<story><title>Atlassian is 20 years old and unprofitable</title><url>https://www.smartcompany.com.au/startupsmart/analysis/atlassian-unprofitable-valuation-adam-schwab/</url></story><parent_chain><item><author>ASalazarMX</author><text>What&amp;#x27;s wrong with having a small or medium company? Why must a company sell its soul for the chance of becoming a money-printing behemoth in the future?&lt;p&gt;I understand that being small leaves you vulnerable to the predatory tactics of big players, but I see that as a consequence of lax regulation. There are too many mono&amp;#x2F;duopolies already, and the bigger they get, the harder it will be to split them apart.</text></item><item><author>dalbasal</author><text>The idea that growth is better than profits was in-built into Atlassian&amp;#x27;s proposition to shareholders, ultimately.&lt;p&gt;The slow and steady mentality is fine, but we see over and over that it isn&amp;#x27;t what the market wants. A private company or a high risk growth company, those are the two options for a software company.&lt;p&gt;Either that or they&amp;#x27;ll be taken over. They&amp;#x27;re revenue &lt;i&gt;now&lt;/i&gt; is just a $2bn, so that &amp;quot;grow grow&amp;quot; mindset from 10 years ago did not work out. In theory, a steady CEO could try to steady at that size with a nice margin. But, actually declaring and pursuing that would mean halving the companies market cap to a &amp;quot;normal&amp;quot; P&amp;#x2F;E of 20-30X.&lt;p&gt;At that price (say $20bn) one of the big software companies would just buy them... for their own growth targets.&lt;p&gt;Moderation has no place in the public markets as a software company. It&amp;#x27;s remarkable how unstable a stable condition is.</text></item><item><author>ryanackley</author><text>Worked there from 2008-2013. So early-ish employee here. I still have a chunk of shares from the original ESOP program. Saying that for full disclosure because I&amp;#x27;m biased and this feels like a hit piece to me.&lt;p&gt;When I worked there, they disclosed all financials in our internal Confluence site. There was a policy of full transparency with the employees. The owners (Mike and Scott) had impressive business discipline. They were profitable every quarter. They had many many opportunities to get vc money and go wild. When they finally took VC money, It was a modest amount ($60M I think) and the purpose was explained to us as setting up an ESOP program and putting Atlassian on the path to go public.&lt;p&gt;A year or two later, Doug Berman, the founder of Great Plains software became chairman of the Atlassian board. He gave a presentation to all of the employees at the Sydney office. One thing that stood out was that he said, it&amp;#x27;s actually bad to be profitable when you&amp;#x27;re growing. I&amp;#x27;m paraphrasing here but he essentially said, you&amp;#x27;re leaving growth on the table. His thesis was growth is more important than profits.&lt;p&gt;So whether you agree with that or not, that is obviously the idea they are operating on rather than uncontrolled spending and helicopter dropping stock on employees heads out of desperation.</text></item></parent_chain><comment><author>aeturnum</author><text>&amp;gt; &lt;i&gt;I understand that being small leaves you vulnerable to the predatory tactics of big players&lt;/i&gt;&lt;p&gt;This, I think, is the core of why. It&amp;#x27;s not that being a medium sized publicly traded company is immoral or unprofitable - it&amp;#x27;s that in a public market your stock is priced on future earnings and choosing to be smaller than possible means your tech can be bought for cheap. If you choose to stay smaller than maybe you could be - you&amp;#x27;re leaving ROI on the table in a lot of peoples&amp;#x27; eyes (even if you&amp;#x27;re right and you&amp;#x27;d lose money trying to get huge). So, as your stock price drops off to reflect the expectation that you&amp;#x27;re not going to get super impressive earning growth, you start to look appealing as an alternative to developing technology for an industry giant. Why spend $5bn over 10 years to develop competing services when you can borrow $5bn today, buy atlassian, get a tax break on the debt and start making a play for market dominance with the atlassian tech?&lt;p&gt;If you want a small or medium company, staying private is a more sustainable approach.</text></comment>
<story><title>Atlassian is 20 years old and unprofitable</title><url>https://www.smartcompany.com.au/startupsmart/analysis/atlassian-unprofitable-valuation-adam-schwab/</url></story><parent_chain><item><author>ASalazarMX</author><text>What&amp;#x27;s wrong with having a small or medium company? Why must a company sell its soul for the chance of becoming a money-printing behemoth in the future?&lt;p&gt;I understand that being small leaves you vulnerable to the predatory tactics of big players, but I see that as a consequence of lax regulation. There are too many mono&amp;#x2F;duopolies already, and the bigger they get, the harder it will be to split them apart.</text></item><item><author>dalbasal</author><text>The idea that growth is better than profits was in-built into Atlassian&amp;#x27;s proposition to shareholders, ultimately.&lt;p&gt;The slow and steady mentality is fine, but we see over and over that it isn&amp;#x27;t what the market wants. A private company or a high risk growth company, those are the two options for a software company.&lt;p&gt;Either that or they&amp;#x27;ll be taken over. They&amp;#x27;re revenue &lt;i&gt;now&lt;/i&gt; is just a $2bn, so that &amp;quot;grow grow&amp;quot; mindset from 10 years ago did not work out. In theory, a steady CEO could try to steady at that size with a nice margin. But, actually declaring and pursuing that would mean halving the companies market cap to a &amp;quot;normal&amp;quot; P&amp;#x2F;E of 20-30X.&lt;p&gt;At that price (say $20bn) one of the big software companies would just buy them... for their own growth targets.&lt;p&gt;Moderation has no place in the public markets as a software company. It&amp;#x27;s remarkable how unstable a stable condition is.</text></item><item><author>ryanackley</author><text>Worked there from 2008-2013. So early-ish employee here. I still have a chunk of shares from the original ESOP program. Saying that for full disclosure because I&amp;#x27;m biased and this feels like a hit piece to me.&lt;p&gt;When I worked there, they disclosed all financials in our internal Confluence site. There was a policy of full transparency with the employees. The owners (Mike and Scott) had impressive business discipline. They were profitable every quarter. They had many many opportunities to get vc money and go wild. When they finally took VC money, It was a modest amount ($60M I think) and the purpose was explained to us as setting up an ESOP program and putting Atlassian on the path to go public.&lt;p&gt;A year or two later, Doug Berman, the founder of Great Plains software became chairman of the Atlassian board. He gave a presentation to all of the employees at the Sydney office. One thing that stood out was that he said, it&amp;#x27;s actually bad to be profitable when you&amp;#x27;re growing. I&amp;#x27;m paraphrasing here but he essentially said, you&amp;#x27;re leaving growth on the table. His thesis was growth is more important than profits.&lt;p&gt;So whether you agree with that or not, that is obviously the idea they are operating on rather than uncontrolled spending and helicopter dropping stock on employees heads out of desperation.</text></item></parent_chain><comment><author>RC_ITR</author><text>Well, it &lt;i&gt;is&lt;/i&gt; fine to be a small enterprise, but unless you have a huge moat, you run the risk of a &lt;i&gt;different&lt;/i&gt; growth-at-all-costs competitor (not necessarily a giant) coming in and vacuuming up all your customers.&lt;p&gt;Salesforce vs. Siebel being a great example of exactly that.</text></comment>