Oct 9, 2023 · 52m · news
Scott Farquhar: Founding Atlassian; How We Scaled to a $50B Valuation; The 4 Jobs of a CEO | E1070 · 20VC with Harry Stebbings
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In this comprehensive interview, Atlassian Co-Founder and Co-CEO Scott Farquhar shares his journey of scaling the software giant to a $50 billion valuation, detailing his frameworks for executive leadership, strategic product decisions, AI integration, and pioneering remote-work models.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 18% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 3.9 Guest disagreement 1.2 Harry pushing back 2.2
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 28:52 Scott refutes the executive consensus on return-to-office
When Harry states that most CEOs privately agree in-person work is vastly superior, Scott firmly rejects the notion, presenting Atlassian's empirical data on connectivity decay and arguing that daily office presence fails to build true togetherness.
Hardest push from Harry ▶ 35:21 Harry confronts Scott with CPO complaints about Jira's complexityHarry explicitly challenges Scott by citing top CPOs who criticize Jira as a polarizing product that caters exclusively to power users while losing simple onboarding to upstarts.
Biggest teaching moment ▶ 31:50 Scott breaks down product pricing and team productivity trapsScott educates Harry on key SaaS mechanics from the Stride shutdown, illustrating how doubling team size stalls output due to architecture overhead and why freemium models outperform fixed low-cost seats.
Harry holds his own ▶ 37:31 Harry challenges seat-based SaaS durability using VC argumentsHarry leverages industry insights from Benchmark partners to press Scott directly on whether AI renders Atlassian's core per-seat pricing model obsolete.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Founding of Atlassian | 1 | 2 | 0 | 0 | Harry sets an encouraging tone and asks a standard origin story question about Jira's early days. Scott provides context on graduating college and discovering a passion for building software. | |
| Bootstrapping in the Dot-Com Crash Era | 2 | 4 | 1 | 2 | Harry references Trade Desk and tests an Australian accent before asking if bootstrapping is still viable today. Scott lightheartedly teases the accent and explains how niche markets like Constellation Software still allow bootstrapping compared to crowded AI markets. | |
| Debunking Startup Myths & Glamour | 1 | 3 | 2 | 1 | Harry asks Scott to call out common startup myths, and Scott rejects the notion that startups are glamorous, citing early perceptions of unemployment. He then shares a dramatic story about a hacking incident during his 2010 honeymoon while raising venture capital. | |
| The Closed-Envelope VC Bidding Process | 3 | 4 | 1 | 2 | Harry asks about Atlassian's scale during their first round and Scott explains using a closed-envelope bidding process to maximize valuation. Scott teaches the game theory behind counteracting standard VC price-collusion tactics. | |
| Building Trust with VCs & Benchmark's Missed Split Deal | 4 | 5 | 2 | 5 | Harry pushes back on the closed-envelope strategy, arguing it sacrifices authentic relationship and trust-building with VCs. Scott corrects this premise by explaining that they pre-screened investors they already knew well, illustrating with Benchmark passing on matching Accel's valuation. | |
| Mistakes of Omission & Product Bets | 3 | 4 | 1 | 2 | Harry asks Scott about his biggest regrets, and Scott explains the distinction between mistakes of commission in small companies versus mistakes of omission in scaling companies. He discusses under-investing in Bitbucket and Stride against GitHub and Slack. | |
| The 4 Jobs of a CEO | 3 | 4 | 1 | 2 | Harry asks if resource allocation is a CEO's primary job, and Scott outlines his framework of the four core CEO jobs. Scott candidly reflects on his own strengths in systems thinking versus his weakness in prioritization. | |
| The Tech Shifts & The Need for an AI Strategy | 3 | 5 | 1 | 2 | Harry asks how Scott navigates public market pressure to project an AI story alongside running a legacy core business. Scott provides a historical breakdown of technological paradigm shifts from mainframes to mobile and cloud. | |
| AI Resource Allocation & Scale Advantages | 4 | 5 | 2 | 4 | Harry questions whether a large public enterprise can move quickly enough to capture the AI wave. Scott counters by contrasting small company speed with incumbent data scale across 250,000 customers. | |
| Team Anywhere & Intentional Togetherness | 4 | 6 | 3 | 5 | Harry challenges Scott's full-remote 'Team Anywhere' policy, stating that behind closed doors most CEOs agree in-person work is vastly superior. Scott firmly refutes this consensus with internal data on 'intentional togetherness' and connectivity decay rates. | |
| Scott's Riskiest Decisions (Stride & Team Anywhere) | 2 | 5 | 1 | 1 | Harry prompts Scott on his riskiest successful decisions, and Scott discusses shutting down Stride. He educates listeners on freemium pricing dynamics, team scaling friction, and market growth benchmarks. | |
| Shutting Down Stride & Sunk Cost Fallacy | 5 | 5 | 2 | 5 | Harry addresses sunk cost fallacies before delivering direct pushback on Jira, noting top CPOs find it polarizing and overly complex compared to modern upstarts. Scott defends Jira's enterprise scalability while distinguishing inherent product complexity from admin misconfigurations. | |
| How AI Reshapes Per-Seat Pricing | 5 | 5 | 2 | 4 | Harry brings up prominent VC arguments (citing Benchmark) that AI will eliminate per-seat SaaS pricing models. Scott partially agrees for high-cost seat software, but reframes how low-cost utilities will capture value through AI augmentation. | |
| Raising Humble Children in Wealth | 3 | 3 | 0 | 1 | Harry asks about managing wealth, citing David Velez on raising humble children amidst extreme affluence. Scott reflects on the trade-off between time and money and the difficulty of isolating kids from wealth awareness. | |
| Transition to Quick Fire | 1 | 3 | 0 | 0 | Harry transitions to quick-fire questions and asks about education reform. Scott details the origin story of Atlassian's partnership with Room to Read and the birth of Pledge 1%. | |
| Changing Minds and the Power of 'Disagree and Commit' | 2 | 2 | 1 | 1 | Harry asks what Scott has been wrong about recently. Scott discusses evolving from proving he was right to embracing 'disagree and commit,' alongside personal habits for maintaining serenity. | |
| Kindness, Chemistry, and Co-founder Dynamics | 1 | 2 | 0 | 0 | Harry asks about kindness and co-founder dynamics with Mike Cannon-Brookes. Scott highlights their complementary styles and shares his long-term vision for eliminating administrative work for teams. |
Statements from this episode (35)
Farquhar: Atlassian grew to 250,000 customers and 11,000 employees
“And 22 years later, 250,000 customers, 11,000 staff.”
Farquhar: Atlassian went 15 years without putting raised capital on balance sheet
“It took us 10 years before we put, you know, we were born VCs on board and we didn't take any money on the balance sheet for 15 years.”
Farquhar: AI startups cannot be bootstrapped in today's environment
“I think today, if you were doing an AI startup, The environment's slightly different, right? Like, you're not going to be bootstrapping your AI startup these days”
Farquhar: Heavily funded startups outpace bootstrapped rivals in crowded markets
“I think it depends on what you're going after and the niche or niches Americans say that you're going after, because if there are thousands of other companies or dozens of other companies going after the same customer that you are, And they've raised 10 times,…”
Farquhar: Bootstrapping software startups is still viable in niche markets
“But there are many markets, like, ah, that go after very, very small, like, niche software. Constellation Software is a public company out there that does a lot of this, where they literally invest in, ah, you know, reservation systems for dog kennels or somet…”
Farquhar: Atlassian disclosed a 2010 breach to prospective VCs and customers
“We called these VCs up to tell them what had happened because we felt, you know, openness and transparency was important, even though may have never come out, may have never like come out publicly. You know, we told VCs, we told customers because I guess that'…”
Farquhar: Atlassian had $60M revenue and 20-30% margins when raising VC
“So we're on sixty million dollars of revenue. I think we were doing 20 or 30% profit margins.”
Farquhar: Accel won Atlassian's initial round at $405M valuation
“And the valuations we got back varied between, there was one sort of high hundreds. There was three of them ended up in the two to three hundred million dollar range. And Excel, who ended up you know, winning for us came back at four hundred and five million U…”
Farquhar: Benchmark declined splitting Atlassian's initial round with Accel
“And actually like we went back to Peter Fenton at Benchmark was, I think the runner up bidder. And we went back to Excel and said, Hey, look, all things considered, maybe we should get two VCs or, you know, in there, even though there was a huge difference in …”
Farquhar: Accel achieved roughly a 100x return on Atlassian
“I don't know how much Excel's made off us, like it's a hundred times, I think something like that when they distributed.”
Farquhar: Pre-IPO Atlassian round saw bids ranging $1B to $4B
“We actually raised money from before we went public, the year before we went public to give some employees some liquidity, and to get in a public market investor, we ran the same process. And actually, the numbers were almost exactly the same, just out of zero…”
Farquhar: Scaling shifts leadership mistakes from commission to omission
“When you're small as a company, or what I found when we were small as a company, the mistakes are mistakes of commission. Like, you do something stupid that didn't make sense, or you invested time in something that ultimately was a waste of time. I think when …”
Farquhar: Atlassian reached ~$4B revenue and $40B-$50B valuation in 2023
“We're about four billion dollar business, like revenue wise, a value to 40 to fifty billion dollars, you know, today in 20, 23.”
Farquhar: Atlassian built a better product than Slack in many cases
“In, in many cases, I think against Slack, we had a better product.”
Farquhar: Resource allocation should be conducted quarterly rather than daily
“I don't think resource allocation is something you do every single day. I think if you're doing that, you're probably not going to see the forest for the trees, and so it depends on the size of company you are, but I'd say quarterly is a more reasonable cadenc…”
Farquhar: Market leaders in tech are rarely disrupted outside major technological shifts
“The history of technology with the way I would write it is that it's a very much a winner takes all market. And once there's a winner established in a market, it's hard to disrupt them except when there's a technological change.”
Farquhar: AI will significantly alter top tech company rankings within five years
“I do think that there's going to be a big change in how technology works and change the landscape, honestly. I think you'll walk in five years time, and the list of top companies may look very different to today, so I don't think you can avoid having an AI str…”
Farquhar: Basic AI text summarization is a commodity, not a differentiator
“A lot of people are doing the simple parlor trick, which is like, let's just summarize some text, or let's, you know, give me 10 bullet points, and look, that is a commodity now, like, you know, whether you're using OpenAI or any of the other ones, it's going …”
Farquhar: Atlassian Has Hundreds of Engineers Working on AI
“We have you know, multiple thousands of engineers in Atlassian and we have Multiple hundreds of engineers working on, you know, AI you know, things at the moment.”
Farquhar: Atlassian Is Not Building Proprietary Large Language Models
“So we don't have to make the huge list and investments of you know, building our own large language model or building, you know, our own thing across So across, you know, data sets.”
Farquhar: AI startups without customer data move slower than incumbents
“If you're an AI startup and you don't have access to customer data and customers to test with, that can actually make you move slower.”
Farquhar: Atlassian will never require employees to return to offices
“We made the decision that we would never require someone to come back into an office”
Farquhar: 80% of Atlassian's UK workforce lives outside London
“80% of our staff in the UK live outside of London.”
Farquhar: 92% of Atlassian staff say remote work improves performance
“92% of them say that they, Think our remote policies help them to do their best work.”
Farquhar: In-person team gatherings boost employee connectivity by 30%
“When you get together, people together, we see our team connectivity boost by 30%.”
Farquhar: Connectivity gains from in-person work events decay over 4-5 months
“How long does it take to return to baseline? It's four to five months actually before that returns to the baseline.”
Farquhar: Doubling a 10-person engineering team yields zero net productivity gain
“And when you double that team, You actually don't get any more productivity because when you double the team, they now need to document things. They now need to work like, you know, separate the code out. They needed to start micro, you know, microservices and…”
Farquhar's framework for overcoming sunk cost fallacy in product decisions
“It ended up not being a hard decision because the way I looked at it was, you know, could I look my staff in the face and say that the next five years of their life was going to be the biggest impact to humanity working on this product?”
Atlassian had 200 employees on Stride before selling to Slack
“And so in the end, like, you know, deciding to shut down that product, we had a couple hundred people working on it. It was hard because a lot of people had poured their light, you know, heart and soul into it. We sold it to Slack”
Farquhar: Jira will never be as simple as products built for five-person teams
“We're never going to be as simple as something that, you know, has built from scratch for a five person team.”
Farquhar: AI will disrupt high-cost per-seat SaaS pricing models
“I will put pressure on per seat pricing. I agree with that premise in general. For example, if you provide help desk software and it's, you know, licensed on a per agent basis. And in many cases, these, our competitors have these things that are a hundred doll…”
Farquhar: Atlassian's $10/Seat Model Is Less Vulnerable to AI Than $150+ Competitors
“If you're, you know, a 152 hundred dollars a seat, like you've got a much bigger pricing model change to worry about than if, like the last thing does, we charge 10 dollars a seat, and then how much is going to be augmented by AI versus replaced by AI.”
Farquhar: Software Won't Become Free Despite the Collapse of Per-Seat Pricing
“So, in general, the premise is true. I don't think we know what we move to, and I don't think software is suddenly going to become free because, you know, per user pricing just doesn't work.”
Farquhar: Atlassian Raised $100K in 5 Days with $5 Promo
“So we said, let's make our software five dollars for five users for five days Only. And we ran basically a one week campaign to just see, well, is there a desire for a five years of version of our software? And by the way, all the money goes to charity. And so…”
Farquhar: Pledge 1% Has Inspired 18,000 Companies to Donate
“All the philanthropy stuff ended up inspiring me to start Pledge One Percent, which is you know, a foundation that encourages startups and companies to give one percent of equity, product, profit, and employee time to non-profits, and that's inspired about 18,…”
Shorts cut from this episode
▶ Atlassian’s WILDLY SUCCESSFUL Product Experiment 🧪 · 20VC w (@44:11)
▶ The Four Roles of a CEO · 20VC with Harry Stebbings (@18:24)
▶ 3 Secrets to a Happy Marriage 💍 · 20VC with Harry Stebbings (@42:11)
▶ The 4 Jobs of a CEO 💪 · 20VC with Harry Stebbings (@18:19)
▶ How Peter Fenton Missed Out on Billions $$$ · 20VC with Harr (@14:26)
▶ Atlassian's Remote Work Experiment 🧪 · 20VC with Harry Steb (@29:43)
▶ Investors Made BILLIONS on Atlassian 🤑 · 20VC with Harry St (@12:32)