8 lessons about bootstrapping from zero to $ 100 million from the middle of nowhere

I’m always interested to read stories from people who overcame geographical challenges to build great companies, because most European startups (except maybe the ones in London) are geographically challenged.

So what can we learn from two guys who lived in Sydney, were 22 years old at the time and thought it would be a great idea to build a company that would take over the world? Well, quite a lot, because they’ve done alright.

The company is called Atlassian, they make Jira and Confluence and recently bought Hipchat. They raised $ 60 million from Accel Partners in 2010 and they’re rumored IPO in 2013.

Founder Scott Farquhar gave a talk last year, and I distill 8 lessons from his talk (you can see the entire video at the end).

Lesson 1: your first idea will fail

Before building their first product, Scott Farquhar and his co-founder Mike Cannon-Brookes thought it would be a groovy idea to make a business of offering third party support for a company in Sweden that had most of its customers in the US.

Farquhar and his cofounder were in Australia:

“We had no practical mechanism to contact customers. We couldn’t get access to the source code, and we couldn’t fix peoples issues. It was a terrible business. We kept getting phone calls at 4 in the morning, and my girlfriend at the time was very unhappy with this business.”

But, they did develop an issue tracking software that seemed promising. So how to market that?

Lesson 2: let market pressures shape your business model, instead of the other way around

Here’s something that you see with nearly every successful company out there: they don’t see their business model as a weapon to fight market realities. Instead, they find ways to let market realities shape their company.

“Over time, our website morphed and our company morphed and we moved from a support company to a one product company, and now we’re a software portfolio company so don’t be afraid to let your first idea fail.”

By listing the roadblocks that they couldn’t work around, they identified the cornerstones of their business model, explains Farquhar:

  1. Firstly we couldn’t have a sales team, we couldn’t afford one, we were 22 year olds who couldn’t raise any money. So software has got to sell itself.
  2. If it’s going to sell itself, it needs to be low price, because you can’t sell 50,000 dollars worth of software online so it needs to sell itself.
  3. If it’s going to be cheap, you’re going to have to sell an absolute ton of this stuff before you are going to make any money
  4. If you’re going to sell a ton of stuff, you need to sell it globally.
  5. If you’re going to sell it globally, you need to have pricing on the website, you need to be able to download it and install it and so forth.

That single, first insight: “we can’t afford a sales team” was the foundation of their business model. It also gave them a clarity of focus and a rule to discard everything that didn’t fit into the model.

Lesson 3: Measure everything

With the rise of ‘The Lean Startup’ and the idea of ‘innovation accounting’ this probably doesn’t sound as revolutionary as it did in 2002. But it’s still a good point to hammer home: measure everything. Even if you lack the time or tools to analyse the data, says Farquhar:

“My advice for start ups is even if you don’t have the capability to analyze everything today, make sure you capture it. Make sure you’ve got your website logs turned on. Enter your website logs today, even if you don’t have the capabilities to analyze it now when you finally do you will have all that information stored there.”

“And we Confluence (an Atlassian product for collaboration, ed.), our product, to put all that stuff online and we share it with all our employees. What’s the use of having all this information if not everybody can access it? We’ve had interns come up with a new insight about Atlassian.”

Lesson 4: Always be marketing. If you have no budget for marketing, hijack something

I think what Atlassian also shows is that it pays to have pluck. Don’t wait for people to talk about you: make some noise. Atlassian didn’t have money to pay for a booth at the Java Conference, which can cost up to $ 20 000 to 25 000. They did have some money to buy a truckload of beer, though, slap Atlassian labels on them and give away free beers.

Farquhar: “There is a session called Java posse. Its always held in the afternoon and it gets maybe a couple thousand people there. And you’re not officially supposed to do this, but we basically truck in about 15 to 20 cases of beer, slapped Atlassian labels on them and sponsor the beer.”

“As a result, the people speaking gave us a great shout out, we got mentioned in a podcast, and it cost us about 3000 dollars to provide the beer to the conference, as opposed to sponsoring the booth.”

Lesson 5: a free t-shirt can do wonders

Kickstarter actually built a huge business on this idea: people love a t-shirt. As Farquhar says: t-shirts work better than e-mails.

“People these days get an email every ten or twenty seconds, people still love getting something in the mail. We decided to ship tee-shirts to our customers, because that way they tell their friends about us, they get something in the mail right after they purchase as opposed to something intangible.”

The thing is that t-shirts, at a cost of maybe a few dollars per t-shirt, even work for products that cost $ 3000 (!). (You should be ordering a stack of t-shirts by now!)

“We only give the teeshirt away with the most expensive version of our product. So you have to pay an extra 3000 dollars for a tee shirt [laughter] and it turns out that quite a few people would say later on “ Yeah, I wasn’t sure which version to go with, but I found out that I get a tee shirt with the 3000 dollar version and so I splurged for it.”

Lesson 6: make someone complain to the press about you

Atlassian seems to have a knack for great PR. The way to tackle that is to go a little bit outside of your own comfort zone (and more importantly: outside other people’s comfort zone).

Once, when recruiting, Atlassian told recruiters they could send a maximum of four candidates to the company. If one of them was hired, Atlassian would keep doing business with the recruiter. If not, Atlassian would never work with the recruiters again.

The result was outrage among recruiters, who complained loudly in the press. And also: recruiters sent their best candidates, says Farquhar:

“So we’ve had great press through the whole thing, we’ve had a couple people come through recruiters now, and it makes the recruiters send us their best four candidates because they wanted the chance to keep working with us. And this gave us a huge amount of press”

Lesson 7: Create the right culture from the start

The first hire, says Farquhar, was a backpacker who spent 6 months living with the backpacker community and ended up staying at Farquhart’s home. Today, Atlassian uses a technique they call “topgrading”.

“The process just goes through their entire work history and says “Ok, so what did you do in each job, what are your good points, ad points? Why did you leave? Who was your boss, what were their good points bad points?”

“You just go through their entire work history. It takes about three hours so it’s a pretty involved process, but at the end of it you can very clearly answer the questions of have they always done a good job no matter where they’ve landed and are they interested in this job.”

“And we’ve had a few times where we’ve had two or three candidates and we thought this is the right guy for the job and we changed our mind after that process.”

Lesson 8: Set high goals

Again, pretty plucky: when they just started out, says Farquhar, the Atlassian founders decided that their goal was to build a company with 50 000 customers worldwide:

“We wanted 50 000 customers around the world. This was when we had 500 customers. So we’re thinking big, and we found that sort of challended people’s thinking.”

Today, ten years later, Atlassian has 23 000 customers worldwide, according to their website (halfway there!).

You can hear echoes of bootstrapper’s bible ‘Rework’ by 37signals where Farquhar says:

“Today, many people seem to want to flip a company fast. I’ve always wanted to build something that’s going to survive beyond me. An HP, so to speak”.

via Businessofsoftware.org

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About the author

Raf Weverbergh

Editor of whiteboard. Raf Weverbergh was a magazine journalist whose work appeared in magazines like Rolling Stone, Playboy, Mail on Sunday, Publico and South China Morning Post. He is the co-founder of FINN, a corporate communications agency where he advises startups and multinationals on their PR and Mustr, the easiest media database for PR professionals. You can contact him on Twitter, Linkedin or Skype (rafweverbergh).

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