Scott Farquhar's Remarkable Rise
Building Atlassian Into a $50 Billion Behemoth
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Scott Farquhar, along with his co-founder and co-CEO, Mike Cannon-Brookes, started Atlassian in the early 2000s.
Today, it’s a company with a market capitalization of nearly $50 billion and one of the world’s largest software companies, doing more than $3 billion per year in revenue.
Throughout the company’s life, Scott and Mike have operated unconventionally, from starting in Australia to being co-CEOs, to shunning the traditional software sales model.
All of this while going through the dotcom crash and financial crisis.
The even more incredible part?
They essentially bootstrapped the company to an IPO.
How’d they do it?
Let’s get to it.
Scott grew up in a working-class family in northwest Sydney, Australia.
His dad did some computing early on but had a sleep disorder that disrupted his work so he had to quit and find other employment. His mom, for much of his life growing up, was a housewife.
While he came from humble beginnings, Scott didn’t realize his economic status was lower than others until he started dating a girl in a private school, and, upon seeing the houses of other kids, understood their financial status was a bit different than his.
This became an issue when Scott wanted a computer as a kid:
His father managed to buy Scott a computer a year or two later, but there was one problem.
It couldn’t play any of the games Scott wanted because it was too outdated.
While Scott tried for months to get it to work, it was to no avail.
But even the fact that Scott tried for so long showed he already had a good work ethic or, at the very least, a high level of persistence.
This work ethic of his started young, when he got his first non-A grade in his 6th year of school, as his former teacher described:
Years later, in 2013, Scott would email his teacher, letting her know the impact that had on him, writing:
Of course, Scott would become a bit more than “reasonably successful” in the business world, but how did he get started?
As an undergraduate at the University of New South Wales, Scott meets a guy named Mike Cannon-Brookes, often working together on some of the same class projects.
When they end up doing the same scholarship program, working with different companies, Mike drops out of the program to build his own company, Bookmark Box, with a classmate and friend, Niki Scevak, who later started the venture capital firm Blackbird.
Mike and Niki raise a little money from family and friends and rent some office space to build their internet bookmark management tool, selling it in 2000 for a small amount to a company called Blink.
Scott on the other hand finished the scholarship program, working various stints as part of the program for IBM, PwC, and ASX (The Australian Stock Exchange).
He didn’t like it.
Scott was disillusioned with the corporate world, so when Mike sent an email out to a bunch of people at school in June 2001 asking, “Before you take grad jobs, does anyone want to do something crazy and do our own thing?”
Guess who was the only person to say yes?
It didn’t seem like much of a risk at the time. Scott just figured he could get a job later if he had to and, given that he could get dinner as cheap as $4.50 at a restaurant down the street, he didn’t need much money to live off of.
Plus, Scott trusted Mike.
They had worked together on projects at school, Mike had previously sold his company, and they seemed like a good fit.
That doesn’t mean it was necessarily easy.
All of their peers had taken a different path with stable jobs.
Scott’s girlfriend, now his wife, was an investment banker at the time and her friends were wondering why she was dating Scott, this guy who didn’t have a job. That was the view of entrepreneurship in Australia back then.
Scott and Mike’s timing to start a business wasn’t great either:
They couldn’t raise any real amount of money if they wanted to back then and yet, neither could their competitors.
This turned out to be an advantage eventually, but without any funding, how did Scott and Mike survive?
We’ll get to Jira in a moment, but one of the first support calls they did for their consulting company was during a party and Scott spent the next 5 hours trying to debug something for a customer.
That was the type of work and chaotic schedule they had.
But the customer support they’d provide is how they got their company name, Atlassian, after the Greek god Atlas, who was condemned by Zeus to hold up (support) the earth for all eternity.
Just like Atlas, Scott and Mike would provide legendary, or Atlassian, support.
You've got to love the creativity.
And, as co-CEOs and 50/50 partners, their famous partner agreement stipulated that if they disagreed on an issue, they’d have to solve it with a game of rock, paper, scissors.
Of course, that would later change.
Less than a year into their service business, they’d abandon it and launch their first product.
The first version of Jira, a bug-tracking tool for software developers, was launched in 2002.
It took Scott and Mike 3 months to make, with a 1.0 version, as Scott would later describe it, taking about 6 months.
Where did the idea for Jira come from?
It’s a theme that’s come up repeatedly in these founder deep dives: Personal problems becoming massive businesses.
But wait, where did the name Jira come from?
Scott and Mike sold their Jira software for $800 initially.
They needed to sell one copy per week, as Mike described:
On top of the $800, they’d offer a $400 maintenance contract for ongoing support.
They were updating the software every week or two, which was very unusual at the time, and these maintenance contracts were a great alignment of incentives to continually provide better software.
For about the first two years they only were paying themselves $300/week and they put around $10,000 of costs in the early days, for two desktop computers and hosting, on Mike’s credit card.
And how were they getting the word out?
Early on, they had a tiny marketing budget of $100/month, then $100/week.
They’d go to software events, but couldn’t afford a booth, so they gave out business cards.
Another time, at a conference in San Francisco, they printed flyers and left them everywhere they could.
At one point, they asked an event organizer if they could bring beer for attendees, so they did, handing out beer with Atlassian stickers on each bottle.
They were scrappy, doing things that don’t scale, the type of things that came up repeatedly with successful companies in the early days.
And their first office space was kind of as you’d expect:
Nonetheless, they had customers and their first employee actually heard of them from one of their customers and just showed up one day.
Not long after, Scott and Mike would hire many of their classmates as their early employees.
And, with around 20 customers, a breakthrough moment occurred.
Scott and Mike were hustling to get customers in the early days, hand-to-hand combat you could say, but you can’t do things that don’t scale forever.
They got an order for their software early on from American Airlines.
A big deal on its own, but, more importantly, after seeing the order come through, the team had a realization.
Nobody on the Atlassian team had talked with American Airlines.
American Airlines had found them on the internet, looked at the details for Jira on their website, and paid for the software.
Seems like no big deal nowadays, but that was huge back then.
As Atlassian got more customers, the team grew, but with a particular type of hire:
A theme throughout this story is how Scott and Mike have taken a different approach to building Atlassian than many others have in building their companies.
This differentiation became a key piece of their strategy.
Scott outlined their big hairy audacious goal (BHAG), a concept popularized by Jim Collins in his book Built to Last, to acquire 50,000 customers, at a time when they had just 500, and when other software companies, like Rational, charged way more for software, yet again taking a different approach:
This differentiated approach started paying off very quickly and, within two years of launching Jira, Scott and Mike released their second product.
In 2004, the same year Mark Zuckerberg launched thefacebook.com, Atlassian launched Confluence 1.0, a web-based corporate wiki.
This was at a time when Atlassian was only a team of about 10, a decision facilitated by Mike, and one that ended up working out well.
The same year, they opened a small office in New York but shortly after closed it, as they’d over-extended themselves.
It didn’t matter, Atlassian was already on a roll.
In 2002, they did a few hundred thousand in revenue. The next year, $1.2 million. Then $4 million when they had two products in 2004.
By 2005, when they launched their quarterly hackathon tradition called ShipIt, Atlassian would have more than $10 million in revenue and hit the 1,000-customer milestone.
Their product-led growth created a phenomenal flywheel, as Atlassian’s former President, Jay Simons, would later describe:
I like that.
I wonder how many companies actually think that way.
Anyways, Atlassian was off to the races.
In 2006, only four years after starting the business, Scott and Mike created the Atlassian Foundation and pledged to donate 1% of equity, profits, and employee time to charitable causes.
Scott would later describe how important this was for them and, as it would turn out, for many people who ended up working for Atlassian because of this.
The next year, they solidify their five core values:
Open company, no bullshit
Build everything with heart and balance
Don’t fuck the customer
Play as a team
Be the change you seek
A few years later, after going through the financial crisis and continuing to grow, Scott and Mike decided, for the first time, to explore bringing outside capital into the business.
In 2009, the first Atlassian Summit, now called Atlassian Team, took place in San Francisco with 340 customers.
The year after, when Scott and Mike were both 30 years old and had been in business together for 8 years, they reached a point where they were contemplating Atlassian’s future.
What should they do next?
The company had $50 million in the bank and was doing $50 million a year in revenue by this point.
They had 20,000 business customers including all of the world’s top ten software companies.
Scott and Mike both thought they weren’t done with Atlassian and that the next decade would be better than the first decade so they decided they should each take a sabbatical.
So they each took 3 months off, at separate times.
This was made possible by them being co-CEOs.
They decided they were going to bring on investors at this time. They didn’t need the money, but they wanted the expertise of investors who could help them in the next decade of the company and beyond.
Scott and Mike kept a spreadsheet of all the VCs who were contacting them inbound by this time, something they stopped doing by the time they had 80 different investors on the list.
They couldn’t pitch all 80 of course, so they chose the 5 or 6 investors they had gotten along well with, met over the years, and had a good relationship with.
They told the final investors that they were flying to SF for a week to meet them and get a deal done, creating a Dropbox folder with historical financials and everything they needed to evaluate Atlassian.
All the investors were told the rules - they’d get one shot, give their best offer, and Scott and Mike would decide.
When one investor had a question, Scott and Mike would share the answer with all of them. Nobody had an information advantage.
In the end, Accel’s one-page term sheet, something their general counsel hated, won out, and they invested $60 million into Atlassian, valuing them at $400 million.
Scott elaborated on this in a This Week in Startups interview in 2023:
By this time Atlassian is a company with 225 employees and selling software for less than $10,000 per product.
As part of the Accel investment, Rich Wong, an Accel Partner, joined Atlassian’s board.
Two years later, Scott and Mike would continue making moves.
In 2011, the same year Atlassian shipped the first cloud versions of Confluence and Jira, they did $102 million in revenue.
In October, they changed entry-level pricing from $150/month for 10 users to $10/month for 10 users.
The next year, they acquired HipChat, a tool for internal private online chat and instant messaging, when the company had only 6 developers.
HipChat was growing 300% to 400% year over year at one point.
Yup, except that Slack, which launched publicly in 2014 was growing 1,000% year over year.
Scott didn’t think there was room for 3 players in the market and Slack, as well as Microsoft Teams, were already leading the way.
Atlassian would later sell HipChat to Slack in 2018.
Scott learned an important lesson from the experience though:
The same year, in 2012, they launched the Atlassian Marketplace, which today has more than 6,000 apps.
Reflecting on Atlassian’s journey in 2013, Scott said the measure of success for them was building a company that’s around 50 years from now.
To achieve that, culture mattered most, and it had to extend beyond Scott and Mike.
Raising money from Accel in 2010 was part of making that happen.
The next year, Pledge 1% was co-founded by Atlassian and a number of other organizations to be a force for good in the world. There are now more than 18,000 companies pledged and they’ve given away 200,000+ hours of time as well as hundreds of millions of dollars.
At the same time, gearing up for an IPO, Atlassian did a pre-IPO raise from T. Rowe Price of $200 million, mostly from employee shares, valuing Atlassian at $3 billion.
Atlassian went public in late 2015, with Scott and Mike each owning more than 30% of the company, a testament to bootstrapping the company early on and building an incredible business. The IPO valued Atlassian at around $4.5 billion.
Two years later, flush with even more cash, they acquired Trello for $425 million.
It was their 18th acquisition and their largest to date.
In 2018, building off his angel investments, Scott launched Skip Capital, his private fund investing in technology and infrastructure, with a portfolio including Canva and Figma among many others.
By 2019, two-thirds of Atlassian’s workforce is based in San Francisco.
After the pandemic in 2020, Atlassian became one of the largest companies committed to remote work, with a team of more than 11,000 employees.
Scott and Atlassian Today
Today, Atlassian has more than 260,000 customers, 250,000 of which have never had a salesperson interact with them.
Clearly, their product-led growth model worked to near perfection and Atlassian generated more than $3.5 billion in revenue in the last year.
Scott and Mike, in more than 20 years of working together, also showed that the co-CEO model can work.
A CNBC article in 2022 expanded on that:
While Mike is the more creative of the two, coming up with lots of ideas, Scott is the more structured person, helping turn those ideas into something and also showcasing tremendous leadership:
While Scott grimaced thinking back to that story in a 2014 interview, saying he had to have another honeymoon with his wife later, it showcased his commitment to Mike when he needed him.
Besides becoming close friends themselves, Scott and Mike have also become friends with others in the tech world and host a private retreat to bring them together:
It’s been 21 years since Scott and Mike started Atlassian as a software support firm, they’ve had an incredible journey and built a nearly $50 billion company in the process.
In each edition of the Just Go Grind newsletter, I like to include a few more quotes at the end from my research into the founder who is featured, sharing their wisdom.
On what keeps him motivated as Atlassian has become a huge company:
On the most important thing about leadership:
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