Venture Atlanta’s 2016 Conference kicked off on Wednesday afternoon. The opening keynote presentation was delivered by Jay Simons, president of Atlassian, a 14-year-old software company bootstrapped with a $10,000-dollar credit card bill that grew into a company valued in the billions.
Simons started by stressing the importance for Atlassian, as a young company, to learn how to make money versus learning how to spend money. Simons attributed Atlassian’s success to 5 key, and sometimes, unconventional decisions.
1. Price for Volume.
In their first year, they made a decision that would have been highly unpopular with advisors and investors. Atlassian decided their flagship product, JIRA, would have a very simple pricing:
* Commercial – $800 flat, unlimited users.
* Academic – 1/2 Off
* Opensource – Free
It was this pricing model that forced the company to solve the challenge of selling an $800 product without a sales team. Faced with that, their model philosophy became, “Our products are bought, not sold.” They published the pricing online, made all their products free to try, and were opposed to registration forms and hidden pricing. Purchasing was made simple so customers could get going in minutes and was completely driven by the product. They focused on improving and investing in the product with an inverted spending plan of 19 percent in sales and marketing and 37 percent in research and development.
2. Add Second Product in Year Two.
While many advisors may have said they were losing their focus, this ended being another great unconventional move on their part. Atlassian figured out what chapter two was early on which has been hugely valuable to them.
Their second product, Confluence, was the perfect complement to JIRA which widened their market. It also forced their team to build muscle around cross-step, expansion, and how to bring on a different buyer using the same model. The success they witnessed encouraged them to continue adding new products every two years.
3. Forfeit Revenue to Widen the Funnel.
During the recession in 2009, Atlassian was still growing, but it became clear the small businesses they catered to were suffering. At the time, JIRA was priced at $1,000, which they realized, was a big cost burden for teams of 10 or smaller in uncertain times.
Atlassian made a difficult decision to lower the price to $10 and donate that fee to a charity (Room to Read), effectively making their product free for small teams. They took a leap of faith that their product would speak for itself, and that they would keep their smallest customers as they continued to grow into higher price tiers try this.
It ended up being the exact right thing to do. Since launching the program they have sold $6 million in $10 licenses. The benefit was a massive and significant growth in their funnel because they were able to bring in more small teams who in subsequent years spent more with other Atlassian products.
“Sometimes to aid growth, you have to forfeit revenue to capitalize on an opportunity.” – Jay Simons
4. Practice patience.
Atlassian founders decided to think for the long-term from the beginning. It has always been a goal to think about creating a company that would outlast them.
Patience and long-term thinking have given them the benefit of structuring their business to incorporate those ideas into all facets of their business including their sales. Atlassian has consistent growth through their quarters because unlike most companies they don’t make decisions thinking about the quarter, they make them thinking about the 12 months ahead.
With single user customers, they exercise patience, which in turn gives them the foresight to look at the how a customer’s long-term value can grow over the next 5 years. It’s different way to think about business.
5. Create Values and Traditions.
The last, and one of the most important decisions they made early in the company’s growth, was focusing on creating traditions and a value system that became the keystone of the company. The founders wanted to establish their values to create a system that would survive beyond them. They wanted to document what they thought the company was and wanted to preserve.
“The places that we work at and the people we work with become family, become our homes.”
Simons’ advice was to look for the things that people gravitate to then make them part of the part of the culture. Atlassian’s values, which Simons said, are still incredibly important to the company have stayed the same through the 14 years of the company’s existence.
Simons ended by challenging early companies to decide to pledge 1 percent to good causes. That 1 percent could be revenue, time, options, or whatever a company decides on. He encouraged companies to begin pledging early and to watch the huge impact their company can have over time.
For more on the “Pledge 1%,” visit www.pledge1percent.org.