Today's episode is with Jay Simons, who spent the last 12 years as the president of Atlassian, overseeing go-to-market strategy and big acquisitions as the company went from startup to IPO. He digs into their unconventional moves, such as using channel partners instead of a traditional sales team, and building a second product in their second year. From why HipChat lost to Slack, to their "land and expand" enterprise strategy, Jay has heaps of advice for startup leaders of every stripe.
Jay Simons: [00:00:00] We created our second product in our second year. And that's really unusual, right. Especially when you've got a breakout product like JIRA, that's growing really nicely, and there's a ton of things that you need to do to it, to fragment your focus a little bit, or split your focus on a second thing.
Conventional wisdom would say, don't do that. But I think the thing that we benefited from by doing that is we began to build this muscle around. How do you think about cross-merchandising cross-selling upselling? How do you think about. Pricing and all of a sudden you need to rationalize pricing and packaging across not just one thing, but multiple things.
How do you think about business model? How do you do product planning and prioritization and budgeting and staffing? If we're going to acquire a company that has a product that can only be sold by people because it wasn't built to be sold any other way. And that's actually going to be a challenge for us across, you know, the things that we may want to do.
It makes cross flow and cross sell in a system that we built harder to achieve. And so I think we just had a really early age begin to kind of wire our brain to think about all those things. Like all the things that companies need to do as they get bigger. We learned when we were a teenager or even younger,
Brett Berson: [00:01:20] welcome to in depth, a new show that surfaces tactical advice, bounders and startup leaders need to grow their teams, their companies, and themselves. I'm Brett Berson, a partner at first round. And we're a venture capital firm that helps startups, like notion, roadblocks, Uber, and square tackle company building firsts through over 400 interviews on the review.
We've shared standout company, building advice, the kind that comes from those willing to skip the talking points and go deeper into not just what to do, but how to do it with our new podcast. In-depth you can listen into these deeper conversations every single week. Learn more and subscribe email@example.com.
His episode of in-depth, I'm thrilled to be joined by Jay Simons. Jay is currently a partner at bond and serves on the boards of HubSpot and Zapier. But before that, he had a long run as the president of Atlassian, which developed software collaboration tools like JIRA, confluence, and Trello as Jay put it at, LaSeon covered a lot of distance.
In the 12 years, he was there growing from about 20 million in the ARR when he first joined in 2008 to around 2 billion today. So he was really excited to have Jay on, to dig into the lessons he learned from scaling this incredible business. What I found particularly interesting about our conversation is just how much of it lasts in story runs contrary to conventional startup wisdom, the company's success, and their ability to go back to first principles.
Doesn't get enough attention while young flashy startups grab headlines at last year and has been humming along for 18 years. They started not in Silicon Valley's center of gravity, but in Australia, they relied on product led growth before anyone coined the phrase with a focus on low pricing and a heavy use of channel partners instead of the traditional sales model.
They also had two people in the CEO role and launched a second product in their second year, sidestepping the common advice to centralize leadership and focus on a flagship product. In the early years in today's episode, Jay unpacks, each of these counterintuitive moves getting super tactical on how the Atlassian team made them all work.
He also digs into how they thought about the funnel as a product itself and talks about why they lean so heavily on channel partners. Instead of building their own traditional sales team. We also got pretty deep in the weeds on why HipChat lost a slack, how it Lassie and pulled off their land and expand to enterprise strategy and how they approach the build versus buy question throughout the company's life.
We close out on a discussion of how they built a culture around first principles thinking and the flywheels that fuel and reinforce Atlassian growth. There's tons of great advice in here for go to market and revenue leaders. But the lessons on product and culture, as well as the inside, look at how this massive company got built, make it a great listen for all kinds of startup leaders.
I really hope you enjoy this episode. And now Mike conversation with Jake, Jay, thanks so much
Jay Simons: [00:04:40] for joining us. Thanks for having on a Brett.
Brett Berson: [00:04:43] So I wanted to start by having you define the Atlassian playbook and how you think about the business model. I'm excited to get to dive in, in this area because one of my favorite topics is what are the sort of underexplored success stories in technology?
I actually think there's a lot of companies and a lot of things that actually get too much coverage. And I think outside of people saying, oh, it lasts Sheehan has this weird go to market with no salespeople. It's not a particularly well understood company. I think a lot of people don't understand that.
I think it went public for low billions in market cap, and now is about to cross 50 billion in market cap since its offering. And it's an extraordinary company. And so excited to sort of start by maybe having you define how you think about the Atlassian playbook
Jay Simons: [00:05:26] and business model. I'll try not to have this one answer, cover the entire podcast because there's lots of dig in here.
Naturally. I think you need to begin with what it last year did really well. Even before I got there, which was to build an incredible product and the company's mission, its earliest mission. It characterized is building remarkable products and they were really intentional with the word remarkable because they thought we want to build a product that compels people to remark about it, which is sort of the definition of word of mouth.
They wanted to build something that was just delightful, that people were surprised by that they love to use, which, you know, certainly a lot of founders and product teams aspire to create, but the companies before it focused on the value, or in addition to focusing on the value that it was providing customers that was really critical.
And what that allowed us to do was really build a different way to distribute that product and acquire customers. And so some listeners may know this, but you know, it lasting for a long time was characterized and still is by having a very different sales model, a very different customer acquisition model.
What's typical is, is when you've got a product that you've identified has value for customers. Use speaking to build a, you know, a team that can find those customers and help them understand what your product does and transact with them effectively sell the product or convince the customer to buy. And.
Last thing, approach it very differently. LaSeon believed that we'd built a product that was easy to use the people loved. And so that was sort of going to add to the megaphone kind of the marketing megaphone of getting the word out about who you were and what we did. And then we chose in the earliest years of the company to basically price the product very affordably.
And part of this was the condition of what the market looked like at the time, the market for JIRA lysines first product, it was characterized by products like IBM, rational or Microsoft. Now team foundation server used to be, you know, visual studio, but these products that were licensed at a thousand dollars per seat, per developer for a technical user.
And then on the other end of the spectrum, there was a lot of free and open source issue, trackers, bug Zilla, and mantis and track and things that actually, don't got a lot of airplay now in 2020, and the vast majority of the market was using opensource. And so when Alaskan thought about it's tan, it's accessible market, the first customers that it wanted to go after were customers that weren't paying any money for the thing that Atlassian wanted to convince them to replace.
And so we intentionally priced it effectively just above free. And that meant that we needed to find a way to distribute it to customers economically. And you know, at the time this is sort of in the early two thousands seems like really head-nodding now. But the internet was a way that you could basically technology was sort of really at the advent of cloud.
And, but even if you had, uh, an on-prem software, you could host it and let customers download it from the web and install it. It was the advent of AdWords. So we were a really early adopter of that channel to meet customers at the point where they were looking for something to solve a problem. And that wasn't something that IBM as a competitor or free and open source alternatives were really doing.
And so that gave us kind of a leg up. And we wanted to build a model where we just believed that for the most part, people really want to help themselves. They want to self-serve. And if you can eliminate the path all the way into the product and have the product kind of guide them through in the same way that maybe a human being would, if they're sitting right alongside them and you made it easy for them to buy the product, there's a way for them to transact online.
And the price point was something that didn't require a lot of explaining or a lot of convincing that all of those things would effectively lubricate this self-service flywheel. And that is what we created. And what we proved that we could scale to over a billion dollars. And, you know, the last thing we'll say, and then either I'm sure there's a lot you want to dig into, maybe the one misunderstood part of that is it LaSeon always had people that were involved in that self-service flywheel.
You know, we would say to every customer, let us know how we can help. We refer to this team as advocates. They were either product advocates or their customer advocates, and they were absolutely focused on the success of the customer and helping them. They just realize, or they knew that most of the model would support the customer's journey all the way through and what they were there for is to remove whatever hiccups or speed bumps or potholes the customer might step into.
And so they'd answer a question about a product capability or they'd answer a question about a competitive alternative, or they'd answer a question about pricing. But with a great answer, they would then send the customer back out into the self-service path. And the customer for the most part would go all the way through and by themselves.
And that's the part that we scaled. And it just meant that we had this sort of one to many commerce engine and an emphasis on self service that meant that our human capital, that support that was a lot more cost-effective for us was a lot more economical. And then we built basically a system that would help us acquire customers in the thousands and grow it.
Brett Berson: [00:10:44] about that is I think that when Silicon valley we often spend most of our time talking about product innovations. And I think what Atlassian did is, is sort of the magic of when you join a product innovation with a distribution innovation and a business model innovation, I think it's just such an elegant example of particularly now everybody's obsessed with bottoms up SAS.
But back then it was quite non-consensus and I'm sure a lot of people sort of looked at what you were doing as kind of something quite funny. Is there a way that you approached or executed this now consensus idea of bottoms up SAS that you actually think is unique relative today, or reasons why it worked or maybe go a few levels deeper on exactly.
Sort of outside of the philosophy of bottoms up SAS, getting people to take their credit cards out and then sort of upselling and cross-selling is sort of at penetrates a given organization, kind of some of the details of the way that you executed that you think sort of ended up working so well.
Jay Simons: [00:11:39] I think a lot of the characteristics are similar to maybe what you would see today in freemium or bottoms up SAS or some aspects of kind of a modern SAS company.
I think the thing that we really did well, you know, you mentioned this sort of emphasis kind of outside of product. I think product and the business model are really married together. And that's what we got. Right. You know, a lot of companies worry about how to sell a product really, before they do build a practice that can sell itself.
And so there is no way that they could, there's basically either too many wrinkles to iron out or too many potholes that the customer will step into and you compensate for those things, but with people, and once you go down that track, it's sort of very difficult to say, whoa, we could actually fix all these things in the product.
And then we either wouldn't need as many people or we could use those people differently. It's sort of, once your train is set in motion, It's difficult to jump to a different set of tracks. And so I think what we did that was very unconventional at the time was think about how could we build a self-service model and what are the core ingredients that would make that work?
Well, first you have to build a great product. You have to build a product that people can discover on their own can begin to use on their own, can be onboarded effectively on their own, or sort of guided kind of through the product with technology and automation. And that's sort of part one. If we can't do those things, it's not going to work.
We probably need a price point. That, as I mentioned earlier, doesn't need a lot of explaining we had at the time, if you look at how it lasts and priced, it was basically just one price per product. I mean, it was priced by user tiers, but we didn't have what's very common today. And actually what it lasting has today, the notion of kind of a free version and maybe a standard version and then a premium version and then an enterprise version or a premium plus version.
And the reason we didn't have that as at the time, we were so focused on reducing the cognitive load on the person that was coming to us, the customer, to understand what we did. And if you had four different versions at four different price points with different features across those price points, that would be very difficult to help the customer kind of Wade through that.
The first thing that they'd want to do is to shortcut it and say, I'm not going to spend all my time going through all this stuff to understand it, just get me somebody to explain it to me. And I think if that's what happens, our ethos at the time was well, let's fix that. Let's only have one single price point.
It'll make the flywheel move faster. It'll help our marketing teams explain to the evaluator what it is they're looking at in the choices that they're choosing from are simpler. So we always, you know, I mentioned this before. But, you know, we thought about the, the funnel really as a product in and of itself.
And we looked for opportunities to either fix bugs in the funnel, like defects or to add features, to achieve what we wanted, which was this high velocity, very low friction kind of automated self-service engine. And in the two thousands, you know, it was a very unusual well approach, but it just meant that we had to emphasize, we had to put a lot more energy into building a great product and then improving that over time.
That's what I don't see. Maybe a lot of companies do in part, because you may be impatient for growth. You want to move really quickly. And so you don't go all the way there. I forgot who said it, but the business model ends up becoming the business, right? It's as equally as important as the market you're going after and the product that you build.
And I guess the takeaway from the last year is we were really intentional and thoughtful about it and spend a bunch of time building towards it. And so
Brett Berson: [00:15:08] on that note is part of the way that you thought about it was basically this new customer journey from somebody hearing about it, to ultimately having it deployed at their company.
And you looked at that very, very closely, like a product manager might look at any part of their product. I guess I'm curious what that process looked like for optimizing that. And are there moments along the way, sort of the ahas or unlocks that actually led to a disproportionate amount of the improvement in that distribution mechanism?
Or was it chipping away at little percentage points over many, many years that ultimately led to success
Jay Simons: [00:15:44] on the whole it's more the latter than it is the former and the early days you get more of the inflection points. When you realize that there's just kind of big boulders that are in somebody's way that you can remove.
And remember a lot of this was for last year in any way was precess. It was really pre-cloud. And so cloud provides a whole bunch of additional benefits and advantages because you have a higher fidelity connection to the user in the product. You can make a bunch of changes in the product that you're hosting for them to either get kind of the influxion gains or the incremental percentage gains forward.
A tweak to onboarding, you know, way better fidelity around the data that people that do convert or the features that help people do convert. You understand what those are. And so you can sort of like steer people towards them. For us, we would do things like, you know, we just understand this kind of a very head naughty, but we would understand through either observation or through asking customers, or if somebody went through an evaluation of the product and then basically said, no, I'm not going to buy it.
We would spend a bunch of time understanding what were the headaches that you bumped into that convinced you to go somewhere else. And then we'd focus on fixing those in product, in the funnel. It was things like that team of advocates that were basically on the receiving end of customer questions. We would look for patterns.
It was like, Hey. Every day, customers are asking us a question about this product capability or, you know, in a no brainer would be here. If you don't put pricing in your website and everyday somebody is asking you, Hey, what does this product cost? There's one school of thought that says, wow, you've created a lead stream.
You've created a reason for people to identify themselves to you and ask a question for us. It was like, we actually don't want that as a lead stream. The customer, ideally, doesn't want to ask us that question. They just want to know the answer to it. And why not just give people the answer and then remove the need for them to kind of interact with us for something that is kind of a relatively simple thing that we can resolve.
And so those were the kinds of things that we begin to chip away, and it was all in pursuit of how can we help the customer go through this funnel faster and get to the other side? That's what it was a really about, but it was a combination of both kind of product and funnel optimization.
Brett Berson: [00:17:59] And so on the advocate or sort of your version, I guess, of pre-sales support or however you would define it, how did that role evolve over time?
And did it start with just, Hey, have any questions, email us, and these are the people that would respond or what sort of was that function in person and background that was kind of your flavor of maybe pre-sales or something like that. It
Jay Simons: [00:18:22] still exists today. And I think it's it most closely approximates, maybe customer success.
And so it is a very product oriented person. That's why we chose product advocate. You know, I'm representing this product to you. I'm not necessarily trying to sell it to you. Although everyone in the company should to some degree be a sales person should be selling. And so they definitely had an aspect.
I want, I want to convince you that this is a great product if you need convincing. But my job is, is not maybe the one differences I'm not paired to you as a lead or as an opportunity that I'm trying to close. I'm here to help because there's some friction points that are preventing you from moving forward.
And my job is to help remove them. And then trust that if you bump into other friction points, you're going to come back to me. If not, you're going to Atlassian has created a path for you to buy the product on your own. And the way that it's evolved is mostly in just the dimensionality. And as we become bigger, we began to recognize that there was an advocate role specifically around retention that would be dedicated to there'd be a retention advocate or a lo we call them a loyalty advocate.
There'd be an advocate role specifically around the customer for customer service or billing issues that are separate from product. And so post-sale, I don't have a technical break fix issue that I need somebody in support to help me with the billing contact at my company changed. And I can't figure out how to remove that person and put me on.
As we moved up into the enterprise more, and that this began to kind of evolve. We really became the closest thing to salespeople at other companies. We added an enterprise advocate role, the first enterprise advocate role. I think we added probably in about 2013 or 2014, but we had, you know, at last year had kind of deferred any real enterprise focused and we had lots of enterprise customers, but there were things that large enterprises were asking us to do.
And, you know, as we began to invest in them, we thought about there's a product offering here that really is for these big, big, existing customers of ours to upgrade to. And in some cases that upgrade could move them from spending hundreds of thousands of dollars a year with it last year to potentially millions of dollars of year to do it lasting.
And at that point, it really made sense, sense for us to be a bit more proactive with those larger customers that had. You know, material growth opportunities with a product that we could explain to them with more energy to accelerate that upgrade cycle from the numbers that I mentioned a hundred K to a million.
And so we created this enterprise advocate role that really paired with the largest existing accounts. Now, still today, most new customers that Alaska and acquires come through a funnel that is, you know, almost identical to the one that I've been describing. It's very easy to try the product that they're using to buy the product we sell team software.
And so even if you're a fortune 10 company, you might start with the last thing with a team of 10 or 20 or 50 or a hundred. And, you know, in that particular case, you could be spending less than a thousand bucks a month. But, you know, as you begin to grow and we've got the advantage of having, you know, natural network effects in our products built in because they're collaboration software.
And so one user can be, get another user. One team can be, get another team, but at some point you had the products expand to a point where it makes sense to talk to that customer about this sort of enterprise more premium upgrade opportunity. And that's where we've layered in more proactive sales energy in the form of enterprise advocates.
But if you look at it, LaSeon lasting has probably close to about 5,000 employees now and relative to most enterprise software companies of that size, it has a fraction of the number of quota carriers in part because the company benefits from. The flywheel that we've described as an acquisition engine, as creating kind of more and more existing customers for a sales team where the maturity of that customer and the opportunity and that customer is right more right for a sales team to engage by the way.
The other thing that's really important to mention, because it's a core part of last things business is when we were really young. Whenever there was really maybe a need a customer need or a market need for a sales person. And so maybe in the enterprise, they'd say, Hey, I'm comparing you to IBM, rational and IBM sending in, you know, a whole demo team and they're going to do a dog and pony show.
I want it last thing to do the same thing. We chose not to invest in that directly. And instead we thought that was a perfect opportunity to build. A channel or reseller channel and a partner ecosystem because those big companies are going to need some handholding. If they select us, there might be some services work around migration around configuration and set up.
There's some expertise that a third party could develop. Then that third party probably also we can help them develop the proactive sales energy that the customer is asking for. And then we won't need to do it. And so the channel, which accounts for about a third of it, last scenes revenue, the channel, we had a really symbiotic relationship with the channel because we weren't competing with them directly.
We didn't have our own sales team that was hunting for the best deals. Whenever there was a really big opportunity. We were motivated to introduce a channel partner of ours to basically handle the sales engagement. And that's the, I was characterized at last year's business model. There's a lot of ink spilled about maybe the aspects of it not having kind of a traditional sales organization.
It really is. This. Three legged stool of this high-velocity acquisition, self-service leg one, an indirect global network of partners that provide services, but also have their own salespeople who are out trying to like find opportunities and sell them and close them, them complimenting that self-service high-velocity flywheel.
And then like two, and then like three is our own very strategic sales, an organization that is taking existing large customers and helping them grow often in concert with the channel. And it takes a lot to make sure that those things harmonize. And I think, you know, if there's one thing that LaSeon worked really hard at is making sure that, that not to butcher the metaphor, but that harmony sounded good.
Cause it's easy to sort of cannibalize one dimension of that stool for another. I'm curious to
Brett Berson: [00:24:36] talk a little bit about that just before we move on in the different product advocacy roles, retention advocate, post-sales et cetera. Which one are those? Do you have a quota or do have some sort of incentive comp that you might think of?
That looks a little bit like sales versus isn't sort of comped oriented in that way.
Jay Simons: [00:24:54] Well, I would say the business model is going to involve. And so this is maybe subject to change in the time that I haven't been there, but on the whole it's really the enterprise advocate group that carries quota and focuses on that upsell and upgrade path for an existing customer from a meaningful collection and usage of our products.
But up to. And enterprise grade or premium version of the product and they carry quota. The product advocates largely are measured by volume of customers that they serve and the satisfaction of those customers that they touch in part, because the flywheel was basically built that high velocity firewall was built to let customers go all the way through.
And so if you intercept a customer that could self-serve and you say, well, I'm gonna attach myself to this customer. And then I'm actually going to close them when we've already proven that that's unnecessary with a bunch of testing over the years around what is the difference. If we throw a bunch of people and we really work at it, and in our particular case, I think because of the characteristics of the product and the investments that we've made in the product over time and the cost of the product and how affordable it was, there really wasn't negligible difference in trying to traditionally.
Go one-to-one with every single customer also recognize that that high velocity flywheel has customers in the thousands and thousands that kind of flow through it. And so it would require a lot of human resource, a huge teams to basically pair with all of them. So short answer, your question is really just enterprise advocates.
Brett Berson: [00:26:17] going back to the sort of stool metaphor, and you were talking about maybe one way to think about it is how do you create a stool that doesn't become very wobbly and fall over? And it just seems like this is very conceptually easy to understand the three legs of the stool, but I'm sure internally, and you sort of were mentioning this, keeping that balanced is very challenging and I can just see questioning well, what is the role of the channel?
And we'll why don't we take this and we could expand margin in this way or that way, or sort of what have you. So can you share a little bit more about, maybe share some stories or some instances of hard trade-offs or ultimately sort of, how do you keep that stool balanced.
Jay Simons: [00:26:57] One of the reasons it's hard is because it can always seem easier to do things directly and to manage your own organization, your own investment in capability.
And it's harder to trust some aspects of that to partners or to companies that are affiliated with you, but aren't, you. And there's always going to be trade-offs, but I think we were focused on where can we get leverage that improves our speed and velocity and just the efficiency of the business. And, you know, we paid really close attention to what are the differences here and what are the trade offs that we're making and where can we invest in?
And if there are differences that are pronounced, where can we invest in fixing them as an example? You know, if the retention rate for a customer that bought through a channel partner, which this isn't true necessarily, but if it were significantly lower, that becomes the focus here. It's like, how do we improve that?
Let's understand why and figure out the things that we could do to fix, you know, either in the business model or, you know, with training with the partner enablement, or maybe there's a different group inside of our company that needs to work as a quality assurance on top of the relay, you know, whatever the thing would be.
And I think it just, if it just, it comes back to where we were rooted. If you think about in building an international global business, you know, a lot of companies will say, well, God, I need my first boots on the ground in Europe. And it's not just to boots on the ground. Right? Like you have to think about all of a sudden, I don't just need a salesperson than I need to think about how is that person supported with marketing and eventually.
There's going to be tax implications for both paying their salaries and how they're transacting with customers locally. There'll be different finance considerations, or there's a whole bunch of other stuff that comes with kind of just planting a flag in a particular country. In our particular case, we got the leverage and advantage of saying well, there's customers in France that we could sell to that don't want to buy online from us.
They want to buy through. A local entity and rather than create our own local entity, we could actually sell through a reseller that is a local entity. They could actually, if the customer wants to buy in euros, sell in euros, they could invoice from a French address for tax reasons. We transact with them over the single currency that we transacted with for the bulk of the last things, life and us dollars in our business.
It's just a lot simpler to manage. And maybe the question you're asking is it's sometimes it's really hard to understand how material some of those trade offs are, but that's actually where the hard work comes in and try and understand that as best you can. What do we get for the choices that we're making and what do we lose and how does all of that square and the business that we're building, not just over the next four quarters or the next four years, but over the next 15 years over the next 20 years.
And that I think is, you know, LaSeon always thought very, very long-term about what we were building and how. So you
Brett Berson: [00:29:47] were mentioning one of the areas you look to sort of see if things were in harmony. One example would be depending on if the opportunity came through us versus through a channel partner, how that given company retained, are there other things you were looking for to make sure this decision of like what the channel or maybe some other, basically that the stool is kind of balanced or that this is all in harmony.
Jay Simons: [00:30:08] Yeah. I mean, you look at ASP for customer, you look at customer growth, kind of in the expansion rate and the retention rate. I mean, all of the properties of, if I take one customer that came through one channel and another customer came through another channel, you know, one direct one indirect, how do they compare?
And you try to make sure that the cohorts are similar. And so you'd take a fortune 2000 company and you'd look at it. And so we would do all of that just to understand where's the optimization opportunity for us. And in some cases, you know, the channel we'll do things a lot better than we could directly in part, because they're marrying the engagement that they have with the customer, with other things that they're selling that customer like consulting and services and sort of expertise and kind of tuning and configuring the product.
What's difficult for a lot of companies in building, you know, an indirect channel is in part just the thing that I mentioned that it's hard to trust. A third party outside of your company with kind of a core part of your business, you know, finding and selling and converting and making customers successful.
What happens a lot of times is even if you start there, the direct sales motion can begin to cannibalize the opportunity for the channel partner. And that's where you really need to think about the architecture of being symbiotic. And so it could be a lot of companies start out where it's like, Hey, it's great to have a company in Korea that represents us in resale.
But then when we get to a certain size, we're going to have our own people there. And then our own people are going to focus on the biggest opportunities for us. And the channel sort of gets pushed down the value stack, where they go from being able to sell and support the largest companies in the country.
And then they move down to the medium ones and then they moved down to the small ones. And then what that does, the effect that that has is the channel. If the channel has enough to kind of feed and grow their business with just you. That's all they need. That's all they'll do. But I think if they see that some of the value that they depended on or they relied on previously gets eroded because you're beginning to take all that on directly.
They'll probably diversify. They'll say, well, I actually need to find another product or another company to represent. And then their attention is fractured. And then the thing that the channel has given you is degraded. You could say, oh, but it's to our benefit because we'll do a better job with those big customers.
And then we'll be able to sell customers more directly than the indirect partner to some cases that may be true. I think in ours, we worked really hard on creating this opportunity for these third. And there's, you know, more than 400 of them around the world, but creating this opportunity where I hate the phrase, but, you know, everybody won.
Everybody went around the table customer one because they got somebody local that they could work with. We won because it was a way more efficient for the customers that needed the channel and not everyone does, but for the customers that did and wanted to work with somebody, we had a lot more efficiency benefit in our side because there were things that we didn't need to invest in and do, and we could make them successful and grow with them.
And then the partner naturally won because they're building a business and that's part of the whole economy around it. Last thing is, it's not just these 400 companies that employ thousands and thousands of people around what Alaskan is doing and creating. They're also kind of building extensions and products on top of it.
And they're also a really core part of our marketing flywheel. Like that word of mouth where people are out in market saying, yeah, this is the way to go. If it were just us, you know, in Germany with a team of whatever, 10 or 20 or a hundred people that approach I believe is dwarfed by the thousands of people in Germany that get up every day, not working for lasting with a business card, but working for it last year.
That's super interesting. Why do
Brett Berson: [00:33:37] you think more companies don't. Take this approach to the way that they think about scaling channels and they tend to do what you talk about, which is you get to a certain size and you start to chip away at the channel and sort of want to own a direct,
Jay Simons: [00:33:49] I think it's hard to do for the reasons that I've mentioned.
It's kind of easier to hire your own salespeople and you control them and train them. It's hard to. Be represented by a third party, a partner company, and the connection is a little bit lower fidelity. And so it requires you to do different things and kind of work in different ways. That's one, not every product and not every market I think is conducive to it.
One thing that made it work for us is I think there was enough learners are not just resellers, they're building consulting practices. They want to engage with a large French bank. And the thing that they're selling in addition to it lasting were low carry margin is they want to sell people that are going to go into this French bank and have a project to actually make it lasting, really make a difference for this company.
And that's kind of the joint opportunity is for both of those things. And that may, may not exist. You can think about slack, maybe like, you know, pick on them. Slack has a pretty easy product. I mean, there's sure there's lots of integrations that you could build and you could kind of change different workflows and kind of build something unique for a company.
But I think on the whole, most people are actually just going to use it as a communication platform. So potentially the opportunity to build up the kinds of partnerships that we have is less. And it would be for a product like a real-time messaging system than it would be for a product like JIRA.
Brett Berson: [00:35:07] I guess I'm curious on that point, anything you could share on sort of the, why slack ended up working in getting to scale and you all had a similar type of product and it seems like similar sort of early go to market motion.
You had a distribution advantage. Do you have any reflections or thoughts on the
Jay Simons: [00:35:23] dynamic there? Yeah, lots. I mean, slack did a great job of doing the thing that we talked about at the very top of the conversation. They built an incredible product that people loved and felt compelled to remark about and sort of that word of mouth drove, I think at the time at last and a product called hip chat.
And I think it lasting was sort of in front of kind of the market opening to what that technology could do, what HipChat or slack could do inside of businesses. And so HipChat was a great growing product and used by lots and lots of companies, but the market was still pretty nascent. And I think had the market opened a little bit earlier and maybe a different story, but I think slack had built a great product before the market really, really was ripening to what those technologies meant and could do, and then did everything right.
Could just continue to care about the customer. Make it do some of the things that we've talked about that last, he did make it easy for people to sort of get into the product without a lot of barriers to entry made kind of the pricing simple and easy to understand, certainly complimented that. I think similarly with sales teams that could expand the customer wall to wall, where there was that opportunity in the same way that I think it lasting took advantage of a really early amplification channel and acquisition channel in Google ad words, slack really did the same thing.
If you think about it with Twitter and social media, where you've got a product that has that remarkability to it, it married perfectly with kind of the advent and kind of explosion of networks that we're connected over social media platforms that made that signal even more potent made the word of mouth even stronger.
I think they really took advantage of Twitter and social media as an accelerant to word of mouth for them. But, you know, it's the basics. I think it gets back to, you'd start with something that people like to use and you continue to tell them that you're going to make it better. And actually you walk the walk, you make it better.
And they did that collecting
Brett Berson: [00:37:20] on that. You think the number one thing is it was just a better product aside from sort of a number of the other things that, that was the sort of main reason.
Jay Simons: [00:37:28] Well, I wouldn't say that because I, um, but last year had rebuilts HipChat into a product called stride and I think Slack's a great product.
I actually think, I think there's some bias here because I use stride for a couple of years, but I like strive better. I thought there were some things that we did that I'd love to see slack do as a slack user now. So I wouldn't go that far. I think it lasted and also had pretty diversified focus. And so there are lots of things that we were doing.
Slack was only doing that thing. And I think history is kind of painted with some examples where when you've got slack, just ruthlessly focused on one particular thing and moving forward and moving faster and innovating in the last year, trying to do kind of a number of things simultaneously. That's also a little bit harder.
And ultimately the choice that we made when we divested the product to slack is. There's an opportunity cost for the things that we also want to do for other products in the portfolio. And we're going to focus on that opportunity and we're going to focus on other things where we feel like we've got a better shot at kind of winning outright.
And by the way, that's hard for companies to do. I think it's hard for companies to, you know, admit that something's not going in the way that you want it to and have a really honest conversation with both the market and with its customers. It's easier for companies to kind of ignore it and say, ah, let's just, we'll continue to add a couple of features to it and sort of like, let it kind of chug along.
Cause it's going fine. One of our Alaskans values is don't fuck the customer. And we felt like not being really honest about our feeling that we can really win in this category of the long run and give it both our full attention and not take away attention from kind of other things is being dishonest with a customer and that, you know, the reason that was hard.
And I still think a lot about that because you know, there were lots of customers. I mean, we're talking thousands of customers that had chosen. HipChat and stride over slack for a reason they'd said, I've looked at both of these products and I'm going this way. And we had to go back to all those customers and say, we know that you made a choice here, and this doesn't feel good, but we're actually going to divest this products.
Slack's going to buy it. We're kind of out of this particular category. And we took all those conversations really seriously. I think in the long run again, customers appreciate that. They're like, oh great, thanks for telling me really what you're doing here. And again, kind of walking the walk and sort of respecting us as a customer.
We may not be happy with the choice, but we get it. And we appreciate the honesty. And I think that's been a hallmark of Alaskans characteristics, the company,
Brett Berson: [00:39:53] if you go back, do you think there's a different execution path or different strategy where you could have won? It could have worked, or it was given the nature of the market and products.
It was just destined to fail.
Jay Simons: [00:40:06] Oh, man. I don't know. Those hypotheticals are always, the review mirror is always 2020. And so you could say man, at this time, if we would just would have done this, you know, the reality is, is that HipChat was one of the fastest growing products, if not the fastest growing product, kind of inside the portfolio.
And they're naturally from a smaller base, but it was just exploding. And then slack became a product that was moving from behind HipChat at faster velocity. It's a tough hypothetical to say, what exactly could you have done to make a difference? But I think probably the things that we did in stride had we done earlier.
I don't know if that would have produced a different outcome as possible. There's lots of hypotheticals, but it's tough. You know, you're sort of in the reality and you see what you're doing and you're doing everything as hard as you possibly, we can, and we've won a lot of them and we haven't won all of them.
And that was when we didn't win. I still feel good about the outcome. I feel good about what we learned through that process. I feel good about how we exited that particular candidate and I'm a cheerleader for slack. And the thing that we probably could have done that would've changed history and AB is for whatever reason, I didn't use HipChat and had they used HipChat that would've changed the outcome probably.
And instead they built, uh, you know, their own little internal tool. And if you look back at history, it was like, they got the right, just the right number of influencers that were sort of connected to what the game was doing. That also didn't use HipChat or fickle enough where they can move from one to the other, even if the differences are on the margin.
I think it's a really hard thing to say like, oh, what happened? I mean, like, certainly there are things that if I could roll back the tape, I would do slightly differently or at different times. And maybe those would have changed the outcome. Maybe not. Maybe the stuff that I just mentioned was all of the right elixir ingredients.
You know, to make this little magic potion with the one thing that kind of matters most is you can't screw it up. Like you've got execute, which to Slack's credit. They did a great job. They just kept on doing the right thing. But the catalyst for all that I think is this chemistry of a bunch of stuff that is really hard to pull together.
Brett Berson: [00:42:18] of the things that you mentioned earlier, it would be great to talk about the land and expand strategy. I think we spent some time talking about the landing strategy and less time sort of talking about how you go from maybe a 50 or 70 K ACV deal. And then with your enterprise advocates, turn that into a big enterprise deal.
Curious, like what worked or what was the approach that ended up making that
Jay Simons: [00:42:44] successful? Well, the first version of this for us, I mean, there's always been expansion, just built into the natural virality of the network effects of the product. And so you may start with 10 users of JIRA in a team of a hundred or a team of 20, or as your team of 10 adds an 11th person or 12th person.
We naturally benefit from, from that expansion. And then we would focus on through marketing and in product nudges, highlighting the path for a customer to product B or product C or product D. And so you use confluence or you use JIRA. We want to point you at the other one and often that's just, Hey, try this nowadays.
We're a lot more sophisticated. You know, we can see if you've pasted a Google doc link into a JIRA project. There's a little pop-up or a little tip. That'll say it looks like you're connecting content to your JIRA project. Do you know, there's an easier way to do that. Click here. And we can actually sort of deep link an individual user kind of into confluence is sort of like a way to highlight the benefits of using those two things together.
So that's always happened the kind of bigger expansion opportunity we introduced. I mentioned some of the investments that we began to make and kind of 2012, 2013 around sort of enterprise scale. Enterprise sort of administration, a bunch of capabilities that our largest customers, when they had a thousand or 2000 or 3000, sometimes 10,000 people running on, you know, a version of JIRA, there was some things that they actually wanted that weren't in the product.
And when we added those things, I think what's sort of unique about our approach is first of all, we added them and do a, kind of a separate skew in a separate product that became, think of it as sort of the enterprise version of JIRA confluence. And we had a collection of thousands of customers already that needed it.
That wanted those things could still use the products fine without them, but we're really asking us for those things. And we'd sort of collected thousands of customers that were kind of ready for it. And we basically priced that enterprise version at a premium to the non enterprise version. And in some cases that premium was still cheaper than what most large companies would be accustomed to paying for software in their businesses that supported thousands of users.
And so even though. The relative price jumped for them, maybe five X or 10 X relative to other things that they're spending, it's still super affordable. And so we created this premium enterprise product line. And the thing that we did is we weren't quite sure whether or not we had product market fit there.
We weren't sure. Hey, listen, you know, these are things that customers really want. Are they willing to pay five X or 10 X depending on kind of their user tier, they're willing to pay a lot more for it. And to find that out, we had advocates protect those customers and begin to talk to them about what the capabilities were that they added and what the price points were and effectively do.
What is a traditional sales job? I want to explain, I want to offer you, I want to talk to you about the benefits of it. I want to make sure that you're comfortable paying significantly more than you. We are. And when we realized we did have protocols, if that actually customers were buying the products through this advocate channel, the thing that we did that again gives us leverage, as we said, great.
Wow. Figured out that actually we've got product market fit at a price point that people are going to pay. Let's put it on the web so people can buy it online if they want to. And then let's incorporate kind of automation, right? Work in the product to nudge an admin or nudge a primary sponsor of JIRA.
Towards this premium version that they could either add to their bill, or they could upgrade at an annual renewal cycle and do it on their own if they don't want to talk to anybody because there's going to be a huge cohort of customers, we'll just get more leverage. Let's make sure that all of the big enterprises that could upgrade to this, a lot of them actually either bought products through the channel or engage the channel to do services on them.
Let's make sure that channel is really ready to sell this thing. And so when you looked at it, we sort of started with maybe 10 enterprise advocates to kind of establish that product market fit and kind of get the first sort of flywheel around the enterprise motion. Turning that group really didn't expand.
It's not like we went oh, okay. Let's really get after it with a thousand customers by taking 10 advocates up to a hundred, we got leveraged because we made it ordered a bowl selves through the self-serve funnel. And we had this global channel of partners that we trained to basically really sell and represent this product.
And it's back to the three legged stool we could do all of those things, kind of working in concert and that kind of, that expansion motion was pretty meaningful for Atlassian, especially as kind of a later stage. If you think about the last year, that's kind of this company that I've used overuse the word, maybe flywheel, but it's got lots of different flywheels spinning at different times and different velocities.
And one that we began to spin kind of later in our growth cycle, was this really meaningful enterprise growth flywheel. And what that meant was like, if you look at how it lasts and sort of grown over the arc of time, it's sort of defied gravity for a long time and has, you know, grown north of 30% year over year in part, because it's always sort of adding different dimensionalities of growth to things that it's still working flywheels that, you know, began in its earliest years, that it's still working on accelerating.
Brett Berson: [00:47:54] There's so many indication that it made sense at this point in time to execute the type of enterprise strategy that you ended up executing. I'm sure every offsite for a long time, people were saying, Hey, we have. Coca-Cola that's using the product. Let's go figure out what they want and go do million dollar deals with them.
And so I assume that you kind of pushed it off and said, let's focus on the core and develop the core. And that eventually sort of it got to a certain point. Do you remember sort of how the decision was made that now was the time to figure out what that
Jay Simons: [00:48:25] opportunity to look like? I do. And it, it looked very similar to what you described.
I mean, there was a lot of thoughtful strategic direction because we were prioritizing more things around the same time. Like we were effectively rearchitecting our cloud and the cloud serves this massive spectrum of customers from teams of two up to teams of 10,000 or more. And we needed to really rebuild that for the next 10, 15, 20 years of what will be the predominant is the predominant platform for it.
LaSeon. And so when you think about kind of back to 2011, 2012, we could have said, well that's because you know, most of the customers in the enterprise segment at that time were using the on-prem products. So we could have said, man, let's go after this enterprise opportunity and defer cloud. I think that would have been the wrong choice, but you know, that's a very strategic choice.
It says, Hey, we're actually going to trade off. So maybe faster short-term growth and short-term opportunity for the longer term durability of the company, which is the trade that we would make every single day. But that's hard. You could stare kind of revenue that you know, is probably there in the face.
And you're saying actually like, you know, the thing is, is that revenue wasn't going to go away, could delay it. And we could say there's more important things for us to do from a product and an engineering and kind of a core perspective. The added benefit by the way of deferring is. It gave us the pool of customers that wanted it kept growing.
By the time we actually had that offering, selling to an existing customer is a lot easier than kind of winning a new customer. And so like, if you think about that kind of enterprise premium product that we finally built in the years that we deferred building it, the Tam kept growing. So we had even more of a captive market that we could sell into more of an opportunity to give our channel more of an opportunity to upgrade customers through self-serve it just became bigger and bigger.
And, you know, maybe, maybe to preempt a question you may ask, I think if we were debating, if there were a real meaningful, competitive alternative, like if we were talking about something that a competitor offered that we didn't offer, the calculus might be different, right? Because then that Tam shrinks or then the future opportunity that you're trying doesn't accrue in the same way that it did for us.
But in our particular case, it was about deferring more short-term opportunity for more durable long-term opportunity. How does,
Brett Berson: [00:50:40] uh, multiproduct fit into the sort of flywheel of the business and maybe the concept of we're going to build a new product versus acquire a product. How does sort of all that fit together in your
Jay Simons: [00:50:53] framework?
Well, one aspect of it is if you think back to land and expand, I mean, every product portfolio is effectively a product that a customer could begin with or a product that they could expand to. So I can start with JIRA. I can expand a confluence. I can start with confluence. I can expand a bit bucket. I can start with Bitbucket.
I can expand a Trello. There's lots of different permutations of the wiring. And so that's certainly one dimension. If you look at what we do, none, I mean it last year has sort of been, uh, it has been a mix of, of organic product development and products brought in through acquisition. And it really depends on kind of the fit, you know, what you're going after, what the adjacency is.
If it isn't adjacency, some things that we've acquired had already a deep established integrations to JIRA, and it was really kind of a hub with a spoke out. Even if you could start with that spoke kind of the main hub might be something like JIRA in some cases, We would maybe acquire pieces of technology, but build kind of the core like we did with JIRA service desk, which was a really big kind of adjacent opportunity for where JIRA was.
The original Jew was really focused as an issue tracker and project tracking system for software development teams, but began to be used by it as a help desk, both external for its customers and internal for it to support kind of the rest of the business as an example. And so that's an opportunity where it's a really big market and kind of the core we could sort of take from our organic development, but we could acquire a pieces of technology to round out what we didn't have.
There's a lot more going on. And I think one of the advantages that Atlassian kind of earned early on, and again, as a very unconventional thing about it is we created our second product in our second year. And that's really unusual, right. Especially when you've got a breakout product like JIRA, that's growing really nicely, and there's a ton of things that you need to do to it, to fragment your focus a little bit, or split your focus on a second thing.
Conventional wisdom would say, don't do that. But I think the thing that we benefited from by doing that is we began to build this muscle around. How do you think about cross-merchandising cross-selling upselling? How do you think about. Pricing and all of a sudden you need to rationalize pricing and packaging across not just one thing, but multiple things.
How do you think about business model? How do you do product planning and prioritization and budgeting and staffing? If we're going to acquire a company that has a product that can only be sold by people because it wasn't built to be sold any other way. And that's actually going to be a challenge for us across, you know, the things that we may want to do.
It makes cross flow and cross sell in a system that we built harder to achieve. And so I think we just had a really early age begin to kind of wire our brain to think about all those things. Like all the things that companies need to do as they get bigger. We learned when we were a teenager or even younger, it just means that some of the complexities that inevitably as companies get bigger and they have more products that you face.
Um, I think we're able to navigate more easily.
Brett Berson: [00:53:51] Maybe I can talk a little bit more detail in terms of that question of. Launching additional products and maybe how that shows up at planning off-sites or sort of other times throughout the year where you sit down and say, now it does make sense to go launch another product, because I'm assuming, given where you said you have dozens of products, standalone products, adjacencies that are constantly getting discussed, and you have some framework to decide whether you're going to pursue it or not.
At some point in time.
Jay Simons: [00:54:24] Yeah, it's a really hard question because there is no simple formula for it. And the answer I would give you is there's lots of debate in kind of planning and thinking that goes on around what are the trade offs that we're making here back to the thing that I said earlier, this will sound like I'm contradicting myself, but you know, when you've got a business that you're running and there's lots of things you need to do for existing customers or for new customers that you're trying to win with that particular product, starting something new does draw away from that.
It's got a zero sum. And I think there's sort of like in moments of time, whenever we thought about boy, this is really we've, you know, it all begins with listening to the market and listening to the customer and kind of paying attention to what's happening and looking also internally at the itches that we've had to scratch for ourselves and whether or not we think those are transferrable to hundreds or thousands or tens of thousands of customers kind of like out in the universe, after you go through all of that listening, it really comes down to the mechanic of like, okay, what are the things that we need to do?
And. You know, if we're going to create something new, it's going to take away from something that is already here that also needs more coal in the furnace. And I think that we've done that really well over the years, but it's not easy. I'm sure there's going to be lots of spreadsheeting, but it's not just the spreadsheet that says just sort of like input a bunch of things into cells and you'll get out of a yes or no.
A lot of hand-wringing around the trade-offs in my head, I'm stirring the cauldron of all the acquisitions that we've done, or the new products that we've introduced or the kind of the market adjacencies that we've gone after. And I remember each one of them involves kind of a different set of, of debating and kind of thinking and prioritizing and agreeing to disagree or disagreeing and committing.
There's sort of a lot of that, that kind of goes into, okay, we're going to do this because when you add something new, it's a big deal. I think what's harder that when you get bigger too, is the thing that you add actually needs to be bigger. It's kind of easy to sort of add the thing because compared to the thing you're already building, it might be small and it's, you've got another small thing you're going to grow when you're.
And a company like it. And that has individual products that are hundreds of millions of ARR, a new thing that you add. It's got to grow pretty quickly and it's got to have a big market that it can grow into. There's not a lot of products inside of Microsoft that are $50 million ARR products for a reason.
How does sort of
Brett Berson: [00:56:35] that fit its way into the discussion or debate that you have as a leadership team? It's a fascinating topic. Like why do large companies often so poor at launching even adjacencies? And I think some of it is related to what you're talking about, which is when you're doing billions and ARR, you need something to be very large for it to move the needle and matter.
And yet at the same time, we all know that. Great, great, incredible things. Often start as a little Ember. And so does that just organically get discussed or. You obviously have done something very special in it. LaSeon is there anything more than really what I'm hearing you say, which is like judgment intuition, discussion debate, and I'm sure with some analytical rigor on the backend, but is there anything else that if you look back and ask yourself why you were so successful, maybe outside of the original thing, which is you did it early.
And so it was codified in the culture and maybe it's kind of as simple and as
Jay Simons: [00:57:30] hard as that. No, I think it's all the things that I mentioned in the last, since two founders and co CEOs, I think both have just really great instinct. So that's sort of the part that may be the hardest to acquire. They've been really thoughtful about the market.
And a lot of it is you're making bats. You're saying like this is a big market. There's only so much I can study it to understand it, but there's a bet that I'm going to make. And there's a lot of execution to kind of fulfill the opportunity that I see. That's hard on its own, but the other hard part is it, isn't just the fact that, Hey, I've already got a big business.
And so I need this thing to be equally big, faster than it would be on its own. It's that, that big business also takes a lot. So it's back to, it's got to come from somewhere in our particular case. What makes it challenging is even our biggest products are growing. Great. And so then it's like, well, that thing is still like JIRA is still growing like crazy.
And even though it's a product has been around for a while, do I take things away from it to put into something smaller? And in some case. This'll be kind of a crappy example, but maybe one engineer that I put on, on JIRA, the features that they add, because JIRA has got tens of thousands, hundreds of thousands of customers, right?
That one feature, if it's added to sort of premium version that on the dollar return for that one engineer would be greater than if I put them on an emperor
Brett Berson: [00:58:47] as conversation. One of the things that's been clear is that it LaSeon chose to do a lot of things very differently than they were traditionally done.
So just a few things that we talked about, the way that you've engaged the channel, the fact that you have co-CEOs, which is something that everybody says is a complete disaster. The fact that you were a multi-product company early on, everyone says your first product should last you for years before you launch a second product, the fact that you were one of the first companies that had the insight around bottoms up versus traditional sort of selling, and it makes me wonder, how do you think about the question of when to do something the way it's been done before versus go back to first principles or kind of do the opposite.
And was there anything about your Alaskan experience that kind of gave you a way to think about that question?
Jay Simons: [00:59:40] I think it lasts in is very grounded in first principles thinking. And again, huge credit to Mike and Scott, the two Atlassian founders and CEOs. I just think they're wired to think that way. So all the things you mentioned, business model pricing, expanding the portfolio early, even down to hiring and cultural practices, how we operate, I think.
It was really rare for us to just do something that works somewhere else, just because it worked now, there's going to be natural places that you sort of do that. But I think we always began culturally with just a why question around, why is it done that way? I kind of want to understand it first and maybe there's room for not just incremental innovation here, but really invention and that invention can make a big difference for us.
And that's what I learned really early there and became a very energetic participant in because I did see sort of the substantial differences it made in the business that we were able to build over a long period of time. But I think it's hard because of the constant willingness to reinvent the wheel.
It just takes a shit ton of courage and energy. It's way easier just to rip the page out of the playbook and just follow the script. But I think real breakthrough businesses and the last thing is real incredible breakthrough business. It is a breakthrough business because it's a difference, you know, like we put one of the cover photo on our , our IPO filing document just had a picture of, one of the Dr.
Seuss characters with a quote from him that said, you've got to be odd to be number one. The reason we put it in there is we wanted to signify that we are different and unique and unconventional, but those things are virtuous for us and kind of our position and what we're trying to accomplish. So when you think
Brett Berson: [01:01:19] about the way that you sort of ended up operating, do you think it's, you know, you asked why an 80% of the time you ended up with a very different way of doing something or was it a coin flip or was it sort of in the other direction and you ended up being very.
Particular about what you wanted to ultimately innovate on. I mean, you, in the case, in the role of president, I mean, there's a zillion things, compensation, philosophy, performance reviews, there's literally hundreds and hundreds of things that you could go back to first principles, completely rethink from the ground up.
And so I'm curious what percentage of the time you ended up actually doing that, or maybe a little bit more detail on what that ultimately looks like, right. If I'm on your team and you're pushing the idea of constantly going back to first principles, what that might look like.
Jay Simons: [01:02:08] I would answer by talking about kind of the main buckets that I think we really focused on where we feel we get the biggest benefit and the most leverage.
And it was really around business product and then culture. And especially at a really early age, I think those were the three biggest places where we invested in first principle thinking and saying, well, man, these things are going to be core. These things are the most important foundational elements of business that we're all building to outlast us.
And so it really matters that we take our time to think about them. And we basically just don't rip a page out of the playbook and follow script, pick culture. As an example, we did really unconventional things around performance reviews, and we did unconventional things around. Even things as simple as like the dreaded quarterly employee survey and by the way, not all of them work too, but I think what's important is we tried, in some cases we tried to do things differently and you know, what we found is usually when they did work, those differences matter a lot when they didn't work.
Like you can always, in some cases, just go back to the way that 90% of companies do performance reviews. If you want to do it really differently, you're like, ah, we'll try. It might be hard. There may be a reason that 90% of companies just do that either. It's because it's easier because all the times that people have tried to sort of break through that problem with something innovative or interesting, they failed, we could be the one that does it.
Brett Berson: [01:03:31] When you look back at your decade plus experience, is there a singular thing that you went back to first principles or reinvented that you sort of most admire or most proud of?
Jay Simons: [01:03:43] We've spent a bunch of time talking about it. I'm most proud of the business model and it wasn't without not just a lot of hard work, but you know, second guessing and questioning and testing and debates and fist pounding when there's lots of that over the years, and a willingness to not be dogmatic about anything, to know that our business model has evolved and changed and really, really thoughtful ways.
But I'm, I've said this before, too, but you know, when we were 20 million ARR people would look at us and say, yeah, it's cute that you guys kind of do it that way, but there's no way that you get to 50 million without doing the thing that every company has done before you. And then that number became a hundred million and then it became 500 million and they became billion.
And we've always just sort of, you always heard this just cause you know, people wanted to say eventually you're going to be wrong. And I'm proud that, and again, we weren't dogmatic about it. We were just super curious and thoughtful about how can we make these things work. And it requires anything requires investment.
Like if I go, if I build a big sales organization, that's a lot of investment, a lot of work too. It's just different. And we chose really early on to kind of invest in the possibility that self-service and this high velocity acquisition engine could be a really important foundational building block for how the whole model works and that different aspects of the model from the channel to kind of direct selling and strategic selling, you know, would evolve together around it.
And that's what I'm most proud of because I think that is, like I mentioned earlier, it's not just that it lasts in didn't have any traditional salespeople for a long part of its history. It's that each of those things are different parts of Vultron and they kind of all come together and I think a really powerful way for the company.
Brett Berson: [01:05:19] The last two things. I just wanted to spend a couple of minutes talking on you hinted at this in a bunch of the different parts of the business that you described, sort of this core idea of flywheels. And it's something I'm always fascinated with. I think a lot of people have written about flywheels, but I was interested if you could talk a little bit about the core concept of flywheels and maybe how you thought about them, maybe on the most macro sense.
And it sounds like there's kind of a, you have this idea of a core flywheel at like the highest level and then a series of all of these flywheels kind of working up and down the company.
Jay Simons: [01:05:52] There's probably an image somewhere floating around. I think we put it in our perspective, but it's probably on the internet if you search for it last year in flywheel.
But we talked about how the flywheel for us really began with this notion of remarkable product, a great product. And in our flywheel is this high-velocity self-service. Funnel where the customer could discover us, try us and bias and kind of go all the way through. And then once we landed them as a customer effectively, they're feeding the flywheel because it begins with remarkable product.
And so if a remarkable product attracts a customer. And converts the customer and wins the customer. Then they're helping to spin the flywheel faster for the next one. And the next one, and the image that I'm describing, it talks about remarkable product. And then you think about, well, you want to reach tens of thousands of customers.
And so how would you do that? Well, you would probably price it affordably and price it low. And you would make pricing transparent because if you do have the opportunity to win 10,000 customers, but pricing, isn't exposed to them, you're going to slow down the flywheel by not telling them how much it costs, because you're going to force them to ask you.
And so you tell them how much it costs. Like everything is transparent, the product and so great product, huge market, transparent information around pricing and access to the product and product information. And then that great product trial experience like free to try. Like just come in here, get into the product that free trial experience brings you all the way back to the very top of the flywheel diagram, which is build a great product.
It's kind of full circle. If you think about the things that can make the flywheel move faster. One is the one that I mentioned, which is the accumulation of more and more and more customers, especially where word of mouth exists. And you've got, you know, recommenders and you've got promoters, not detractors.
You've got good MPS. All of those folks, the more that you add to them, the greater energy goes towards continuing to spend the flywheel. You know, we also found pricing is another one. Whenever we. We had a couple of moments where we lowered the price kind of at the bottom. And the first one was in 2009 for the on-prem products.
We created a starter license, which is effectively free, but we charged $10 nominally for it, $10 a year for 10 users. And then we donated the 10 bucks to charity. That was one of the first times that there was just a significant inflection in the number of people that kind of came into the door. And by the way it last thing was already cheap.
I mean, this is another thing that I sort of learned in my time there at LaSeon for 10 users was at the time maybe 800 bucks. And so for a piece of business software, it wasn't outrageous. It was like still pretty cheap. But when we took that entry-level 10 user tier and we made it virtually free. It just widen the aperture and market and.
Tens of thousands of more people kind of came in and again, the flywheel caught them, not all of them, but it began to catch more of them and it fed them into the system that I mentioned earlier. So there's lots of different types of flywheels. You know, we liked kind of gravitated to the metaphor early on because flywheels is really big, heavy device that takes a lot of energy to spin.
And so you can't actually get it to accelerate really fast typically because it takes so much to push it. And so once you get it going, it's sort of going to kind of move at pace. And then there's small things that you add to it to keep it moving or to move it a little faster. Conversely, what we liked about it as a metaphor is it's not going to stop suddenly.
It's really hard to stop a flywheel. You can't just grab onto it. That feeds into what we really have always tried to architect for, which is the durability of the business as a whole and the business model. The last
Brett Berson: [01:09:24] thing I want to talk about, you actually just talked about, which is pricing. And so I am curious if you have sort of pricing principles or things that were big unlocks, you shared sort of one interesting story about how you thought about pricing.
The on-prem sort of entry tier, which is super interesting, but I'm curious either reflections on pricing or I'm sure you have lots of founders who are grown in a million in ARR, and hadn't really thought about pricing and now we're saying, okay, we're starting to get going. And we should actually spend time thinking about pricing and some of the sort of things you would encourage them to focus on in that
Jay Simons: [01:09:58] topic.
Well, a couple of things and yeah, we could spend a whole hour talking about pricing, but I'll try to summarize some cogent thoughts. One is that because it was just such a large market that we believe pricing was kind of a way to lower the barrier to entry for us and allow us to acquire customers at higher velocity in give us importantly, future opportunities to grow with us customers over the long run.
And I think the corollary to that is I want to maximize the value you exchange with customers upfront. I want to get every possible dollar I can at them at kind of the initial point of acquisition or sale. That's the alternative approach we didn't do that. We left probably a lot of money on the table in the early days, but it gave us.
Just this fertile kind of expansion and growth opportunity within an existing customer base where we can capture that value later. And that I think is added to the durability of the last thing. That's sort of 0.1 0.2 is we also always wanted price to be a competitive advantage. If the last thing we're the highest price product, or even close to the highest price product, or maybe not even the lowest price product, I think it would have made.
Our business model, more difficult people would have said, why are you so too expensive? Or why are you more than X or Mario? That would have been the question we got every single time. Why are you so much more expensive than Y and again, it's always hard to sort of replay the tape and say, well, what would have last seen had been like if it had been that I think it wouldn't be the company.
You bet it is. I think pricing fed into our business model and our business strategy. And, you know, it was one ingredient that made it all work together. The other thing that we did that was unconventional that again is kind of weird debate is the thing I mentioned around. We didn't, we didn't really have a lot of complexity in the pricing structure.
Now, if you look at it, I think today it's got more complexity, right? If you look at kind of the cloud products it's got, what is a pretty common kind of menu of free and slightly above free in standard and then premium and enterprise it's sort of has kind of tiering. And one of the reasons that I think that's okay now is because does that tiering, it's got hundreds of thousands of customers that it can expand through that tiering.
And it's a little bit more established kind of in its market with its product brand. And so the additional cognitive overload for new customers is offset by it's positioned in the market and its brand, and customers are probably willing to spend a little bit of time learning about the Atlassian choices because they know who it last seen is than if it were just a company they'd never heard of before.
And I think that the architecture of those options creates some opportunity for expansion and growth within the existing customer base of which there's a big one. But when I think about it, I think the thing that it, it helped us when we were unknown and when we were young and small, because it was just so simple, like the kiss principle actually worked in our favor, we just came to the web and it was like, oh, JIRA one price.
I just need to think about the number of users I don't need to think about. Does it include this? Does it get the single sign on them, the SSO and the security stuff or no, that's in the enterprise package. Is that worth it to me? Is it worth twice as much for that stuff? You know, there's all these questions that then the customer gets bogged down into thinking and that's friction.
Now it could be friction that kind of in the right context and the right approach you can capitalize on as a company. But in our particular case, we chose not to. We were like, we're just going to make it simple. We're going to go for high velocity volume customer acquisition, and we're going to reserve.
Future opportunity to have those conversations with those customers. And we think that's going to be easier for us because guess what, they're already hooked. They're already deeply committed. They love the product it's used by thousands of users. Now, if they want extra security features and we want to charge them for them, it's probably easier.
And I'm not recommending by the way that every company follow that kind of play. But it's back to, it's just a very different approach where I do think the, keep it simple strategy for us benefited a lot of the other things that we were investing around, the kind of the business model and our approach that overuse the word durability, but sort of like helped really establish the system that we were able to build and improve over time.
Brett Berson: [01:14:03] What's I think useful about what you're saying goes back to deeply yeah. Understanding what you're doing and why you're doing it. And so the fact that you have a unique go to market that's bottoms up versus top down, allows you to then rethink the pricing that goes along with that. Cause it's interesting.
Cause the number one thing I think you find with more experienced CEO and VCs is the number one piece of advice is, Hey, you should be charging more for your product and then they go do it and actually works. And my sense is that the fact that you had a very different go to market, it allowed you to then rethink all of these different pieces of the business, which is kind
Jay Simons: [01:14:39] of amazing.
The other thing we didn't mention, but it kind of relates is, you know, we also chose early on not to negotiate pricing or discount and not to negotiate terms and conditions. And so we, if they were a customer that said, Hey, listen, I need to negotiate my warranty or my indemnity clause or my payment terms.
By the way it's hard. It's hard when you don't have any customers trying to win them. But we basically just said no. And partially like the answer was a little bit more sophisticated because we would say we don't do that. And we don't do that because we're not paying for people to do that with you. And the reason we're not paying for people to do that with you is because we're charging you so little for the product.
We basically took the savings of the human capital expense to have either lawyers or salespeople negotiate your discount. We took that and we just pass it on to you in the form of cheaper software than you would buy. And if it's really important for you to negotiate your indemnity clause, probably one of our competitors will do that, but they're going to charge you 10 times as much.
And we found really customer-friendly and artful ways to say that. But usually, you know, what happened was customers would be like, Okay, I get it. And actually I'm okay. I'm okay. Paying less, even though you're going to be the only vendor that I twisted knots on indemnity, or sort of like, you know, whatever negotiated, I'll take a lower price.
And that's just, again, another unconventional thing. And the other thing that I always kind of remind people of is like, there's no business where you get a hundred percent of the customers. You're going to lose some for various reasons. And we were comfortable early on and losing ones that wanted different things than we were going to offer.
And that was actually okay because it meant that we had 50,000 customers and not a single modified ULA. And we were a eight year old business before we hired our first lawyer with 50,000 customers. When you think about the efficiency and the velocity of how the business operates now, there's a kind of argument that says, yeah.
But think about how the money that you left on the table, like those customers that walked away and probably they're the big ones. I think in the long run actually at LaSeon it's particular case was better for it. Well, that's a great place to end.
Brett Berson: [01:16:38] Thanks so much for spending the time with us, Jay. This was
Jay Simons: [01:16:40] awesome.
You bet, Brett. Thanks man.