Mike Cannon-Brookes and Scott Farquhar started Atlassian (SaaS for developers) in 2002 and bootstrapped for 8 years.
They are now public with a £32bn market cap:
How?
This posts explains…
In Biology, there are two different types of cells:
Prokaryotic cells – simple cells with a nucleus and cell membrane
Eukaryotic cells – complex cells with multiple different compartments
If Basecamp were a cell, they would be prokaryotic – they have focused on growing one simple product for the lifetime of the business.
But if Atlassian were a cell, they would be Eukaryotic – they have grown through a host of acquisitions, forming a complex group of products.
Mike and Scott started off by creating a freemium tool for developers to track their work, Jira:
Their first masterstroke was to distribute this product with a freemium model and employ no sales or marketing people, this worked for two reasons:
Their customer person doesn’t like talking to salespeople
This made them extremely capital efficient – spending only 12-21% of annual revenue on CAC, vs an industry standard of 50-100%
Two years later, instead of diving deeper into Jira they built a second complimentary product: Confluence, to allow developers to build internal wikis.
The two products had a robust integration and by 2007, they were profitable and growing.
Again instead of doubling down on their existing product suite, they went on a rampage, acquiring:
And more recently:
This may seem unfocused, but if you look closer you will see that all products:
- Integrate tightly
- Are sold using a freemium model
- Serve the same customer persona
Any developer that enters the Atlassian universe is going to start using one of these products for free (for 30 days), will gain value and then will try to integrate into the other development tools in their businesses.
And there will be an Atlassian alternative to anything their business is currently using that has a more robust integration and of course… a 30-day free trial.
BOOM: lifetime value explodes into a large multiple of CAC.
The ultimate land and expand the model.
What did we learn?
That focusing on a core persona and mastering a distribution strategy can lead to massive growth.