How to Buck the Silicon Valley Model and Grow Slowly

Most young tech companies follow this model: Bootstrap your great idea. Get venture capital money. Grow as quickly as you can, and then sell or go public.

That’s not the way collaborative enterprise software company Atlassian sees things, according to its president, Jay Simons. The company, co-founded by Mike Cannon-Brookes and Scott Farquhar in 2002 in Australia, has 300 employees in San Francisco, and 100 in Austin. The company is based in Sydney.

Atlassian has about $250 million in annual revenue, a devoted customer base of 40,000 businesses, but it has never had a sales force, and it claims to sell its software more cheaply than competitors by allowing customers to pick and choose their own products via the Web. And save for two secondary financing rounds, which let employees and founders sell shares to corporate investors, it has never taken venture capital money.

I spoke recently with Simons, about forgoing venture capital money and growing your company slowly. Following is an edited transcript of our conversation.

What’s wrong with taking venture capital?

Jay Simons: When you take a bunch of venture capital–and this is not a screed against taking VC–and you get a board full of VCs, and you have sold so much of your company to them, it is the nature of investing that they are very short-term oriented. An investor in Box, for example, does not care about ten years from now, but two years or less. They want Box to be as big as possible, and as quickly as possible, to get their money out. There are companies that don’t follow this model, like Mail Chimp and Survey Monkey, which have very unconventional approaches to building long-term, sustainable businesses.

Our founders still own 80 percent of the business and they are 100 percent focused on making sure the business is here 50 years from now.

So companies that take venture capital aren’t in it for the long haul?

JS: It is not the Silicon Valley status quo. Silicon Valley is geared to putting a bunch of money in that you spend as quickly as possible, so you can get as big and fat as possible, as quickly as possible. On the one hand, growth is good, and it’s not a bad strategy and works for some companies, but if you look at the number of companies with terminal velocity, that have become big, iconic brands, it is so rare. Google and Amazon and Facebook took venture capital, but they also had an ownership structure that is very different from the ownership structure of most companies that get acquired or fizzle out. The founders owned more and had far more influence and they sold far less of the company. One reason they did this was because they had a very long-term attitude. It comes back to what is the founder’s ultimate goal, and are they in it to be around 20 or 50 years from now. And maybe that is not every company’s goal.

So besides not taking massive amounts of venture capital, how else does Atlassian buck the typical Silicon Valley model?

JS: We are building software for a massive market, but we do not have a sales organization. The advice our founders got when they were starting out was that they should be go hire a sales force. Early on investors said, you built a $1 million dollar business without a sales force, that is kind of cute, you will never get to $5 million. And it was the same when we got to $10 million and $100 million. Now it is, “You’ll never get to $1 billion.” We are a better, stronger and more vibrant business as a result. And it takes a lot of courage to say we can get to [$1 billion] this way.

So Atlassian is in it for the long haul, and to be a big, iconic tech brand like Amazon or Google?

JS: Our approach has enabled us to be very long-term oriented, and we can make decisions that will matter 10 years from now. If we had followed the Silicon Valley playbook we would not have made the same decisions. We would have hired a sales force, increased prices and it would have been just grow, grow, grow.

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