Atlassian doesn’t fear tech stock revaluations

The founders of software group Atlassian have welcomed the pull-back in the valuations of global technology companies.

Mike and Annie Cannon-Brookes at their home in Sydney. Picture: James Croucher

The founders of multi-billion-dollar enterprise software group Atlassian have welcomed the pull-back in the valuations of global technology companies but say it will do nothing to stall the growth of good tech businesses or the disruption of legacy players in key industries.

Shares in tech icons like Apple, LinkedIn, eBay and Amazon have all been hit in recent weeks after they posted lower than expected quarterly revenues or downgraded forecasts for the year ahead.

A number of so-called Silicon Valley “Unicorns” — start-up companies that have achieved a valuation at or above $US1 billion in a private financing round — were also hit by revaluations by high-profile managers late last year, which has made private financing harder in recent months.

“I think that there is always the element of overshooting where businesses that aren’t supported by profits get overvalued,’’ said Atlassian co-founder Scott Farquhar.

“For a company like Atlassian it is really healthy because it makes it easier for us to acquire staff. For companies with solid business models it is a good thing.’’

His co-founder, Mike Cannon-Brookes, said that, while private financing had “come off quite a lot”, some big rounds were still being done at more reasonable prices.

“There is a huge amount of capital but there are questions about the sources of that capital. Maybe some of that will go away and maybe that won’t be a bad thing,’’ he said.

Mr Cannon-Brookes said it was “never a good thing to see people losing their jobs’’ after tech companies had shed staff as they battled weaker revenues. But he added that “none of the fundamentals has changed’’.

“We are going through a particularly golden period in the way technology is affecting every industry and Atlassian is likely benefiting from that,’’ he said.

“There is no doubt it is very different to the dot.com boom where there were a lot of businesses with huge amounts of fluff and no real underlying business model.’’

Founded by Mr Cannon-Brookes and Scott Farquhar in Sydney in 2002, Atlassian ­floated on the Nasdaq in December after four years of planning and closed its first day of trading valued at $8bn — making them both instant paper billionaires.

The software tools maker, which counts more than 50,000 customers worldwide including Facebook, NASA, PayPal, Visa, Cisco, Tesla and Netflix, specialises in productivity and collaboration tools for businesses. Key products include JIRA, HipChat and Confluence.

Its shares so far this year have slightly underperformed the wider market and remain about $US5 below their opening day close.

Earlier this month Atlassian booked a $US5.1 million profit for the December quarter, ahead of analyst forecasts for a loss of $US7.9m, and provided a bullish forecast for annual revenues.

Asked if he kept an eye on the share price, Mr Farquhar said he only looked at it “every couple of days’’.

“But you have no control of it — it’s the same way you look at the weather each day. It doesn’t make any difference to your day-to-day life,’’ he said.

Asked the same question, Mr Cannon-Brookes shook his head before a deadpan reply: “Not ­really. People tell me it.’’

“We are the same company we were 60 days ago. We just keep doing what we do. We have always said the biggest difficulty will be if we lose our focus on what we have done and what makes us a special company,’’ he said.

“We tried to prepare the company as well as we could for the stresses and stains this would put on it and time will tell how well we have done that.’’

Outside Atlassian, Mr Cannon-Brookes has a range of other investments, including in online retailer Shoes of Prey and banking technology company Tyro Payments.

He and Mr Farquhar are also the largest investors in small ­venture capital fund Blackbird Ventures.

“My general rule is I try to keep it to only 5 per cent of my time,’’ Mr Cannon-Brookes said of his external ventures.

“The second one is I don’t really invest in something I don’t learn from. It is a kind of selfish viewpoint. I have learnt a lot from Blackbird and for Shoes of Prey, moving to the US was a big thing — and I have learnt about retail, mass customisation, and the online selling of consumer goods.”

Tyro last year received an Australian banking licence from the Australian Prudential Regulation Authority to take deposits, which it is expected to do from April this year.

“At Tyro (where he has been on the board for the past six years) I have learnt a lot about the insides of the financial industry and how biased the system is here — and how ridiculously profitable it is and it should not be,” Mr Cannon-Brookes said.

“Everyone in Tyro wants a fairer, more competitive financial system.”

But now with a much fuller wallet for start-up and private ­equity investments, he has no burning ambition to find the next Atlassian.

“I think it is one of the entrepreneurial challenges,’’ he said.

“If you want the next one to be bigger and better you can run out of room on that road pretty ­rapidly.’’