Atlassian (Nasdaq: TEAM) is planning to price their IPO next week. It’s a hot deal, being led by the dream team of Goldman Sachs and Morgan Stanley with seven other banks on the cover. As far as stories and positioning is concerned the company is about as close to “perfect” as one will see. (Of course that comes along with a very high price tag – at the $17.50 mid-point the $3.6B market cap is over 10x revenues and 54x cash flow.)
Atlassian is an odd but enchanting duck in the world of enterprise software – their team collaboration product is bought rather than sold, it was founded in Australia and financed without traditional VC and has enjoyed rapid growth with consistently positive free cash flow. In the most recent fiscal year Atlassian booked $320M from 51,000 customers.
The product family consists of five main offerings: Confluence which is a shared repository, HipChat for communication, Bitbucket for code management, Jira for project management and Jira Service Desk for customer support. The company has a number of additional add-ons and external organizations have created more than 2,000 add-ons which are available to users in the Atlassian Marketplace. In this way Atlassian has done a better job than other collaboration software companies in creating something closer to a platform than just a product. More details are in the TEAM IPO roadshow slide deck. (We will post the transcript here when we have it.)
Consistent with their “bought not sold” approach to the business the company spends a stunning 37% on R&D and a paltry 19% on marketing. This stands in stark contrast to most enterprise software firms with the figures are typically reversed with most spending on sales and marketing versus R&D.
In order for this to work Atlassian puts all their pricing online, allows free trials for all products and makes it very simple to buy and install their software. It’s all consistent with the new or “Enterprise 2.0” way of doing business. We’ve seen other examples in the IPO market with companies including Zendesk (NYSE: ZEN), New Relic (NYSE: NEWR), and ServiceNow (NYSE: NOW).
