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

In this weekly series, CNBC looks at the companies that made the list of the inaugural Disruptor 50, 10 years later.

In early March, associate software maker Atlasian published a blog post titled “Atlasian stands with Ukraine”, outlining the company’s plans to support employees and customers in the region and announcing that it was “stopping selling all new software to Russia.”

The post was signed by co-CEOs Scott Farquhar and Mike Cannon-Brooks. They lag behind in content and key points. But Farquhar did most of the work, freeing Canon-Brooks.

This is one of the many benefits of having two people at the top of a company. The atypical structure has helped Australians take the 20-year-old firm to the top of the competitive software industry, with products so well-known that it can be difficult for large companies to move.

In 2013, Atlassian landed on CNBC’s inaugural Disruptor 50 list of private companies, ahead of the 2015 Nasdaq debut. The stock has risen nearly 1,000% since then, compared to a 124% increase for the S&P 500 over the same period.

The two had the same job for 20 years in the same company, they were born one month apart, they became parents three months apart, they were the best men in each other’s marriages and they owned property next to each other in Sydney. “Our stock ticker is the team, and so, yes, that’s what we’re carrying,” Farquhar said.

But they are different people. Canon-Brooks is a long-haired idealist who owned a US basketball team and tried to take over the Australian utility company AGL Energy. His comments were obscene. Farquhar is clean and careful when speaking. Rich Wong Farquhar, an early investor in Accel, called it more analytical.

“Mike is a kind of irrational man,” Farquhar said. “That’s the way the world should be.” “Mike, it’s not over yet.”

Farquhar and Cannon-Brooks became friends in the late 1990’s after doing the same course at the University of New South Wales. When they graduate the technology bubble bursts and they form a business in the face of a lack of job opportunities. Initially it provides support for another company’s application server. Then it changes direction and starts creating its own software. The first edition of Jira, a tool for tracking problems and projects, appeared in 2002.

Within about five years, many Excel-supported start-ups adopted Cumin. “It was already a standard you had to integrate your software with,” Wang said. The company expanded its portfolio with the launch of the document-collaboration service Confluence in 2004 and the acquisition of the 2012 team messaging app Hipchat. Along the way, Atlasian has released versions of Cumin for a variety of employees.

Today, Zira exceeds her status as a market leader, Silicon Valley darling, and surpasses heavyweights with decades of experience selling in enterprises. According to an estimate by researcher IDC, Atlasian controlled more shares than any other company in the market for software transformation, configuration and process management tools in 2020 than Microsoft, IBM and Broadcom. Atlasian’s revenue in the market grew by about 22% year-over-year, faster than the overall division, which expanded from about 15% to $ 4.8 billion, according to IDC data.

Part of Momentum comes from programmers who try out free Atlasian software before paying for it. The strategy goes back to the founders.

“Our exposure to software started with things like games,” Farquhar said. “Back then, games had different business models. You could buy your PlayStation shrink-wrap. If you look at the ID software, they came up with a shareware model. Try it before you buy. We thought it was a great way. Sell the software, because You must try before you buy. In SAP, there is no attempt. You will see what it looks like, because it takes so long to implement. ” (SAP offers free trials for some of its products.)

Atlassian is the first or soon to sell software with a freemium offer, Farquhar said, adding that cloud file sharing app maker Dropbox has made it even more popular. And in the late 1990’s, Red Hat, which later acquired IBM, released CDs with distribution of the open-source Linux operating system and allowed people to download them for free.

For the first eight years, venture capitalists avoided the practice of assembling a squadron of salespeople to make deals, due to a lack of funds. Now, though, there are few employees who pursue selected business opportunities, Farquhar said.

Focusing less on selling strictly and more on delivering products that people actually want to use has led to a stronger financial profile. Atlasian WisdomTom enjoys the fifth widest gross margin of all 76 components of the Cloud Computing Fund, at 83%.

That situation has caught the eye of investors.

“In my 33 years of working history, I have seen a handful of companies that have tried to do this without any internal sales force or external sales force. All I can say about Atlasian is that they are the most successful,” said Founder and Managing Partner of Catalyst Private Wealth. Brendon Canton, which had $ 91 million in Atlasian stock at the end of 2021, is the largest position at that time.

Like many other cloud stocks, Atlasian is not really profitable. Connanton said that thanks to the relatively rare sales team of Canon-Brooks and Farquhar, it would be easier to turn Atlasian into a real money maker than his peers.

A more prominent feature of Atlassian’s 7,000-person organization is the group that actually makes the company’s accessories. Engineering, product and design report to Canon-Brooks. Farquhar oversees legal, human resources, finance, sales, marketing, and customer support groups. “I’m like grandparents,” Farquhar said. “I’m leaving him to deal with mood swings and screams.”

When they talk about responsibility, they consider both efficiency and enjoyment. You don’t want someone who is good at managing a job but doesn’t like to do it and vice versa, says Canon-Brooks.

Marketing and sales have been reported to Canon-Brooks for 15 years, and Engineering once reported to Farquhar. And they both deal with their confidence as they choose to embark on their play activities. They are on vacation. Last year Farquhar took a three-month vacation in a caravan with family around northwestern Australia. “We had to travel somehow,” he said. “I think other CEOs will have to retire or resign to be able to take such a long break.”

Mizuho analyst Greg Muskovitz said the structure contributed to Atlasian’s success.

“I think it has helped, having two strong executives at the very top who have an eye on at least all the important issues,” he said. Other technology companies have appointed CEOs in pairs, including Autodesk, Seridian, Oracle, Salesforce, SAP and Workday. Waymo, Alphabet’s autonomous-driving subsidiary, recently moved to the co-CEO route.

The strategy has a mixed history, Muskovitz said, but it did not work well at all on handset maker BlackBerry. According to one account, the relationship between co-CEO Jim Balsili and co-founder Mike Lazaridis “cooled down,” and the two resigned.

What makes Atlasian different is the founders of both Canon-Brooks and Farquhar, Wang said, an Excel investor. Their combined knowledge helps them move faster, he said.

Wong hinted at a $ 384 million acquisition of the 2017 task-management app Trelo, the company’s biggest deal yet. It was a shock to Trelo, as Atlasian’s Cumin was seen as a competitor, said Stella Garber, who was marketing at Trelo at the time.

“I think the founders were convinced to say, ‘I know we could have made it, but it will take our time, and if we like it now and pay for the acquisition, it will really expand the company,'” Wong said. .

When there is a problem on the Canon-Brooks turf, it is his decision. But when it comes to big things, he consults with Farquhar, because it will almost certainly affect both of them. There are plenty of examples like this in and around the company right now and it’s only natural that they split things up.

“The epidemic and Russia and Ukraine – Sydney floods right now,” Cannon-Brooks said. “Put these together, and there’s plenty of things to deal with in a growth BJ that aren’t just products.”

Farquhar said he and Canon-Brooks had a long conversation about what to do with their team-messaging app Stride, which came in 2017 when the Slack and Microsoft teams were gaining momentum.

“It was weird, in fact, because everyone was talking about how good the slack was. We were using steroids internally,” Farquhar said. “The product was actually better. The slack thing is amazing. It’s not really as good as we had. We had to make a decision.”

Eventually, Atlasian Stride and Hipchat shut down the Cloud and sold the intellectual property to Slack. It also bought an equity share of Slack, which has risen in value since Slack Stock appeared on the New York Stock Exchange in 2019.

When Cannon-Brooks and Farquhar were young, they could close office doors and talk to each other about a crisis, and they could have mountain biking or beer together for fun. Epidemics prevented them from seeing each other often in private. They’ve been good at connecting with Zoom, Farquhar said.

Canon-Brooks doesn’t have to massage what Farquhar says. Without prompting, he imagined what would happen if Farquhar left.

“I’m constantly explaining things that make me feel like I’m talking to someone,” he said. “Good idea, but let me tell you what happened in 2012.”