Australian software company, Atlassian, recently entered the NASDAQ market with an Initial Public Offering (IPO) under the ticker symbol of TEAM. Known for their suite of software development tools, they entered the market on December 10, 2015 at a price of $21 (USD) per share and closed out the day at $27.78 per share. In a time where technology firms struggle with their IPO's, Atlassian was the first such company since September to close their opening day higher than their initial bid.
At the time I wrote this article, the price per share was listed at $28.22 per share. Now that Atlassian is now a public company, what now lies ahead?
Recap — What Atlassian Has To Offer
For those who haven't worked with (or even heard of) the Atlassian suite of tools, they provide software teams with a number of browser-based/mobile device-enabled tools that assist in the development process:
Confluence - team collaboration software that provides wiki-like functionality
Jira - issue and bug tracking solution
SourceTree - GUI-based application for source control systems
Bamboo - build and deployment solution to deliver continuous integration
HipChat - chat/instant messaging solution for software teams
Clover - code coverage analysis tool
FishEye - revision control
Crucible - collaborative code review
Most, if not all, of these tools are considered market-leaders in their respective space.
Change in Innovation
With the responsibilities public corporations often place on generating a profit for their investors, the budget for innovation is often compromised. This approach is often viewed as a short-term gain and a long-term loss - since investors are getting a quick return now at the sacrifice of potential long-term growth.
I was happy to read that Atlassian is making it clear that they do not expect to be profitable in 2016 - citing costs associated with research and development, plus the costs associated with becoming a public company. I am hopeful they continue to innovate their products to meet the ever-changing needs of software development teams.
Impact on the Team
The core of Atlassian's success has been their team dedication and focus. I was not surprised that they opted to use the word TEAM as their ticker symbol. The challenge here is if Atlassian can maintain their team approach now that the IPO has come to fruition.
Too many times, teams are formed to reach the wrong goal. I remember during the Internet boom where a lot of dot com initiatives had the primary goal of taking their company public. Bonuses and performance metrics centered on this one common goal. The classic example is pets.com, which focused purely on being a major player in their industry. They invested a lot of money in marketing and technology for them to reach their goal, but failed nine months after their IPO - due to a business model that was not sustainable. For more examples dot com busts, see this list.
I don't believe Atlassian will fall a victim of this similar fate, since driving toward an IPO wasn't their primary goal. I am certain that Atlassian's founders will benefit greatly from taking the company public, but it appears that both Michael Cannon-Brookes and Scott Farquhar intend to remain heavily involved in their company going forward.
Challenges for Growth
The biggest challenge I foresee with Atlassian being a public company is how they plan to grow their business over time. At this point the vast majority of Atlassian's sales originate from their online presence, with some sales being attributed to third-party resellers. Looking at their web site shows a pretty impressive customer list ... but we have to keep the marketing side in check (see pets.com example above). This has been a very successful approach for them, but I wonder if it will be enough to satisfy Wall Street investors going forward.
Do I foresee an Atlassian Store set up in your local mall any time soon? I don't think so, but I do wonder if strategic partnerships could be formed to help boost Atlassian's market presence and sales. What if Microsoft opted to include a version of their Visual Studio product to include the suite of Atlassian tools? Or if JetBrains, NetBeans offered a similar bundle?
For the last few years, I have utilized the several of the Atlassian products in an Agile lifecycle with great success when compared to the years prior. If you haven't looked at the Atlassian suite, it is certainly worth your time and effort.
What are your thoughts regarding the Atlassian IPO? Will you be an investor in the TEAM stock any time soon?
Have a really great day!