Great to meet you last night – thought it was a fantastic event with a really interesting group of folks. Look forward to the next one.
I am not usually a big fan of networking events but this structured event in a smaller group enabled me to learn more about the individual businesses and people while also talking through what we are doing in enough detail to get feedback and test assumptions.
Scott Farquhar is the Co-Founder and CEO of Atlassian, an innovative, award-winning enterprise software company. Atlassian produces tools that help technical and business teams collaborate, plan projects and build software. Based in Australia, Atlassian currently has over 17,000 enterprise customers around the globe and has been named one of the “Fastest Growing Companies” by both Deloitte and BRW Magazine.
Subsequent to this talk, Scott’s company, Atlassian, has achieved the remarkable accomplishment of reaching $100 million in sales despite employing no sales people. Scott was talking at Business of Software 2010.
Business of Software 2011 takes place in Boston – 24-26th October.
Talk Transcript:
Scott Farquhar: [Applause] Good day everyone. Is it working? Great. I’m not a professional speaker at all, but I have grown a business from 2 people to about 300 people and so today I’m going to go through some of the things I’ve learned. A bit of a scatter gun approach, it doesn’t really follow from point to point, and I’ve got way too much content, so if we only get halfway through, I apologize. I’ll have to come back next year and finish it off.
So what does Atlassian do? We make software development tools, broadly we help software developers collaborate with each other. We sold an issue tracking system called Jira, we make continuous integration, we make code review, we recently acquired a web hosting business called “Bitbucket”, and for eight years we were bootstrapped. We started with two co-founders, and grew to 300 staff in 6 countries. We sold about 60 million dollars worth of software last year, and about three months ago we took on an equity investor, a venture capitalist called Accel partners.
So today I’m going to run through ten things that I’ve learned running a software company.
First thing is, I think you should start with two founders. I couldn’t imagine running Atlassian without my co-founder Mike, and all the successful companies are doing it. Apple, Microsoft, Google, Hewlett-Packard [Laughter] a long time ago, Fog creek has two co-founders down here, Red Get Software, Campaign Monitor, if anyone uses them for your email. A lot of my favorite companies have two co-founders, and the reason for that is that running a company is like a roller coaster ride. You’ve got incredible highs and incredible lows and they’re often separated by the case of a few days.
For me I got married earlier this year, and for my honeymoon I went to Botswana. That’s my wife up there. And in the middle of this honeymoon (Botswana is great, if you ever get the chance to go), we were staying in the middle of the Kalahari Desert in a hut, miles from anywhere, and I got a message from my co-founder on a scribbled piece of paper saying “Scott call me urgently.” [Laughter] now when you get that message on your honeymoon you know its serious, when that message has come via a phone call to the country office to the local office that then went by CB radio to someone who got in a truck and drove an hour to a hut [Laughter], you know that there are some problems. So in the next 24 hours, I found out that a hacker had hacked into Atlassian’s software, and built up a whole bunch of attack vectors, and had broken into some of the out servers and some of the open source servers as well. So I’m on a flight coming back from Johannesburg, and I’m just thinking “Wow, my company that I’ve built up for eight years is just going to go down the toilet because of this hacker in an eastern European state.” So that was incredibly low. We got back, and people had been through a war zone. People hadn’t slept for 72 hours, the whole company came together. people actually just stayed in a hotel room next door, people ordered pizza at two in the morning. And eventually we got through it, and it was great to know that I had a co-founder there, and he knew that I could come back and help out. And when I came back he pretty much went and slept for 24 hours because he hadn’t slept the 72 before that. So the next week, I actually flew back, we did that over the weekend, got it all fixed up. On the Monday I flew to San Francisco to start our capital raising with our VC’s. [Laughter]
An extraordinary app was just released in the iTunes store. Called Phone Story, it is:
“Description
Phone Story is an educational game about the hidden social costs of smartphone manufacturing. Follow your phone’s journey from the Coltan mines of the Congo to the electronic waste dumps in Pakistan through four colorful mini-games. Compete with market forces in an endless spiral of technological obsolescence.
You can keep Phone Story in your favorite device as a reminder of your impact on this world.
All revenues from the sale of this app will be donated to organizations working to solve the issues mentioned in this game.
Phone Story at Foxconn
Phone Story at the Apple Store
Phone Story iPhone recycling
Eric Ries is an extraordinary entrepreneur. The innovative way in which he has launched The Lean Startup itself is testament to his incredible creativity and energy.
Anyone, whether they are in technology or any other sector, who is involved in product development, should read this book, make sure that everyone in their team has read this book and then argued over a beer about whether it applies to them. Not everyone will agree with everything he says, no doubt some people will think they know better, good luck to them.
Some people will rail against the use of terms like, ‘Pivot’, that Eric uses to describe the (entirely rational) process of discovering the market for a startup. Pivot runs the risk of being the most misunderstood and overused term in startup land as it has become a euphemisim for all sorts of things including, ‘failed’, ‘given up’ or ‘lost interest’. It is hardly Eric’s fault however that he has created and popularised a concept that powerful.
Having been involved in successful and unsuccessful startups, and unsuccessful projects in large corporations, Eric has invested an obscene amount of his time and effort into working out why there is so much wasted effort in product development. More importantly, he has come up with a very plausible hypothesis for a better way of doing things better. Measurably better.
I do have a big problem with this book and some of the language in it.
Today’s guest blog post if from Alex Osterwalder, author of the Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. Drop us a line if you want to run a guest blog. We would love to hear from awesome people with great things to share!
Alex will be speaking and running a workshop at the Business of Software Conference, Boston 24-26th October. If you are serious about building a sustainable, profitable software business, you should give some serious thought to getting there too.
– –
Alex asks you 8 essential questions that you should consider about your business model…
Ultimately, customers are the only relevant judges of your business model. However, you can increase your model’s long-term competitive advantage by assessing its design with a couple of questions that go well beyond the conventional focus on products and market segments.
I suggest you sketch out your existing or start-up business model with the Business Model Canvas below and then start assessing its design.
The Business Model Canvas - a map of how your business makes money.
The Basics
Every business model has a product and/or service at its center that focuses on a customer’s job-to-be-done. I call this the Value Proposition. So before even assessing your business model as a whole, you need to ask yourself some basic questions related to your Value Proposition and the Customer Segments that you are targeting.
That’s it as to the basics. However, even the greatest products are having an increasingly hard time to achieve a long-term competitive advantage. That is the reason why you need to shift your focus away from a pure product/market segment oriented approach towards a more holistic business model approach. Below are eight questions to assess your business model design. Rank your business model’s performance on a scale of 0 (bad) to 10 (excellent) for each question.
1. How much do switching costs prevent your customers from churning?
The time, effort, or budget a customer has to spend to switch from one product or service provider to another is called “switching costs”. The higher the switching costs, the likelier a customer is to stick to one provider rather than to leave for the products or services of a competitor.
A great example of designing switching costs into a business model is Apple’s introduction of the iPod in 2001. Do you remember how Steve Jobs heralded his new product with the catchphrase “thousand songs in a pocket”? Well, that was more than a product innovation focusing on storage. It was a business model strategy to get customers to copy all their music into iTunes and their iPod, which would make it more difficult for them to switch to competing digital music players. In a time when little more than brand preferences were preventing people from switching from one player to another this was a smart move and laid the foundation for Apple’s subsequent stronghold on music and later innovations.
2. How scalable is your business model?
Scalability describes how easy it is to expand a business model without equally increasing its cost base. Of course software- and Web-based business models are naturally more scalable than those based on bricks and mortar, but even among digital business models there are large differences.
Eric Ries is having a busy weekend as he launches his book, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses
The video is not a substitute for reading the book which is brilliant, not just for the content it contains, but for the incredibly innovative way in which it has been launched. Eris is giving away great stuff to people who buy the book, stuff that the people that are likely to read it will really like. If that works, it will hit the Amazon and other best seller lists and this will mean it will be bought by people who wouldn’t normally know about it.
UPDATE: You can track the progress of the book using the HubSpot Book Grader.
It will be a huge surprise is this is not one of the most successful book launches in history for a relatively unknown author (in comparison to say, Dan Brown, best-selling drivel-churning novelist). He, (Eric NOT Dan), deserves the success.
You deserve to read The Lean Startup.
Get 'em lean early
Business of Software 2011 takes place in Boston – 24-26th October. You should probably come – or at least check out who is speaking…
My notes from Eric’s 2010 talk here.
Transcript of Eric’s talk at Business of Software 2010.
Joel Spolsky: According to this our next speaker is Eric Ries. If you’ve heard venture capitalists use the word “pivot” way too often in their conversation, like when they decide to send back an entree that they ordered, and it comes out wrong and they decide to pivot and get a different entree altogether. The person you have to thank for that is Eric Ries, his concept is the Lean Startup. He’s done about three pretty Lean Startups. The one you probably know is IMVU 3D Avatar world gaming kind of situation. He wrote Java books when he was in high school. Please welcome Eric Ries. [Applause]
Eric Ries: Thank you. Thank you all very much. I’m very excited to be here. I’ve got to tell you years ago when I was sitting in a cubicle in Microsoft and reading Joel on software I was like, “Wow, Joel, is like a major celebrity in my world.” So to get the email from Joel to say, “Come speak at my conference.” It was like, for me anyway, getting an email from Lady Gaga asking me to come perform onstage with her. I was like… Well OK, maybe it’s not exactly the same, but you get the idea, it was very exciting. So I’m very pleased to be here.
I want to just set up some quick ground rules. The most important one is that I do not want your undivided attention. So, who has a mobile phone? That’s just a question to see who’s paying attention. Not that many people, OK. Please take it out of your pocket, hold it up, thank you. Turn it on, no phones off, please. Laptops on, power on, get online, if you’re not online you’re basically not alive. So get online. And all I ask, if your attention starts to wane, whatever happens #leanstartup is the hashtag so tweet amongst yourselves.
But as you see I really welcome feedback, so if I say something that you think is worth tweeting I appreciate hearing about it. And, of course, if I say something that is too dumb for words I appreciate hearing about that too. Again #leanstartup hashtag. I have been on this journey to promote this thing called a Lean Startup for the past two years. It means I can’t get this thing on. And I wrote this blog “Startup Lessons Learned” and I never thought that I would do this for a living. I used to be an engineer and that’s a job I really understood well. This I understand less well. But what keeps me going, the reason I get excited about doing this is that I have been imploring audiences, whoever would listen basically to stop wasting people’s time. It’s actually that simple.
Most of the products that we make are never used by anybody. If you think about that, that’s got to be a preventable condition. There has to be a way for us to stop living like that. To stop pouring people’s time and talent into activities that go nowhere.
That’s what I think, by changing the way that we go about building new products, new companies I think that we can change that outcome. Everyone knows that most startups fail. Most of my startups have failed. I know if you’re trying to become a professional expert that’s actually not a good way to start “Hi everybody, most of my adventures have failed.” I have built plenty of products that nobody used, I’m quite embarrassed to say. But we have to start getting serious about the fact that this is an epidemic in our industry.
I brought a demonstration. Anyone remember Web 2.0? So at the height of Web 2.0, this is from 2006, a graphic designer put together this chart. To encapsulate the incredible wave of innovation that Web 2.0 was going to unleash. Then just three years later another graphic designer was feeling a little disillusioned and put together this graphic. Here’s our three years report card on Web 2.0.
You can see already something like half the companies are covered in blood red X’s because they are no longer with us. Which is pretty embarrassing. The green circles, I don’t know if you can see, mark those companies that had an exit. So those are the companies that I guess, by somebody’s standard, were successful. And then the unmarked companies are the ones that are still alive. Of course, many of the companies still alive are just sitting in the land of the living dead. So consuming resources like a zombie, but no one could quite put the bullet through the head to take them down. That’s not a good use of people’s time. And the green circles, sure many of them, somebody made money, and I’m all for people making money, but what about asking the question “Where they successful by this higher standard?” Namely did they actually succeed in living up to the raw amount of time, talent, potential, creativity, and energy that was poured into them by their founders and employees. I think by that even higher standard very few of these companies can be rated a success. And I think that’s depressing.
I think we can do something about it. To do something about it we’ve got to figure out who to blame. Who’s fault is it that these companies have failed? Who’s fault is it that my company’s failed? Certainly not mine.
One of the team here, Luke, just called the number we had for a Deloitte Fast 50 winner from last year to see if they were entering this year – the deadline is midnight 16th September. His Mum answered.
“I’m his Mum. He’s moved out – 200 people work there now. They won’t fit in my house.”
Just shows what you can do when you bootstrap a business and it goes right!
Contrary to most assumptions that venture capital is the fuel that feeds the UK’s fast growing technology companies, the overwhelming majority of the UK technology companies that have seen the highest revenue growth over the past five years are either self-funded or backed by angels.
We have run the Deloitte Fast 50 competition for the past few years and it has given us a really interesting view of the cream of the UK’s technology companies. The Deloitte Fast 50 is an objective ranking of the UK technology companies with the fastest growing revenue over a five year period. The entry deadline for this year’s award is 16th September.
Here is the list along with the sources of funding identified.
If you want to enter the Deloitte Fast 50 deadline is 16th September.
By coincidence, that is about the time that the cost of attending out simply incredible Business of Software Conference goes up again. If you want to spend time in Boston (24-26th October) with some of the world’s best software entrepreneurs, and hear people like Professor Clayton Christensen talk about why and how entrepreneurial businesses can compete with Microsoft, Oracle and Salesforce go and see what is happening on the site now.
If you are coming to BoS2011 and want to get involved in the music at Monday night’s event at the Whiskey Priest, please get in touch. We have a really good core of guitarists, bass, keyboard, bongos etc but would welcome more of the above or other instruments.
We need more cow bell. In fact, we currently have no cow bell.
I was particularly entertained to hear from Jeff Gibson at Intercept Solutions who sent me this picture of him at a previous gig in July. Jeff has since been co-opted, willingly into coordinating the music. Thank you very much. To be honest, I was expecting something a little more homestyle for Business of Software and if you play an instrument and want to get involved, we would love to hear back. Reasonable equipment will be provided on the day.
If you want to get involved ping an email to BoSBOSBand@businessofsoftware.org and let us know what you play.
Strictly no agents.
