what I, what I don't know, didn't research enough and is hard to tell on the surface, is whether that's always been their positioning, or in the past where they developer tools. And now they're teams because they're trying to expand their market as they've perhaps saturated the developer and product manager market.

• 51:07Ben Gilbert?

  Well, that's interesting. I mean, they've had these values for a long time in their S1. They, they have these values that they state. And those are their open, open company, and I'll, I'll keep it nice for kids. Open company, no BS. Build with heart and balance. Don't F the customer. Play as a team. Be the change you seek. None of those are really developer focused.

• 51:30David Rosenthal?

  Nope.

• 51:31Ben Gilbert?

  And, you know, play as a team, that's, and it's actually, it's a nice little, it's play, comma, as a team.

• 51:36David Rosenthal?

  Hmm, nice.

• 51:39Ben Gilbert?

  You know, I, I think this is their, their vision for a long time. It certainly gets a little rewritten and quite a bit shored up over time, as every company's does. I'm sure Snap wasn't started as a camera company, but I'm on board with it.

• 51:51David Rosenthal?

  You raise a fair point, though, that it is far from assured that Atlassian will have the kind of success that they've had with Jira as they expand into other market segments, too.

• 52:02Ben Gilbert?

  I just don't know that many people outside of tech that use Atlassian's products. And that's kind of fine, because everything's becoming tech and software is eating the world, and there's still plenty more. I mean, if you look at what Microsoft sold enterprise software to, Atlassian still has a lot of headroom above it.

• 52:19David Rosenthal?

  Very true, but this is kind of the thing about Slack, though, right? Like, there are people of all types and all levels of technological familiarity who use Slack. I mean, famously, one of Slack's first real, first customers that really made at least the investor community take notice about this might be something really special and different was the New York Times newsroom started using Slack. This is not just developers that are doing this.

• 52:51Ben Gilbert?

  Yeah, that's a great point. All right, listeners, now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 53:06David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 53:23Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 53:38David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 54:02Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 54:21David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 54:51Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you. You want to move on to tech trends?

• 55:17David Rosenthal?

  Let's do it.

• 55:18Ben Gilbert?

  Cool. Before we start diving into these, I think we've covered a lot of them. There was one chart that was really interesting to me, and they have this great deck on their investor site where you can kind of look at what their general positioning is to investors and why they're a good stock to buy. And one of them is that their R and D as a percentage of revenue is like head and shoulders above a bunch of their competitors. So they're at 37%. And working on down from that is Workday, Tableau, Twilio, Box, Zendesk, New Relic, Splunk on down. And a lot of those that are way further down are like intense technology companies. And you never, I mean, at least I never really think about Atlassian as, boy, they do hardcore tech.

• 56:01Ben Gilbert?

  Like for Tableau, I'm like, wow, that's a heavy lift to do that data visualization on the server. And you think about Splunk, like analyzing log files and the incredible sort of computer science. Challenges involved in handling all that data and all the lookups and all the writes and reads. Atlassian must pour a lot of cash into like security, availability, uptime, because those are called out in a big way in their S1 as risk to the business. You know, if, if our customers ever stop trusting our reliability or security, then we're in trouble. And I think they probably pour a lot of into user experience. But I definitely, in preparing for this episode, you know, I've been trying to figure out like,

• 56:40Ben Gilbert?

  why is, why is Atlassian spending so much on R and D relative to other seemingly more technical companies?

• 56:50David Rosenthal?

  I think they, they argue, and when you listen to them talk about it, that this is part of the, the nature of their model. Like they're not spending on sales. They don't have a sales force. And what that means and what the founders and other folks in the company talk about in practice, that means that the sales force of the company is the product itself. And the product, not just that the product has to be good, but it also, it does. But also the product has to literally sell itself. Like there has to be a lot of thought and, and effort and work put into, you know, the conversion funnel and, and tracking it and, and analyzing it along the way. And making sure that, because again, there's no, there's no human.

• 57:35David Rosenthal?

  The, the way they talk about it is that like, when you, when you have a sales force, you're using humans to solve problems about adoption of your product, which is fine, but that's just what you've chosen. They've chosen to use product to solve problems about adoption. And so I think that they would argue that all of the R and D that they're spending is sort of what they have to do because they don't have a sales force.

• 58:01Ben Gilbert?

  Right, right. It's like, if you're not spending on sales, then either you're applying it toward product or you're actually just applying it toward your margin. But in order to sell at the volume that they're selling at, they need to apply to product.

• 58:12David Rosenthal?

  Yep, yep. Really, what you also need is word of mouth, right? And virality. And, and part of that's natural, a lot of it. But you have to do a lot in the product to make that happen as well. And so I haven't dug in enough to know or, or use the product or referred enough people to know. But like, are they giving referral bonuses to people? You know, if you, um, which, which many consumer companies do, right? I mean, that's like, kind of the, the playbook for growth.

• 58:44Ben Gilbert?

  Yeah. I haven't seen it. I've poked around a lot. Maybe I may have missed it, but yeah. Quite honestly, I think it's if you get used to one of these types of systems and then you're starting a new software project on a new team or going to a new company. Like it is a big mental switching cost to learn a new system. A little, little aside. So, uh, recently for Taunt, we launched our alpha. The entire product management and, uh, product roadmap for that lived on a gigantic whiteboard. It was a, you know, it's an eight foot tall by probably 16 feet wide thing that we taped off with swim lanes. And we had hundreds and hundreds and hundreds of sticky notes. And it's an incredible way to do project management.

• 59:25Ben Gilbert?

  Like to be able to visualize every moving part all at once outside of a monitor is like the best thing ever. But unfortunately you have to grow up at some point and you have to scale at some point. You have to actually start estimating hours and doing triage and putting things to buckets. And, um, when the decision comes to, to decide as a team, what are we going to use? You almost never pick a new tool. It's always what does somebody know really well? And it's usually what does the person who's going to be spending the most time in it do really well? I don't think they need referral bonuses. I just think they need to provide a good experience for someone once, and then they got them for a long time.

• 1:00:02David Rosenthal?

  Hmm. Hmm. Well, maybe, you know, in a couple of years when. AR and VR become a thing.

• 1:00:09Ben Gilbert?

  Yeah.

• 1:00:09David Rosenthal?

  You can have the best of both worlds.

• 1:00:10Ben Gilbert?

  Honestly, I think that's a killer killer app for VR and AR.

• 1:00:14David Rosenthal?

  Yeah.

• 1:00:14Ben Gilbert?

  Because I think a monitor is just not nearly enough space to visualize work items and tasks.

• 1:00:19David Rosenthal?

  I totally, we, you know, I went through a period in my, my new venture where we had a whiteboard and then unfortunately we, we, we moved offices and then we didn't have a whiteboard. And then now we have a whiteboard again and like it's night and day, being able to just physically visualize your plans and what you're working on is so different than, than doing it on a, on a screen.

• 1:00:47Ben Gilbert?

  Mm hmm. Yeah. I mean, maybe that's, uh, maybe that's the killer Jira app of the future is AR VR.

• 1:00:53David Rosenthal?

  AR VR. Well, we'll leave that to the future.

• 1:00:56Ben Gilbert?

  Yeah.

• 1:00:56David Rosenthal?

  Um, I think all my tech themes have been covered as well.

• 1:00:59Ben Gilbert?

  Yeah, I got, I got nothing.

• 1:01:01David Rosenthal?

  Should we move on to grading?

• 1:01:02Ben Gilbert?

  Let's do it. So

• 1:01:06Ben Gilbert?

  our definition of grading on this show is for an acquisition, you know, how beneficial was it to the, how good of a decision was it to the acquirer to acquire the acquiree? And similarly for IPOs, how good of a decision was it to do the IPO? What it allowed them to do? It allowed them in practice, what they've actually done, almost nothing. It gave them option value. It gave them credibility to sell into the enterprise. And they, you know, they were doing a great job of that before, but on the, you know, what did it cost them? Not much. I mean, it's

• 1:01:44David Rosenthal?

  Yeah.

• 1:01:44Ben Gilbert?

  They, they only sold 10, 11% of the company. Lots of people who needed liquidity got liquidity. Like it was a nice reward for lots of employees for presumably Excel.

• 1:01:58Ben Gilbert?

  It, uh,

• 1:01:59David Rosenthal?

  Let's not, uh, let's not forget here too. This company at IPO was 80% of it was owned by the two founders.

• 1:02:07Ben Gilbert?

  Founders.

• 1:02:08David Rosenthal?

  You know, I mean, this was a very personal decision, like, uh,

• 1:02:12Ben Gilbert?

  So does that mean they still like, at some point, if they decided to sell a bunch of stock, they have to do that super slowly, right? Because there, if they ever wanted to liquidate, that would flood the market with supply.

• 1:02:26David Rosenthal?

  Yeah. Uh, I'm sure they do it over time.

• 1:02:30Ben Gilbert?

  Yeah.

• 1:02:30David Rosenthal?

  Um, in, in structured sales over time, but, um,

• 1:02:35David Rosenthal?

  But I think that's gotta be a big reason, right? It's like they, and especially Scott, who didn't come from a wealthy family. They were paper billionaires until this point. And at some point, you probably want your billions to be real, not paper.

• 1:02:56Ben Gilbert?

  Yeah, I mean, the way I look at it, literally, nothing bad happened. Only potential good things could have happened and some good things did happen. B, B+. The funny thing is, the story behind the company is great and reviewing the company and talking about how well-positioned it is and their journey is awesome. The actual IPO itself is like, I have a hard time grading it because I'm emotionless about it.

• 1:03:20David Rosenthal?

  Yeah, but isn't that like, this is kind of the dream, right? Like, this is what your teachers in IPO and company building school tell you is like, the IPO should be not a big event.

• 1:03:33Ben Gilbert?

  I want the cowboy situation, though, where

• 1:03:36David Rosenthal?

  The Facebook, right?

• 1:03:37Ben Gilbert?

  You're riding hard into the ground, you need the capital infusion, it happens, you pull the e-brake, you turn around, you got all this new cash, you use it, and then you ride off into the sunset in this flame of glory where you're suddenly your king again. Like, that's an A, that's an A+ to me. This is being really responsible.

• 1:04:01David Rosenthal?

  It's funny, I was reading an interview, shoot, I'm blanking on the name of the guy who's the chairman of the board now, was the founder and CEO of Great Plains Software. And he was talking about how these two kids came to him, this is preparing for the IPO and adding to their board and getting a public company-ready board, and asked him to be on the board and ultimately be the chairperson. And he was like, they're way more responsible and risk-averse and conservative than I am. I'm supposed to be the adult supervision. I feel like the cowboy.

• 1:04:41David Rosenthal?

  Yeah, I don't know. I'm conflicted here. Like, I agree with you too. Like, you, everybody wants to see the, you know, the James Bond movie, right? Like, but, um, but this is the right way to run a company.

• 1:04:52Ben Gilbert?

  Yeah.

• 1:04:53David Rosenthal?

  So I'm gonna give it an A.

• 1:04:55Ben Gilbert?

  There you go. There you go. Well, that Atlassian is who your parents want you to marry.

• 1:05:01David Rosenthal?

  Yeah, totally. It's not the exciting company. They make developer tools. Like, they call it team collaboration, but like, let's be real here. It's, you know, developer tools.

• 1:05:10Ben Gilbert?

  All right, we'll take that A.

• 1:05:11David Rosenthal?

  I mean, but, you know, it might not be, they're the, the company your parents want you to marry, but, you know, Mike and Scott are like, perhaps the wealthiest people in Australia right now. So they're, they're having a pretty good time.

• 1:05:23Ben Gilbert?

  That's true. That's true. I, I do want to go on a little tirade right here. If you're going public, please, God, name your company, name your stock ticker the name of the company. Like, it is, I get it.

• 1:05:37David Rosenthal?

  Yeah, there's like a trend of this right now of not-

• 1:05:39Ben Gilbert?

  I get it, like Tableau, Data, like, I get it. You, you get to make a point about like, this is what we're all about, but like, it's just annoying to-

• 1:05:48David Rosenthal?

  This is one of those things that's not gonna age well. Like, this is gonna be like a, a 2010s thing that when, you know, people look back at like ridiculous stuff from the 90s or whatever, like, this is gonna be one of those things. This and, and, you know, chest-length beards. It's just not gonna age well.

• 1:06:05Ben Gilbert?

  No. Anyway, I just wanted to get that out. So carve-outs. I feel like I'm behind on this, that everyone else read this book last year and, and it made the rounds and it got raved about, but oh my God, is Shoe Dog good?

• 1:06:20David Rosenthal?

  Oh, it's so good.

• 1:06:21Ben Gilbert?

  It is, it is, uh, for listeners who, who haven't heard of it, it's the, uh, the Phil Knight book, and Phil Knight was the, the founder of Nike. I have never read a biographical, non-fiction, supposedly it's a business book, that was so compelling. Like thriller-type, page-turning compelling. And I read the context around the book, the meta-story of, I guess Phil Knight went back to Stanford-

• 1:06:49Ben Gilbert?

  And took a creative writing class. He audited creative writing after being the CEO of Nike to like, write this memoir. And he personally researched a lot of the things rather than relying on his memory because he knew they would conflict and he'd contorted stories over time. So he's, there's points of the book where he says, I remember it like this, but everyone that I've talked to and all the records say it actually happened like this. It's that the meta story is almost as good as the actual story itself, which is glorious and exciting. And there's so many inspiring and there's so many lessons to be taken. So I don't care what you're interested in, you will find something amazing about this book.

• 1:07:24David Rosenthal?

  Oh, so good. You've probably forgotten, this was my carve out, you know, like 20 episodes back.

• 1:07:29Ben Gilbert?

  No way.

• 1:07:31David Rosenthal?

  Well, okay, so there's

• 1:07:31Ben Gilbert?

  I knew it made the rounds.

• 1:07:32David Rosenthal?

  I told, I told this then, but I'll repeat it now. I'm smiling so much. So my graduation from, from GSB, from business school at Stanford, Phil Knight was our graduation speaker.

• 1:07:44Ben Gilbert?

  Whoa.

• 1:07:45David Rosenthal?

  And the speech was essentially like the draft of Shoe Dog. It hadn't come out yet. It came out a year or two later. And, and he came and gave the speech and it was, it was Shoe Dog in like 15 minute graduation speech format. It's so good.

• 1:07:58Ben Gilbert?

  I should listen to back episodes.

• 1:07:59David Rosenthal?

  So good. Well, I can't top that. But, but I have a similar carve out. Either on the last episode or two episodes ago, my carve out was a NPR interview with Bruce Springsteen. And inspired by that, I am currently reading, not done yet, but the, his autobiography, Born to Run. Really, really good. Very different from Shoe Dog, but also great. You know, I think what Bruce and, and Phil Knight, you know, have in common is just like, they were so obsessed with their trade. Like, there was nothing else. 24/7. All they thought

• 1:08:37David Rosenthal?

  about, all they did was, you know, for Bruce, it was being, you know, a musician and a songwriter. And for Phil, it was running a shoe company. It was everything to them. And it's really inspiring, inspiring to read.

• 1:08:53Ben Gilbert?

  Yeah. There's this, this great quote, where Phil says, "All I could think about all day," I'm paraphrasing, "was my cash, my liabilities, my equity, and shoes."

• 1:09:10Ben Gilbert?

  That's obsession right there.

• 1:09:11David Rosenthal?

  That is obsession. All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

• 1:09:19Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:09:30David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:09:50Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:10:03David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started. Well, should we wrap this up?

• 1:10:16Ben Gilbert?

  Let's do it. Listeners, thanks for tuning into this one. If you aren't subscribed and you want to hear more, you can subscribe from your favorite podcast client. If you feel so inclined, we would love a review on iTunes. We really appreciate both the feedback and what it does for helping new listeners to discover the show. Tweet about it, we are at acquiredfm, and you can join the Slack at acquired.fm. Anything I'm forgetting, David?

• 1:10:41David Rosenthal?

  I think that's it.

• 1:10:43Ben Gilbert?

  All right, you want to go get dinner?

• 1:10:44David Rosenthal?

  Let's do it.

• 1:10:46Ben Gilbert?

  Night.