Ep. #3, Feat. Atlassian’s Jay Simons

Jay Simons: The things that Atlassian does really well is attack problems with first principles.

Once you start supplementing what you haven't put in products with people, you never really go back and fix those things.

Atlassian's culture is harmonious and yet separate.

We've been doing things a certain way. Now we're going to do things differently. If you're 200 to 300 to 500 people, that's really, really hard.

We sort of had to think differently about how to build a business.

Fred Stevens-Smith: Hi, I'm Fred Stevens-Smith, CEO of Rainforest QA, and you're listening to my podcast, Zero To Won. On this show, we'll explore the often overlooked tools and techniques that the best founders use to win. Zero To Won is brought to you by Heavybit, a nine-month program for developer-facing startups. For more information, visit heavybit.com.

So don't freak out, guys, but this one is a little different. This time I'm interviewing my friend Jay, who is the president of Atlassian, and he's such a big deal and Atlassian's story is so fascinating that really this is kind of just a free-form interview where we go into pretty much all aspects of how Atlassian is unique. So I hope you enjoy something different this week.

Hello everybody, today I am with the handsome and talented Jay Simons. Say hello, Jay.

Jay: Hello, Jay.

Fred: I met Jay.

Jay: It's the worst joke.

Fred: It's the worst joke, but it's a good start. It's a dad joke. A dad joke? Are you a dad actually?

Jay: I am, yeah. Perfect. Two girls.

Fred: Yeah, you can tell. I met Jay four years ago when we were raising our first seed round, and we have stayed in touch since and he gracefully agreed to be on the podcast today. Jay is the president of Atlassian.

Atlassian's Origin Story

Tell us a bit about Atlassian. If someone doesn't know about Atlassian, give the elevator spiel. What do you say to the kind of IPO roadshow people?

Jay: We make software for teams. And we've always made software for teams. And we started with a very critical team early on, which I think was fortunate. We started with the team building software, way back in 2002.

And our flagship product is a product most people are familiar with, Jira, that basically is a collaborative project system, started out as a bug tracker or an issue tracker and has sort of evolved into like a pretty rich system for tracking shared work and projects, not just for software teams, but kind of across a wide range of different teams inside of the business.

And we've steadily complemented Jira with a number of other key aspects of team collaboration and teamwork, content sharing, messaging, communication for development, code collaboration. But ostensibly we are deeply rooted in helping people work better together and unleashing their potential.

Fred: Nice. You can tell you practice that.

Jay: Oh, I don't know. That was the first time I've done it.

Fred: And incidentally, Jira is Rainforest's number one requested integration.

Jay: Go Jira.

Fred: Yeah. Go Jira. And then tell us a tiny bit, because I think one of the more interesting things about Atlassian is like how the company is set up in terms of geographically and all of that kind of stuff. Just tell us a little bit about that.

Jay: So started, headquartered and started in Sydney, Australia. Two founders and co-CEOs are still based in Sydney. Company was started in 2002 and part of our origin story is, and even way back, like Mike and Scott, the two founders, basically the first iteration of Atlassian was, little known true Atlassian trivia, was a service and support company for an open source application server called Orion.

So these guys were sort of big in the Java community, had some experience and familiarity with Orion, said we're gonna start like a little company that basically helps do support and custom development on top of Orion, which I think was largely centered in Europe. I mean most of the customers in Europe. So here they are in Sydney doing technical support and custom development for Swedish telephone companies.

Fred: Right. And realize that literally twelve hours out of the right time.

Jay: Like everything was like, they tell the story that basically they'd go to a party on a Friday night or go to a party on a weeknight. And one of them inevitably would get sort of like a pager buzz or sort of a text or an email and then they'd have to ask whoever's house they were if there was a spare quiet room that they could kind of crack open a laptop and do some support for some Swedish company.

Yeah, it's awful. They both admitted it was an awful business. But from that, they basically created Jira because at the time, all of the tools that they were going to use to sort of like track work and issues and projects that they were supporting their customer base with were just crude and primitive and frustrating. And so they scratched their own itch, basically built Jira to support what they needed to do and kind of the rest is history.

But in 2002 when they'd created Atlassian, they stumbled across a product that they knew that there was a market for. And then I think there was energy and excitement around. It was a terrible time to basically fundraise. So the depths of nuclear winter for tech.

Fred: The internet is dead.

Jay: The internet's dead. Like two Australian founders that basically had just dropped out of college or finished college to kind of start a company in sort of a space that isn't really sexy, like supporting software development and development teams. They couldn't have raised money if they tried.

And so I think it kind of catalyzed a lot of how we have built kind of the go-to-market function of expanded the model, because we sort of had to think differently about how to build a business. And I wasn't there at the time, but they were in Australia. They knew that most of the market was not in Australia and they had to figure out a way to reach that market.

And it's sort of like one of the things that Atlassian does really well is attack problems with first principles.

And I think it sort of started way back, that we couldn't do what everyone else had done at the time because it just wasn't available to us. And so then you look at a problem, you're like, okay, how will I solve this problem just reinventing a solution to it? I'm not gonna do what everyone else would have done in the situation or what people have done before. So that option isn't available to me and so I'm just gonna rethink it.

And a lot of our go-to-market model was sort of born from that requirement. And so again, 2002, the internet was basically just blossoming. AdWords was relatively new to companies that were trying to market and reach a market. And the guys at the time just said, well, let's use the internet to basically distribute the software to other businesses, which today, it's sort of like a head-nodding duh.

Fred: Yeah.

Jay: At the time, I think was really, really a foreign concept.

And then we are now 1600 people kind of around the world. Still R&D is largely centered in Australia, which for us is an advantage. We don't have to duke it out with every other tech company that's trying to hire engineering. We were sort of the hire of choice in Australia and have now kind of blossomed into a relatively globally distributed company, big presence in the US, big presence in Europe, big presence, naturally, still in Australia.

Distributed Teams and Culture

Fred: And you tend to have kind of like the clusters, right? Like I've been to the beautiful San Francisco offices, which is amazing, and that you have a bunch of people there. Do you replicate that model around the world or is it like lots of people working from home as well? How does that work?

Jay: There are people that work from home who try to like build kind of deep cultural centers. Like culture is a big part of the company and a big part of who we are. And even though we believe in distributed teamwork because we create products that enable it better, we also believe in culture and the intimacy of human connection.

Wherever we are, we try not to spread ourselves too thin and try to create kind of an experience and an atmosphere that's gonna be conducive to creativity and teamwork, because human connection I think is a really important ingredient that you can't underestimate.

Fred: Yeah, absolutely. And I feel like that's a, you know, Rainforest as a company right now, we have about thirty people, about half of our employees fully distributed, you know, so there's one in Tokyo, there's one in Austria, there's one in Lima, and it's been a question for us, and I think in general a question for modern software companies, like one of the major benefits that we have is that you need an internet connection and a laptop and you can do your work anywhere in the world.

But on the other hand, you have such real challenges of communicating and, as you say, building this culture and creating something really meaningful that is exciting for people to go to work every day. And that seems to me to be a kind of fundamental tension.

You guys have ended up solving that by kind of clustering people in specific places. Have you seen people do the other way well? Do you think that would work for certain companies and for you guys culture is really important, or would you generalize that rule?

Jay: You mean the hyper-distributed model?

Fred: Yeah.

Jay: So first of all, I would say there are pros and cons to basically any organizational structure. And it's funny, like early on at Atlassian people would say, what's the one thing that you would change? And my answer was always the same. It was, I put everybody in the same place in the same building.

In part because when we were really young and we were a hundred people, that intimacy was sort of divided in half. Like we were a big chunk of people in San Francisco and a big chunk of people in Australia. And the one thing that I wished for was, you lose out on the, "Hey, I want to walk this out with you or go grab a beer or go grab a coffee," the social connection.

There was the intimacy we built through threaded discussions and chatrooms and avatars. But kind of the real human connection was sort of missing for people that were in two different places.

And yet, even though that's one thing that would change, that was one of our greatest assets, that we could really work because we had a centered population in Australia and a centered population in San Francisco. We work both sides of the day. And it always felt like in the US that there was just a group of people that were beavering away while I slept, and when I woke up, the proverbial ball had moved a couple of yards closer to the goal line, which is a great feeling. You're like, wow, my colleagues, my counterparts somewhere else had basically really kind of moved forward and I can pick up the baton and keep running. I mixed metaphors there.

Fred: That's great. And I'm sure that also it's super helpful that part of what you're doing, kind of like the GitHub thing, you're helping build the tools for collaboration that you yourselves are testing by the nature of how the company is set up.

Jay: And I think you mentioned GitHub.

Fred: Yeah, not to mention one of your competitors.

Jay: Yeah, no, it's okay. It's a friendly competition. They leaned really heavily into building a distributed company where I think at one point they had a hundred people in forty different locations or something crazy like that.

And again, I think that there's a lot of advantage and strength that gives them and then there's some consequence too. It's like when you want to pull everybody into a single place and kind of really unify them around a vision or a mission, that becomes harder, right? And maybe you guys will face that. It might be fine when you're 30. When you get to be 300, the downside impact of that might be something as a company you reevaluate or not.

Fred: And I think also what I've seen is that, I'll say this about GitHub so you don't have to, I think they've stepped back from that hyper-distributed model where now you see that a lot of the revenue-focused functions are in the San Francisco headquarters actually. And that's kind of the split we've ended up with so far.

I mean, like you said, we're still a tiny company, communication is not difficult today. But the thing that we've kind of ended up with is most of engineering is distributed, all of sales and marketing and customer success is here in San Francisco. And I definitely see the kind of personality types that a typical great engineer or a typical great salesperson has are more conducive to one or the other.

Like the engineers love working in the cave and not being distracted and not having lots of shit going on everywhere and being able to just kind of get heads down. I see there's a couple of engineers in the SF office and I see them regularly talking to each other on HipChat while they're sitting next to each other. So they choose to kind of communicate like that even regardless of where they are in the world, which is kind of interesting. Whereas the sales guys is all about all of the talk and all of the banter and going out for beers together.

Jay: Sure. I think too about, as companies grow, I mean the harder thing for me that I think about is where companies face big strategic questions or challenges, sometimes it's difficult to, like communication is hard, and sometimes, either in an internal email or a memo or a blog post or even kind of a video of someone saying why this is important, that we need to do this thing, or there's a strategic change or opportunity we need to pursue.

The thing I think a lot about is feeling really connected to that takes some human connection. It's very difficult to transfer the meaning of things. It's sort of the law of leaky abstraction, where you've got people in a zillion different places, to really make them feel connected, in part because you need people to believe.

Right. And you can't just say it's important that you do this and do it. If they're not convicted about why you're doing that and they don't feel a part of it, then potentially the outcome actually is gonna be degraded because they just don't believe.

And it always feels to me, rightly or wrongly, that if you can gather, you gather people in a room and you sort of talk about, why is this hurdle that we need to jump over there? Like, why is it so important for us to jump? Why are we gonna jump this high or jump this way, and really have people take the time to kind of understand that? And if they internalize it, I think you're in a better position to actually clear it.

Fred: Yeah, I completely agree. One of the things that we do is, and who knows how long this will be tenable, but we bring everyone on site once per quarter. And I can see as we get bigger and bigger that that's harder.

Jay: Yeah.

Fred: It's gonna probably become possible. Do you guys do something similar in terms of getting all of the Atlassian people in one place ever?

Jay: We do regional. I mean again, we're pretty centered around offices and so there's not a ton of remote work. Remote work tends to be really, really small percentage of where people are.

And we encourage people to sort of come into an office. We've created a great environment for you to work in and be connected and sort of do the things you do. And so avail yourself of that.

And then in those centers, one of the rituals for us is we've always done an end of fiscal year kind of celebration, which is a let-your-hair-down, and we do it company-wide, but it's a chance for each office, I think, to really build camaraderie and teamwork, and so we make sure that if you're remote to a San Francisco office, that's a time that you come back in and you connect and you spend a day with everybody.

Fred: Interesting. So then for you guys, there's not so much crossover between the Sydney office or the San Francisco office.

Jay: No, because it's super hard. Yeah. Even when we were 100, you're asking, at the time we would have asked sixty people to basically take a fourteen-hour flight.

Fred: They'd have to really love the company.

Jay: You really do. Yeah, especially the back of the bird.

Building Rituals

Fred: So let's talk about rituals actually. That's something that is quite interesting to me. We haven't touched on your background before Atlassian at all, but over your career, I guess that's something that I see as a young company. We're starting to evolve. There's a few things that people have ended up doing, they just happened and then the company kind of coalesces around it.

One of those things was the quarterly onsites. That's now a hugely important part of especially the remote people's lives. Every three months they get to share all of these in-person experiences. And there's various other things like that.

How deliberate have you guys been around creating rituals? Do you think that's important for a young company to do? What are your general thoughts on that?

Jay: Absolutely. I think there's a couple of things that we've created that we've tried to institutionalize because they're so important. A relatively well-known example of that is what we call ShipIt, which is basically a quarterly hackathon. 24-hour period, you get a work on whatever you want, and the only requirement is that you've specified in advance what you're gonna do.

And so you've thought, like this is the problem that I wanna solve, or the feature that I want to build, or the itch that I want to scratch. And then at the end of that period you just stand up in front of everybody and show how far you got. And really the idea is that you are trying to ship something.

And we started that. It's actually like most of, the joke was we shipped the company.

Fred: That's a cop-out, Jay.

Jay: We shipped an IPO.

Fred: Okay, well that's true. That's not a cop-out.

Jay: Took longer than twenty four hours.

Fred: But do you, I mean, does everyone get involved? Like do you get involved in these?

Jay: I do, yeah. I'm trying to think of the, actually the last ShipIt project I worked on was redesigning the Atlassian cycling jersey.

Fred: Nice. Are you a cycling nerd?

Jay: Yeah. Relatively popular project.

Fred: Yeah, yeah, yeah.

Jay: But that's one that we've institutionalized, where like every office participates in that. Funny backstory is it used to be called FedEx because the idea was like you ship something in a day. And it became so popular that FedEx, the lawyers contacted us and said, actually stop calling that FedEx. 'Cause it used to be that when you searched FedEx space Day, that Atlassian actually outranks.

Fred: Wow. So you get all the blog posts and all of that stuff. That's awesome.

Jay: And so we renamed it ShipIt.

But that's one. But also I think we've been careful about letting each office create their own rituals and not try too hard to basically thrust those into another culture.

Like I've often described, Atlassian's culture is harmonious and yet separate.

Like when you go to Australia, it's familiar but different in a way that you can celebrate both those things. You'd be like, oh, the things that I really love, I know that I'm an Atlassian here and that this is an Atlassian place and then I'm connected to other Atlassians, but this is also uniquely an Australian place or uniquely an Austin place.

So I'll give you an example of a couple of rituals here. In San Francisco, we started one that again didn't transfer to other offices for whatever reason, but became one that we talked about publicly a lot, and it was the Friday beer cart. And so one thing that we did when we were really young is we just instituted, we bought a couple of big adult tricycles, and for happy hour on Friday, the one requirement is if you were a new hire you had to jump on that adult tricycle, load it with a bunch of beer and drive it desk to desk to desk. And it wasn't just beer, it could be soda and whatever, but the requirement was you would deliver personally and introduce yourself.

And it was an incredible way of kind of breaking down that awkwardness of being a new hire and not knowing people's names. It just forced you to basically go out of your comfort zone, and everyone expected it. It was like Friday, where's the beer cart rolling around? No one would leave their desk. And it was an incredibly successful ritual of building culture early on.

Austin basically tried that a little while and then said, ah, it's not quite working for us, in part because their physical space was divided in a way that it wasn't really kind of inclusive in the way our physical space was. And so they did a Friday breakfast burrito.

And on every Friday breakfast, they do this ritual where all the new hires come, and the whole company doesn't need to go there, but a fair number of people do show up. And the one requirement is you have to tell an embarrassing story, admit to a tattoo, or I can't even remember what the third one is. There's one that you could choose between three things. And again, it's grown into this wonderful ritual.

Whenever I go there, I make sure that I go to that Friday breakfast because it's a chance to kind of reconnect with people that I haven't seen in a while and get to know new people.

So I think short answer is incredibly important. It's the way that you build culture and kind of kinship, which again, when the shit hits the fan for a company, if you're not building those things, I think your propensity to break through the shit is lower, right? If you've really built camaraderie and connection and kinship, then when you need to get everybody to grab an oar and row in a single direction, you got a better shot at it.

The President's Role

Fred: So tell us a bit about what it's like to, you know, you're the president, right? Which is awesome. I love saying that. You're the president. Talk a bit about how that works.

You said you have two co-CEOs, the two co-founders back in Sydney. Do you spend a lot of time face to face with them? Are you on the plane a lot? Is it mostly, we're talking, HipChat and video conferencing? How does that work?

Does each office, does each region kind of operate semi-autonomously? It seems like that's kind of like a departure from the typical company, how you guys do things.

Jay: So yep, and we're atypical in a bunch of different ways, this being one of them. We have two co-founders, co-CEOs. I'm responsible largely for the customer-facing part of the operation. So it's sales, marketing, support, customer service. That's sort of my bailiwick.

And so I run a big part of the organization and I'm responsible for helping generate demand and convert that demand into dollars and make sure that we're supporting and retaining happy customers along the way.

That's kind of my mission. Early on, another part of my mission was to help kind of build, unify, and grow the culture here. We had two founders in Australia, but we were building a significant presence. The next big office outside of Australia was the one in San Francisco, which we opened, before I joined, we'd opened it in 2006.

I joined in 2008, so there were like 30 people here, and now there are 350 here and we have 250 in Austin. So we've grown a lot since then, but at the time they were looking for someone to sort of be a cultural leader, someone on the management team that was really connected to strategy, and so I think it alleviated the burden on founders to basically have to come over here and feel connected. We could grow that

Fred: They could kind of trust you to kind of run the show over.

Jay: Yep. And we could grow that kind of single harmonious globally distributed culture, but really, really go deep and kind of build the type of kinship and camaraderie and connection that I think helped us weather a bunch of storms along the way.

Fred: And if you know, I'm sure you have some insight into this, what was it that convinced the founders that you were the guy? Like how did you know them? How did you get the gig?

Jay: Well, partly, I mean, I was hired originally to run marketing. And Atlassian has an atypical sales model and so there isn't a big investment in sales.

My career, if you go back, I started my career in technology in sales, and so carried a bag and did the whole old traditional, hardcore enterprise sales slog, loved it, miss it, but transitioned into marketing in part because in a traditional enterprise sales model, marketing's role is to help enable the field and help drive demand for the field and then help teach salespeople how to convert it. And because I'd been selling for a long time and I understood the market and products, it was a natural transition for me into product marketing and marketing. So the back half of my career was focused on marketing.

And what attracted me to Atlassian was this sort of sales hunger and me to figure out how to convert and close, right? Which I loved. And then the marketing orientation made it think about one-to-many, right?

A salesperson's orientation is one-to-one. Identify an opportunity, figure out how to close that one opportunity. Marketer's orientation is, how do I do one thing that sort of touches and influence and affects many people?

And the combination of those two things in me kind of led me to Atlassian, which is, like, there is a very atypical, not traditional sales model. We don't have a traditional sales organization. And marketing's job really is to think about one-to-many conversion, like both demand generation and conversion. And so, to again butcher another sports metaphor, it really felt like I could, and the organization could, run the ball all the way down the field. And part of the challenge with a human-oriented sales organization is there's

Fred: Interesting, and just to clarify that point, that's because there wasn't a big kind of human-heavy sales organization in place already. And so that felt like a bigger challenge for you to figure out, okay, how do we actually get the lead all the way through to closed without passing off to some human sales organization?

Jay: Yeah, totally. And it's funny, like the conceit when I first joined Atlassian, I thought, well, I'm really interested in understanding how to scale this model. It's intriguing to me to figure out how it works, how this sort of investment in automation and customer self-service manifests itself in not needing to generate a bunch of demand that you hand to a sales organization to convert.

And there's a lot of virtue in actually doing that. And there's a lot of successful companies that have been built with that model. But there's just so much opportunity for error with that kind of human relationship and human connection. There's also a lot of opportunity for it to be successful.

But I was intrigued by the way the model worked and figuring out how to scale, and the conceit, that when I joined, I thought, well, it's gonna have to change. I'll probably have to modulate it because it's what I knew. And the more I kind of dug into it and understood how, at least for us, how virtuous it is, the more it was a really good fit and sort of allowed me to use sort of both aspects of what I'd learned in selling and marketing.

And so to answer the original question you asked, the reason I joined originally was to scale kind of the model, and functionally I knew how to do that and I was deeply connected to it. And then I think also maybe the founders saw in me someone who could also be a significant leader in the company and help build and grow culture here, which I think was important to them.

The No-Sales Model

Fred: So Atlassian is famous for the no-sales model, right?

Jay: Yeah.

Fred: And sometimes people talk shit about it and say, oh, it's bullshit, they have salespeople. And some people or most people seem to believe that that is the case. And I guess something that is interesting to me is, have there been occasions where shit has hit the fan and you guys have started to think, well, maybe we should just build an enterprise sales team? 'Cause it feels like that's so tempting to regress back to just the standard way of doing things.

Have you had those situations? How have you guys been able to kind of not justify, but how have you concluded that the best idea is to stick with the way you guys are doing things today? 'Cause it's hard to go out on a limb, right?

It's hard when you don't have other companies to point to saying, well, look at this amazing software company that IPO'd. I mean, you guys are that, will be that for a lot of the developer tools companies that are being built in Heavybit and beyond. But you guys are the kind of trailblazers for that.

Jay: Yeah. So we've never hit a moment where there's been a "no shit" moment we thought, okay, this isn't working, we need to do something different. That hasn't happened, knock on wood. I never say never, but we're a 13-year-old business, and if you understand the nature of our model, it's it would be unusual for us to all of a sudden hit a wall and be like, oh shit, we gotta do something different. We've built kind of a long-term self-reinforcing company and model that, I think, there may be a slow degradation in growth, but it's never gonna be an "oh shit."

But the other thing that we've done along the way is, I think we're not dogmatic about it. We've evolved and improved the model, including, the one thing that's misunderstood about our model is we don't have a traditional sales organization, so we don't have sales reps that we assign a quota to, and we don't also give them a lot of the typical weapons that salespeople have, which is discounting and deal making and negotiation, and really great salespeople, if you give them those tools, they use them wisely. But one of the challenges with sales is there's a lot of not really great salespeople that abuse those tools. They abuse discounting and deal making and negotiation.

And this gets into kind of deeper to Jay philosophy. The other challenge with the sales organization is typically the sales organization is kind of individually compensated and thus individually motivated.

And so a salesperson kind of doesn't care what the company looks like five years from now. They sort of do. But they really care about what the company looks like in this quarter and they care about what they look like in this quarter.

And when you combine kind of that incentive with some of the tools that you give a typical salesperson, they can corrupt those two things in ways that I think aren't great for the company long term.

And so we actually do have a human group, we call them advocates, that aren't commissioned, aren't quoted, but do work in pursuit of servicing the customer, or the customer needs extra TLC.

We also have a channel, which we don't talk a lot about publicly, and probably is a little bit unfair to say we have no sales because we do. I mean, there's a relatively mature and well-developed over years external channel, where there's a deal that definitely needs a whole bunch of sales energy, demos and dog and pony shows and all that sort of stuff.

We haven't invested in apparatus to do that, well, directly, but we have indirectly. We've said, well, great, like in France, Air France needs to talk to somebody and we're competing against IBM and IBM's brought in the whole dog and pony show. We're gonna send in this partner that actually has done that long enough where they can do that. If that's a requirement to win the deal, we actually can check that box.

Selling Through the Channel

Fred: And how do you, I mean without giving away anything, how do you do that? Is it kind of people on, like, agencies on the ground who do this professionally?

Jay: They do.

Fred: And so you guys develop a relationship with them where they say, hey, we're selling a lot of Atlassian stuff.

Jay: They're a value-added reseller, yeah. And so what's in it for them is they're building a customer relationship. They typically have professional services and customer development. They get to work with the customer to kind of realize team potential by using our technology, and remember, the tool is one thing, but actually getting people to use it and adopt it and change what they do and how they work is a much bigger thing.

Right. And you can either rely on the customer to sort of figure that stuff out on their own, or customer can say, hey, you've seen 18 or 20 or 100 different companies do this and go through this process, help us shortcut it. And so we've got a lot of people that are out kind of in the market basically saying, I know how to do that kind of change on top of the Atlassian stack and I can help you with it.

Fred: Fascinating. And why do you decide to have that outside of the company, right? Because presumably one can get certified as an Atlassian Jira pro or something like that. And presumably those are the highly scalable ways to enable that kind of thing done by third parties. How do you guys think about that?

Jay: Well, I think it's more efficient. If you think about it, I don't even know how to quantify it, but it's thousands of people that are out in the market selling. They don't have Atlassian business cards, but they're definitely representing us and they're building, kind of in their own little territories, a franchise where they understand our technology.

And one of the reasons that that works so well for us is because we aren't competing with them. Right? Like if I had a direct salesperson that I had a quota in France, that salesperson, this is the problem with a lot of channel-driven models with a traditional sales organization.

There's conflict there where my direct salesperson is thinking, well, I don't know, work with the channel. I'm kind of competing with them, especially if they take away some margin. I'm giving them margin for things that I could do on my own. I'm just gonna do it on my own.

Right. And so I think part of the reason that it works so well for us is the period of having an online sales channel, which we have and we invested really heavily with, and the bulk of our business goes through that online sales channel, where our orientation is make the product simpler, reduce friction for the customer, get out of the customer's way and let most of the customers that sort of come through the store get to the promised land. And that's our focus, we're always trying to chip away at friction.

Where one of the friction points is, I actually need way more hand-holding. I need way more intimacy. I need way more selling. I need way more persuasion. I need all the other things that a salesperson would give.

I want account management and I want all that sort of stuff.

We've said, well, great, that friction can be reduced by this third-party channel. We don't need to develop and manage it ourselves, because if we were, potentially there's a little bit of conflict with our pure focus on the online store and removing friction for the customer.

Fred: Right. And so then presumably you have a more abstracted focus, which is helping, enabling those third-party people. How much time and effort do you invest in that?

Jay: Yeah, a fair amount. I mean, the channel basically contributes about a quarter of our business. And again, this is where you can think about sort of the natural kind of slot, supply-demand and kind of the friction in the middle.

The channel mostly serves foreign markets. Right? Because there's a bunch of friction that we're not removing on our own. Like, we only allow people to buy in US dollars.

Mostly we kind of market and reach out to markets in English. Most of the collateral or sort of product demos or whatever we're going to do to try to reach people en masse are going to be English-oriented.

So if I'm Air France, as an example, and I actually want to talk to somebody in French and I want to buy in euros and I want to be invoiced locally and I want to establish a relationship with somebody, they're not going to get that from us directly. And that would be really expensive for us to build.

If you think about again, the company basically has customers in, I lost count, 140 different countries. Right. Imagine, how would we have achieved that with a traditional model? It'd be incredibly expensive or incredibly inefficient. We'd have like one person that we'd plant inside of Europe and they'd be running all around Europe trying to do all the things that European customers would do.

And so the indirect model I think has allowed us to fulfill that need, satisfy what the customer wants, but still really focus on kind of what we think is a core part of our go-to-market model, which is the sort of online, frictionless, customer-oriented model.

Why Most Companies Don't

Fred: Yeah, but the thing is with all of this stuff, I'm like, yes, this is super logical and Jay clearly knows his shit and all of this makes sense. And it kind of sounds like the future, but why don't more people do this? We're talking about exactly what you said, well, you send someone to Europe and you'd have them all running around and then you build country offices, but that's what most companies do. That's basically what every company does.

And also going back to the sales thing, the whole notion of essentially that relatively self-centered role, because you're being compensated on a monthly or quarterly basis on your own kind of zero-sum terms, yeah, that does seem kind of weird when you explain it like that, but yet everyone does that.

So without getting too philosophical about this, or maybe getting philosophical about this, why do you think that is? Why do you think you guys have kind of, and I'm not asking you to be facetious here, but do you think you guys have kind of figured out the evolution of the software company model and it's just slowly being adopted? Or is there something particular about Atlassian or your product or your market that enables you to do this which prevents most people from doing it? I mean, what do you think that's about?

Jay: Let me unpack that.

Fred: That's a lot of questions.

Jay: Yeah. I mean, firstly I think there are some characteristics of our market and products and our origination that conditioned us for this better, right? So early on, we sold a relatively technical product to a technical buyer and a technical audience. We sold the developers, and so like developers, there's not a lot that you could complement what the product and the documentation and the experience is going to do. If I provide that to developer and they can't figure out, like, even a technical salesperson.

And the way we thought about it is if you need a technical salesperson, whatever they're layering on, figure out how to put that in the product and the documentation and the demos and the onboarding and whatever. Right, because, and this is where you go back to first principles.

I think a lot of companies, once you start supplementing what you haven't put in product for any audience, let alone, and I'll come back to where we started, let alone a technical audience, once you start supplementing that with people it becomes very difficult. Like you never really go back and fix those things.

In part because you have fixed it.

Fred: You've fixed it with human beings, in the least efficient way possible.

Jay: In the least efficient way possible. But you fixed it, right? And so then you focus on scaling, and instead of scaling the work about improving the product, improving the onboarding, improving kind of the growth and experimentation and data and measurement and analytics and all the things that you could really do, you're scaling now at sales organization to reach a broader market.

So, as I mentioned earlier, the origination kind of prevented us from thinking that way to begin with. And then our orientation and the ability to sort of, we had a buyer who I think was a little bit easier for us to sort of work with longer term. And so even though we weren't perfect, I think their threshold for pain and their tolerance for just busting through on their own was a lot higher than if we were selling to a line of business executive or something. So that was an advantage, right?

I often hear a criticism of Atlassian is, yeah, but works because they sell the technical people. That would not work for business buyers, which I think is patently untrue.

And I think there's a lot of companies that you could look at that, even if they've modulated differently, they sort of started selling to less technical audiences. Zendesk, I think, is a good one, where it started and it was a very deep self-oriented model, where you weren't just selling to a deeply technical developer or IT person, you were selling to somebody in line of business. Right. So that's one thing.

The reason why I think a lot of companies don't do it is in part because it is familiar, and it's sort of a model that a lot of people are familiar with and know how to replicate. And our model, you wouldn't know how to replicate, like not many people would, because they haven't done it before. And so, as I mentioned, even when I joined Atlassian, I thought, well, I know actually how to build out a sales organization and sort of scale that aspect of go-to-market and converting customers. This one I had to figure out and learn along the way. And so I think that introduces some risk.

I think that there's, the venture capital community also, there's an orientation in technology to grow as quickly as possible and as surefootedly as possible. And hiring a sales organization checks both of those boxes.

It's possible that early on Atlassian could have grown faster with a sales organization. I believe that longer term, we're gonna be able to grow faster continuously with our model than we would with a traditional sales model. I believe that. But it's possible that instead of growing at whatever, we grew 50% or 60% six years ago or seven years ago, we could have grown 100%, 120%, but we would have introduced a whole bunch of things that we're not dealing with now that I think are advantageous to kind of long-term growth.

And where you've got a small company with a bunch of venture capitalists, it's gonna sound like a negative screed against venture capital, but you got a bunch of venture capitalists that kind of don't care what you look like 10 years from now, they care what you look like one to three years from now. They're oriented around having you build the fastest and biggest business you possibly can as quickly as possible. Some of those influences are good. Some of those influences are bad.

Again, if you think back to where we were, we had two founders that owned ninety-five percent of the company.

And so the decisions that they were making were purely oriented around, what does this business look like 20 years from now?

And that's rare. Right. You don't get a lot of that.

Fred: Definitely.

Jay: And I think all of those are chemical ingredients that help kind of inform the model that we started with and how we've thought about scaling and improving it over time.

Bootstrapping and Discipline

Fred: And in general, what do you think about bootstrapping? Has Atlassian never taken outside capital outside of the IPO?

Jay: Only secondary. Yeah. So the IPO actually was the first time that the company raised institutional capital that actually went on its balance sheet.

So we did a secondary round in 2010 with Accel, and basically the founders split that. That was 60 million. They split. And then in, that was 2010, and two years ago, I think it was 2013, we did a secondary round with, or 2014, with T. Rowe Price.

And that went to employees, founders didn't participate. That was like 130 million. And so, yeah, all secondary.

And we've often described it, Atlassian's been run out of the cash register, which again, there's a kind of a deep financial discipline in the company around return on investment, where we thought, okay, this is money that we're gonna spend, what are we gonna get back from that? And I, it's if you're not thinking about that from the beginning, I think you can introduce some sloppiness and some inefficiency that I think is hard to correct the longer you operate with it.

Like when I talk to some companies that have a lot of money that they're spending, like when we think about, it doesn't matter if we're running an event, we're thinking, okay, let's really break down, what is this gonna cost per attendee? How are we gonna measure what we get back? Why is this good for us, and if we're gonna spend a million dollars here, two million dollars here, is that better than other places we could spend two million dollars? Really think about that and scrutinize it.

Fred: Wow.

Jay: And there's companies that, I was just talking to one that I won't name, where they're running an event and I was talking to the marketing person. It's just like, yeah, people keep on saying spend more, spend more, spend more. And there's no rigor around why.

And back to bootstrapping, I think kind of deep in our roots was, boy, think about the dollars that you're gonna spend.

Don't be cheap, but be really, really smart.

And I think that's kind of ingrained in our DNA in a way that's healthy.

Fred: And that must be an adjustment for people, right? Especially, there's people listening to this all over the world, but right now in San Francisco, we're in something of a gold rush around technology companies, and you can kind of see that being reflected in how people are behaving inside companies, like you said, that spend more tends to be the thing, right? Spend more and it'll turn out in the wash in more leads eventually.

How do you instill that from kind of day zero in people that join Atlassian? Is there, do you guys have like a specific culture document outlining these are the key things? Does someone say to you in the first brief that you get, okay, time to organize your first meetup. This is how we do things, we don't spend without having clear path to return on that investment. How does that actually come about?

Jay: I think a lot of it was organic and based on how the founders operate and how they think, from just really early on. How it gets instilled is, I just think it's fundamental to who we are. Like when you come to Atlassian, it doesn't matter what project you're working on, there is, and part of this is because we build products that help enable this, but you realize in the first day, okay, whatever I'm gonna do, I'm gonna have to think about it, build a plan, think about how I'm gonna measure the outcome, define the outcome, determine how I'm gonna measure the outcome.

And I bet some people probably are frustrated and exhausted by that, especially if you haven't faced it. If you were just in a place where it was like, don't think about it too much, just get it done. Yeah, and by the way, we debate this all the time. We debate, like, there's too much rigor and too much of that.

Fred: Right, because it feels like it's possible that you could stifle the longer-term, more blue-sky thinking.

Jay: Yeah. And so we do, we try to say, well, okay, there's certain things we just want to break down, have a team and just say, just run at this. But I think those tend to be more exceptions for the way we operate, and overall I think this is healthy for us.

It tends to be a culture that gets reinforced around, why are you doing, what is this for? What are you trying to accomplish? Where can I learn about it? Where have you actually written down and described what this is, why we're doing it, and what we expect to get out of it? And I think that's a really good discipline.

And people that join new, I think they get confronted with that because there's no other way. It's sort of the way we do things. And that started kind of really early on and we've been able to kind of scale it and grow.

And it's sort of one of those things that, as a young company, if you don't have that, eventually you might get carried away, and then you try to instill it. I think it's a lot harder where you basically say, okay, we've been doing things a certain way. Now we're gonna do things different.

If you're 200 to 300 to 500 people, that's really, really hard. We sort of are operating at 1600 people kind of in the way that we've operated when we're 60. And so because of that, I think we've sort of been able to scale it.

Ask Why

Fred: So this has been such an interesting discussion that I haven't wanted to ask any specific questions about the theoretical topic of the podcast. But getting onto that a little bit, we've talked kind of indirectly about a lot of that stuff. But is there anything that we haven't talked about that you think is really fundamental to your success personally or to Atlassian that, when people like me, three years ago or four years ago now, come to you and say, Jay, give me advice. I'm two people in a garage. How do I make it?

Are there any things like tactics, tools, thought processes that you use that you consider to be kind of fundamental to your success?

Jay: It's a great question. I mean, one is ask why a lot. I try to focus on just asking why, like not accepting. If somebody says, we're gonna do X, I just try to drill in why.

Like, why is X what we've defined we're going to do? Or why is sort of the approach the one that we've picked?

And why is a really powerful question. Because you can always ask it.

It can feel like sort of a circle thing. Maybe people that either work for me or work with me get tired of that question because it doesn't matter what the answer is, you could still ask why again, and I think it's really useful to sort of dig into the really heart of whatever the thing is. And just in terms of improving effectiveness, I think asking why is one of the most powerful tools in any situation.

And then the one thing that I've learned from Atlassian is, and maybe this relates to asking why, is always be experimenting, always be challenging whatever you're doing with, why couldn't it be different? And we've done this a lot. We spend a lot of time talking about the model, but we do a lot of experimentation with traditional sales.

Like what if we pick up the phone and call every single customer that tries? What's the outcome of that approach?

And what would we learn along the way? And is it better or worse? And if it's better, why is it better? And are there things that we could take out of what we've learned that we could apply to the atypical non-traditional approach that would make that better?

And that just takes a lot of time, but I think as a company and organization, we're pretty, again, it's like part of the DNA of always saying, whatever the thing is, could it be better with a different approach or a different way? And can we test those two things?

And even where we get an outcome, don't accept it, right? Like say, okay, that's an incremental improvement. How do we test it again? And it doesn't matter whether we're talking about product or go-to-market or support or customer service or HR, talent or culture, I think we really look at those things through that lens constantly.

And again, I think people have to have an orientation, they have to be excited about that, because it can be exhausting. People can get exhausted, but, like, ah, man, I just improved it. Why are you asking me to improve it again? Right. And I think we want to hire and look for people that are hungry to always figure out some incremental improvement and constantly be making it better and better and better and better.

And self-improvement is the same way. It's no surprise there's a big industry around making yourself better, but you're never done. I think companies are the same way. Improving your product is never done.

It's just a constant state of refinement and identifying what you could improve, and then once you've achieved that, starting all over again.

Seek to Understand

Fred: And so when you're asking why, how do you do that without pissing people off? I mean, is it just that people come to know that that's Jay's thing, he's gonna force you to justify yourself and you better be ready with some answers, or what is that conversation like?

Jay: Yeah, partly, and then I think it's more conversational.

Fred: It's not you sitting on the pedestal saying, justify yourself.

Jay: There's many different ways to ask the question why without using the word why. Right. And because I think if you were just to volley back a why, just the word why over and over and over again, you'd be a dick. And so, I don't know.

I think just conversationally, it's like trying to also, one of our kind of unwritten values, we have five corporate values that we started early on as a company, and they are, be the change you seek, don't fuck the customer, open company, no bullshit, build with heart and balance, and play as a team. Those are our five kind of values, and they've been with us for ten years. The one that is unwritten that I think we reference a lot, even though it's not an official value, is seek to understand, which is rooted in why.

Fred: And I think that really permeates the culture then.

Jay: Yeah.

Fred: In terms of internal discussion and how people communicate and how people learn to be a person at Atlassian.

Jay: Yes. And I think, and by the way, our founders are incredibly adept at this. I think really good at this.

People shouldn't be defensive. If you're trying to understand something, if somebody reacts negatively to that, that's always a red flag for me, because you should want to help me understand. You should want me to feel as connected to what you're doing as you are.

And I'm trying to get there. The reason I'm asking why, or I'm trying to dig in, is not to throw you off guard. It's to really internalize it deeply. And again, I'm also selective with it.

There's things that I don't need to spend as much time learning. But hopefully if I'm doing that to people that work with me or that I work around, they begin to do it. And that's, I think, a healthy level of scrutiny and understanding and connection that gets transferred across the business. But sort of the answer to the question, I think it's mostly framing it around seeking to understand.

Fred: Thanks for listening to Zero To Won. Find me on Twitter @fredsters_s. To learn more about Heavybit, visit heavybit.com, and while you're there, I would go into their library and check out some of the recordings of their speaker series program, where amazing founders get into real detail about how they went from zero to one.