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Atlassian is 20 years old and unprofitable

smartcompany.com.au

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Re: Atlassian is 20 years old and unprofitable

#391

Post by cellar_door »

zeroonetwothree wrote: post #314
carlsborg wrote: post #303

I suspect the following is built into valuations of many software companies with subscription revenue models: they can reduce headcount dramatically and keep a relatively tiny headcount of staff around to sustain the existing recurring revenue and be highly profitable even in a slowing economy. For example how many people would MongoDB, with close to a billion dollars of annual revenue, need to keep the lights on, as…

I think this is not as straightforward as you make it sound. 1. Often the way companies are structured requires specific teams and processes to exist and unwinding that is not easy. 2. It can be very hard to identify which people are actually critical. If you get it wrong it’s a big problem. 3. Additionally, firing a large percentage of employees will create a very negative feeling in the remainder so they might leav…

The thing is, a high growth company like MongoDB doesn't need to fire a single engineer to turn highly profitable. They grew revenue 57% YoY last quarter and spent 52.6% of revenue on sales & marketing.

Re: Atlassian is 20 years old and unprofitable

#392

Post by gnicholas »

avisser wrote: post #354
upupandup wrote: post #345

Earlier quoted context omitted.

> it's actually bad to be profitable when you're growing. I've seen this happen so many times: - profitable, down to earth founders generating net profits - VC approaches said outfit and tries to gather as much info - VC realizes said outfit is difficult to emulate and break into market - VC invests and starts demanding they run at a loss to grow quickly This works well when interest rates are low, and VC is not unde…

Seems like he meant "It's bad for me (the VC) to be profitable when you're growing"

Bingo. The VC wants the grand slam that returns the entire fund. He'd rather have an x% chance of a grand slam than a 3x% chance of a double/triple. Founders have a very different calculus because their risk isn't spread across a portfolio of companies.

Re: Atlassian is 20 years old and unprofitable

#393

Post by foobiekr »

marcosdumay wrote: post #360
ryanackley wrote: post #107

Worked there from 2008-2013. So early-ish employee here. I still have a chunk of shares from the original ESOP program. Saying that for full disclosure because I'm biased and this feels like a hit piece to me. When I worked there, they disclosed all financials in our internal Confluence site. There was a policy of full transparency with the employees. The owners (Mike and Scott) had impressive business discipline. Th…

> it's actually bad to be profitable when you're growing VCs love risk. They will want to dramatically reduce your chances of a small positive outcome if it means a increase on your (always small) chances of a huge positive outcome.

VCs love _technical_ risk. Outside of the very unusual circumstances of the Zero to One capital-funded-monopoly-theory era, they have considered _business_ risk quite toxic.

Re: Atlassian is 20 years old and unprofitable

#394

Post by time0ut »

zac23or wrote: post #335
throwamon wrote: post #333

Earlier quoted context omitted.

You mean literally Windows' Notepad? Because that's about the worst app to write on. Not even going to go into how it's almost devoid of useful commands. Make one mistake, you're good. Make two, tough luck, you can only undo once. Accidentally select some (or all) text and type over it then somewhere else? Today's really not your day. It's actually worse than textboxes in this respect. This happened to me more times…

Notepad++. Or Vim. Or any editor.

This is how I work as well, but Sublime is my preferred editor. Same on both Windows and MacOS. Autosaves everything. Super fast.

Re: Atlassian is 20 years old and unprofitable

#395

Post by foobiekr »

robbiep wrote: post #282
nemo44x wrote: post #215

Earlier quoted context omitted.

The character Russ Hanneman on the TV show “Silicon Valley” took it a step further stating that having no revenue to speak of makes a company more valuable. It’s satire…but is it?

A company with no revenue can potentially raise at a higher valuation with a company of $1 of revenue - because now it’s real and investors will start making their mind up about the actual possiblities of the investment

Directly experienced this - having actual _profit_ makes it hard to encourage fantastical storytelling about how big the upside is. It's the company future equivalent of mark-to-market.

Revenue .. well, if you can get huge revenue with huge losses and convincingly demonstrate (mostly by spending) that more losses (= more capital) means more revenue can actually take you a long way. Almost all of the "unicorns" and "decacorns" embraced this model - lose $2-5 per $ of revenue but able to demonstrate almost unlimited market. Most of those companies can never, ever be profitable entities.

Re: Atlassian is 20 years old and unprofitable

#396

Post by idontpost »

ryanackley wrote: post #362
upupandup wrote: post #345

Earlier quoted context omitted.

> it's actually bad to be profitable when you're growing. I've seen this happen so many times: - profitable, down to earth founders generating net profits - VC approaches said outfit and tries to gather as much info - VC realizes said outfit is difficult to emulate and break into market - VC invests and starts demanding they run at a loss to grow quickly This works well when interest rates are low, and VC is not unde…

Few counterpoints: - Your entire theory relies on VCs having some power over decisions being made at Atlassian. That isn't the case. The founders of Atlassian have always been in control. After taking VC money and going public, they still have over 80% of the voting shares [0]. - A downturn of 5+ years would be the longest downturn in the USA in the last 100 years [1]. Anything is possible but it's unlikely to be tha…

I think you're using "downturn" differently.

GDP contraction won't last five years. But it will be longer than the GDP contraction before VC money becomes as easy as it was for the last five years.

Re: Atlassian is 20 years old and unprofitable

#397

Post by cptskippy »

dalbasal wrote: post #284
ryanackley wrote: post #107

Worked there from 2008-2013. So early-ish employee here. I still have a chunk of shares from the original ESOP program. Saying that for full disclosure because I'm biased and this feels like a hit piece to me. When I worked there, they disclosed all financials in our internal Confluence site. There was a policy of full transparency with the employees. The owners (Mike and Scott) had impressive business discipline. Th…

The idea that growth is better than profits was in-built into Atlassian's proposition to shareholders, ultimately. The slow and steady mentality is fine, but we see over and over that it isn't what the market wants. A private company or a high risk growth company, those are the two options for a software company. Either that or they'll be taken over. They're revenue now is just a $2bn, so that "grow grow" mindset fro…

> but we see over and over that it isn't what the market wants.

What the market wants is short term growth and I firmly believe that is what is destroying our economy and the market.

Instead of building pillars and companies that outlive the founders, we have short term cash grabs. We have VC firms buying up our existing pillars, gutting them of any valuable assets, saddling them with debt, and then selling off the carcass. We have firms buying up real estate and creating or exacerbating scarcity to drive up demand and prices. We have shifts towards subscriptions and quarterly profits.

It's not healthy and it's destroying us.

Re: Atlassian is 20 years old and unprofitable

#398

Post by muhaaa »

gshulegaard wrote: post #232
muhaaa wrote: post #115

Author writes that Atlassian has no network effects. That is BS. Atlassian has massive network in its ecosystem. There are Jira Consultancies, 3rd party apps and plugins and deep integration into customers processes. If one element grows the whole ecosystem profits. Secondly, Atlassian is not a bad company just because it's stock is overpriced. It might be a bad investment! Over the short and midterm Atlassian is in…

I think you might be confusing upselling and cross selling with network effects. Upsell is when you convince a customer to purchase additional service, like offering different tiers of subscriptions. Cross selling is where you sell adjacent services related to (and that possibly integrate with) the original service. Network effects are where the direct value of a product grows simply because the number of users incre…

I disagree. A network effect does not need to be inherent to the product / service itself. It can originate from other sources. What is the network effect of eBay? As a seller I do not care how many other sellers are there. But I care how many buyers are there. For a buyer it's the reverse. Buyers attract sellers and vice versa. That's a network effect too. For Atlassian it's similar. Jira customer attract Jira consultants and vice versa.

Ecosystem is the better word for sure. it's competitive advantage is still a network effect.

Re: Atlassian is 20 years old and unprofitable

#399

Post by mbesto »

Ugh, the "unprofitable" trope in B2B SaaS...here we go again...

FCF:

   2019 - $420M
   2020 - $538M
   2021 - $808M
30% CAGR (just for the last 4 years alone)

2021 Numbers:

   $1.3B Revenue
   $372M S&M Spend
   $973M R&D Spend
These are all super healthy numbers and if the company stopped growing, then it would easily become profitable.

The author needs a finance course.

Re: Atlassian is 20 years old and unprofitable

#400

Post by mbesto »

dalbasal wrote: post #284
ryanackley wrote: post #107

Worked there from 2008-2013. So early-ish employee here. I still have a chunk of shares from the original ESOP program. Saying that for full disclosure because I'm biased and this feels like a hit piece to me. When I worked there, they disclosed all financials in our internal Confluence site. There was a policy of full transparency with the employees. The owners (Mike and Scott) had impressive business discipline. Th…

The idea that growth is better than profits was in-built into Atlassian's proposition to shareholders, ultimately. The slow and steady mentality is fine, but we see over and over that it isn't what the market wants. A private company or a high risk growth company, those are the two options for a software company. Either that or they'll be taken over. They're revenue now is just a $2bn, so that "grow grow" mindset fro…

> They're revenue now is just a $2bn

And has been growing 30% YoY for the last 3~4 years alone. This is unheard of in any other industry/market.

Their FCF is also impressive.

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