Scott Farquhar remembers desperately wanting a computer. He was about 11 years old, the eldest of four children in a working-class family in western Sydney, and the early 1990s recession was biting hard.
"I wanted a computer really badly because my friend had one and I knew you could play games on it," Farquhar recalls. "I remember emotionally blackmailing my parents and at one stage crying to get a computer – I feel horrible now, because my parents couldn't really afford one."
A year or two later, his father managed to buy an old Wang computer through his work. It was so outdated that it wouldn't even run Microsoft DOS, but he spent nearly a year trying to get it to play games, without success. Farquhar's primary school taught some basic computing and he won the technology prize in Year 6, but he describes the computing education at his selective public high school as terrible to the point of non-existent. His next exposure to computers was not until university.
On the other side of Sydney, the Cannon-Brookes family was settling into life in the eastern suburbs. Mike's father is Michael Cannon-Brookes, who, until recently, was better known in business circles than his son. He arrived in Australia in 1984 to set up Citibank and served as managing director. The family was English but Mike, the youngest of three, was born in the US, moved to Taiwan when he was six months old, Hong Kong when he was three and was then sent to school in England. For a few years, until the family decided to settle in Sydney, Mike remained at boarding school and made the long-haul flight to visit his family in Australia four times a year. He was still in primary school when he bought his first computer with Qantas Frequent Flyer points.
"Because of the flying, I had tons of Frequent Flyer points and back then points were worth something so I got the catalogue every year and got some shit," Cannon-Brookes says. "My parents were Apple fans and had Macintoshes but I got my own computer, not the one in the lounge room, when I was eight or nine. It was an Amstrad PC20 and a real hunk of junk to be honest but . . . it sparked my interest in computers. It was a big, big deal."
His schools also had well-equipped computer labs and Mike later persuaded his parents to install the internet at home – in 1991, before the world wide web. He finished school at Cranbrook, one of Sydney's most exclusive boys' schools.
In 1998, Cannon-Brookes and Farquhar, both aged 18, landed in the same scholarship course in business information technology at the University of New South Wales. They met on the first day of university but did not click straight away. As Farquhar puts it, "People from Cranbrook had a bit of a swagger about them before they started university."
But first impressions gave way to friendship and a strong camaraderie developed among the 40-odd scholarship students. "We came from all walks of life but we were all nerds who loved computers," says Niki Scevak, a university classmate. "From the very first day, people hung out and were friends."
RISING STARS
Scott Farquhar and Mike Cannon-Brookes are not yet household names but that is changing fast. As co-founders and co-chief executives of software company Atlassian for the past 12 years, they are one of the most successful double-acts in Australian business, becoming billionaires for the first time on this year's BRW Rich List. The company they founded with $10,000 of credit card debt straight out of university now has 950 staff, generated roughly $US200 million ($212 million) in revenue in 2013-14 and is preparing to float on a US stock exchange. Atlassian has been profitable for every quarter since the outset and famously does not employ sales staff, selling exclusively online. Although the media often describes its products as tools for software developers, the software is actually used widely by business teams. Flagship product JIRA is for project management, while the second-biggest, Confluence, aids team collaboration. The company makes software development tools as well, the smallest part of the business but a sweet spot for growth in a world where software is embedded in everything from running shoes to cars.
Customers include NASA, Audi, Telstra, Cochlear and Virgin Media and, with close to 94 per cent of revenue coming from overseas, they are one of Australia's biggest exporters outside the resources industry. Like the Chinese merchants who sold picks and shovels in the gold rush era, Atlassian has ridden to the very top of the tech wave in part because it is in the business of making and selling technology, as opposed to those who use technology to sell something else – be that real estate, jobs or clothes. Importantly, it has shown that a global technology company can be based here.
Cannon-Brookes and Farquhar were conservatively valued at $1.1 billion each on the 2014 BRW Rich 200 list. Indeed, 16 years after they met, the pair have plenty in common beyond their age – both 34 – wealth and shared work history. They served as best man at each other's wedding and both live within a few kilometres of the Sydney CBD. Cannon-Brookes and his wife, Annie Todd, live in Paddington with their two young children. Farquhar and his wife, Kim Jackson, live in Pyrmont and also have two young kids.
Both wives have careers of their own. Todd is a fashion designer, who recently launched her own label, House of Cannon, while Jackson is an investment banker. "Mike's obviously a busy guy but he's also a hands-on dad . . . and his family is very important to him," says Carrie LaFrenz, a journalist who has known the couple for many years and was one of Annie's bridesmaids. "Mike always makes family time – he is the sort of person who will travel to San Francisco for a meeting and literally be back the next day because he needs to be at his daughter's soccer match or to allow Annie to have a meeting she prescheduled for her business. I think that speaks volumes about him."
Farquhar and Cannon-Brookes talk about managing their calendars to allow family time, and try to give their employees similar consideration. "It's important to both of us," Farquhar says. "You've got 168 hours in a week and you choose how to spend it."
TAKING A PUNT ON AN OUTSIDE CHANCE
Success does not appear to have changed their lives too much. Cannon-Brookes still wears his trademark T-shirt and baseball cap, but has started to accrue a few trappings of wealth, with a weekend house in Sydney's Palm Beach and a Tesla electric car on pre-order. Farquhar still drives a beat-up old Subaru but has "splurged on a personal trainer . . . to keep up with the kids".
Cannon-Brookes already had one start-up under his belt before Atlassian. Partway through his degree, he went part time to co-found a company with Scevak. They raised a small amount of money from family and friends, rented space at the Australian Technology Park and built an internet bookmark management tool called The Bookmark Box. They sold it to another dotcom called Blink.com, making what Scevak describes as a "small but successful exit" in 2000 before the dotcom crash a year later. Back then doing a start-up was a maverick choice, but Cannon-Brookes is now back at UNSW as an adjunct professor, advising students on building start-ups. "They have come full circle, they like me now," he says.
Farquhar still has a copy of the email that Cannon-Brookes sent to him in June 2001, inviting him to co-found a company. "Bored of studying, Atlassian is far more interesting," the email said. It went to a few of their classmates, but Farquhar was the only one to say yes. He had found his internships in the corporate sector unsatisfying and was willing to take a punt on something different.
"The original goal was $48,500, which was the PwC graduate salary at the time," he recalls. "Mike and I thought that if we could earn that and not have to wear a suit and not have to put up with big company bullshit then we'd be ahead." As it turned out, they could only afford to pay themselves $15,000 each for the first two years. "It was basically survival mode," Farquhar says.
The timing was lousy, with the technology industry in the doldrums after the dotcom crash, but it forced them to be frugal and hustle for business. At first Atlassian provided support for another company's products, based out of the shared house in Glebe where Scevak and Cannon-Brookes lived. "One time we were having a party and they got a support call and it was something quite tricky, so Scott was upstairs with all this loud music, trying to solve a customer problem at 2am with a few drinks in him," Scevak recalls.
One of the company's first invoices paid for the co-founders and another friend to go to the Java One conference in San Francisco, where they stayed three to a hotel room with a shared bathroom down the hall. Oracle had bought the company whose software they were supporting, so they went down for a meeting, taking the train and then traipsing miles across Redwood City to avoid paying for car rental. "It was a ridiculously hot summer's day and we were wearing suits," Farquhar says. "Thank goodness they didn't ask us to work for them because we probably would have said yes."
When they decided to build their own products, Farquhar took a short consulting gig in Amsterdam to fund time for Cannon-Brookes to write the code for JIRA. For a time, they sublet space in a building in Sydney's Kent Street. "The building was so cold that Mike had this trick that at 4am you'd go to the sink and turn the hot tap on to warm up your hands so you could keep coding for another four or five hours," Farquhar recalls. The first employee was an Irish backpacker called Owen who had heard of Atlassian from a user and walked in off the street. Most of the other early employees were classmates from UNSW. "We knew they were smart," Cannon-Brookes says.
LEAN START PAYS OFF
The lean start-up years are the basis of their wealth now – the fact they were cash-flow positive from day one and had no outside investment for the first eight years is the reason they still own two-thirds of the business between them. The company has never had funding, but there have been two big secondary investments. Farquhar and Cannon-Brookes sold 20 per cent to US venture capital firm Accel Partners for $US60 million back in 2010 and they have since given some equity to staff. In April this year, T. Price Rowe and Dragoneer Investment Capital bought about 6 per cent of the company from Accel and some employees, in a deal that valued the company at $US3.3 billion.
Farquhar says the Accel investment came after a period of soul-searching about their long-term commitment. They both took time off and went travelling around the world with their girlfriends (now wives). Refreshed and keen to build the business, they sat down to work on strategy.
"We knew it needed to go from the Mike and Scott show to building a great team of senior leaders, building a great board, and diversifying the shareholder base over time," Farquhar says. "We thought that getting venture capitalists in who'd seen that movie before was the next step for us."
In a reversal of the usual courtship, about 80 funds had contacted Atlassian wanting to invest over the years and the founders had kept track on a spreadsheet. They whittled it down to a shortlist of six, flew over to San Francisco for three days of presentations, and said the highest bid would win.
Four years later, an initial public offering for Atlassian is widely anticipated. The founders acknowledge this is the "logical next step for the business" but insist it is not imminent. They confirm that the listing, when it happens, will be on a US exchange such as Nasdaq, not the Australian Securities Exchange. The US has the biggest capital markets and the biggest technology market so it is where they would get the biggest valuation and flexibility over whether to have super-voting shares, a share class that gives company insiders greater control.
A public company structure suits the founders' long-term vision of a firm that will endure long after they have gone. Neither they nor the company need the money. They can go at their own pace because they own most of the business, other investors are not pushing for an exit and the company is profitable. "We have the luxury of being able to do things properly so that we set up the business for the next 10 years, not to get through some event," Cannon-Brookes says. "We're certainly preparing, but that preparation could take years."
As part of that preparation, Atlassian moved its legal headquarters to London earlier this year. There are no employees in the UK and no plans to open an office, but it provides a familiar jurisdiction for global investors – one with enough commonality with Australia to be practical. Thus Australia's tech darling will become an English company listed on a US exchange. The founders say they'll continue to live in Sydney and Atlassian will remain Australian in its physical presence, with a second big office in San Francisco. They don't plan to minimise tax by emulating the complex global profit-shifting arrangements of companies such as Google and Apple. "We still bring all our revenue through Australia," Farquhar says, although he concedes the global tax rate may be slightly lower as a result of incorporating in the UK.
GEEK-STYLE CORPORATE CULTURE
Atlassian's Sydney digs are the 1920s headquarters of the Bank of NSW on George Street, across from the old General Post Office on Martin Place. It is a grand building, replete with marble and chandeliers, which has recently been restored and features on several walking tours of historic Sydney. Westpac still has the ground floor while Atlassian has four-and-a-half floors and is soon to take another one. The front desk for Atlassian has the usual corporate flowers but sign-in is via a tablet and, in a reflection of the pace of hiring, the default option under "reason for visit" is "I'm here for a job interview".
The office space feels open and airy, with natural light coming from windows on three sides. One wall panel is covered in photos from Flickr, anything tagged #Atlassian. The toilets have customer profiles posted on the walls – not real people, but personas to help remind staff of the end user: Alana the Aware, William the Wise, Emma the Eager, Harvey the Hesitant. There are Silicon Valley-style perks: a fridge full of drinks, boutique beer on tap, a corporate pick 'n' mix lolly station, table tennis and a pool table. There are video games but also a trolley full of board games with geek favourites such as Settlers of Catan, Dominion and Ticket to Ride. The company has regular poker tournaments; Cannon-Brookes is apparently a bit of a poker shark.
Farquhar has said in the past that he wants "to ruin employees so they never want to work anywhere else . . . and rue the day they left Atlassian". Even former employees who left because they were disappointed with various aspects of the company describe the culture as fun – one former employee recalls a team rafting trip on the Nepean River in Penrith.
The annual party at the end of the financial year is now a tradition, but Farquhar recalls the first one, a treasure hunt with clues scattered across town in places such as the NSW State Library and challenges such as getting a photo of yourself in the driver's seat of a taxi. Cannon-Brookes got a shock when arriving at a recent family and friends day: "I was walking there with a mate pushing my daughter in her pram and I was like, 'I think it's close to that carnival' but when we got closer we realised it was that carnival – it was like we had created our own Easter Show, it was insane."
A couple of people with knowledge of the company privately describe the culture as "a bit like a frat house". Like many technology companies, there are more men than women. Atlassian was in the news in June because an engineer made a presentation at a conference in Germany where he described his software as like a "beautiful but demanding girlfriend". Cue social media backlash and a public apology from the CEO.
Cannon-Brookes wrote in a blog post that the "offensive slide" did not reflect the company's values, nor those of the co-founders, and that the employee would be counselled. "Quite simply, it's not OK. Sexism is a difficult issue for the tech industry, and today we didn't make it any better."
Former employee Donna McGahan was happy with the apology. She spent seven years at Atlassian, starting in tech support in 2005 and working her way up to customer experience manager in 2013. As a woman in a technical role, she was outnumbered but found the working environment supportive. She is now married to an Atlassian employee and says she still considers the company "like family". When asked about the "frat house" comment, McGahan says it was true only to the extent that beer was central to many social activities. "They always made sure I had wine," she jokes.
COMPLEMENTARY SKILLS
From the outset, Cannon-Brookes and Farquhar were clear they wanted Atlassian – so named after Atlas, because of his legendary service to humanity and their own desire to provide excellent service – to do more than create useful software. The company was still tiny when they pledged 1 per cent of equity to charity, a stake that is now worth $US33 million on paper. The Atlassian Foundation is also endowed with 1 per cent of profit and 1 per cent of employee time and donates software licences to non-profit projects and charities. Atlassian is one of the biggest corporate donors for Room to Read, a US-based charity that builds schools and libraries in the developing world. Room to Read founder John Wood, a former Microsoft executive, describes the pair as "straight shooters". He met them at a Room to Read wine gala in Sydney and within a week they had contacted him, suggesting a social enterprise model in which they would sell $10 licences to start-ups and donate the proceeds to the charity.
Employees describe the founders as having complementary skills and personalities. "Mike's the crazy ideas guy and Scott brings a lot of balance to that relationship," says Nick Menere, an Atlassian development manager who knew Farquhar in high school and both founders at university. Others use similar terms: Cannon-Brookes is the "mad scientist" and the "crazy lifeblood of the company", while Farquhar "makes the details work".
Farquhar himself says he is the "responsible one", while Cannon-Brookes has a "reckless" streak that is as much a strength as a weakness.
"Mike is one of the most creative people you'll meet," Farquhar says. "He's very good at imagining stuff that doesn't exist yet." Cannon-Brookes was the one who insisted the company build a second product, back when the company had only 10 people and was barely coping with the one it already had.
Cannon-Brookes says Farquhar has always been a good leader; he was class president at university. "He is awesome in a crisis situation," Cannon-Brookes says. "We had a security incident . . . Scott was on his honeymoon so he bailed on his honeymoon to come back. By the time he came back, I was just about expiring, it was easily the most stressful seven-day period of our lives. It's instances like that where you see the team rally and the leaders shine." Farquhar grimaces when reminded of the story. He and his bride were in Botswana and to get home they had to take a long car ride through the Kalahari Desert, two light planes, a plane to South Africa and then a plane to Sydney. "I had to have another honeymoon with her later," Farquhar says.
WORK ETHIC LEARNED YOUNG
Farquhar's work ethic goes back to childhood when he received his first non-A grade in year 6 at Castle Hill Public. His teacher, Vicky Crawford, gave him top marks for performance but less for effort. "When I gave him the B or C or whatever it was, I didn't realise he'd never had one before and obviously he went home quite down in the dumps," Crawford says. "I could just tell he was coasting and, because he had the brains, he wasn't pushing himself."
It was the wake-up call Farquhar needed. He finished the year as dux and got into James Ruse Agricultural High School, a top selective school, without coaching, where he continued to do well. Crawford was surprised and touched to receive an email from Farquhar last year. "In effect, you told me I was phoning it in," he wrote. "I can still remember the shame of having to explain to my parents why I didn't get a flawless report card. Since then, I've tried my best to not phone it in and I've managed to be reasonably successful in the business world, I think in no small part to the lesson you taught me 22 years ago."
Atlassian's success has been a game changer for the technology industry and start-ups in Australia. The Accel investment put Australia on the map for Silicon Valley venture capitalists and set the precedent that Australian entrepreneurs could build a global business here, rather than moving to San Francisco. Accel went on to invest in 99designs in Melbourne and OzForex in Sydney, while Sydney-based Bigcommerce has raised a total of $US75 million from other VC funds.
Their former classmate, Niki Scevak, is now a co-founder of venture capital fund Blackbird Ventures and start-up mentoring and seed fund Startmate. Scevak says Cannon-Brookes and Farquhar play a huge role in the start-up community as investors and mentors but, above all, as a source of inspiration. "The example they set in setting the bar at a world standard and creating something that is truly iconic in the local start-up scene is the most powerful thing they can do to help other people."
Cannon-Brookes and Farquhar are mentors in Startmate and the largest investors in Blackbird. Cannon-Brookes has separately invested in Shoes of Prey, an online retailer that lets customers design their own shoes. He also sits on the board of banking technology company Tyro Payments, along with a bunch of bankers. Tyro co-founder and chief executive Jost Stollmann recalls Cannon-Brookes's due diligence before accepting the role was to spend a day with the Tyro engineering team. "He is cool, he's very smart and his mantra is 'growth, growth, growth'," Stollmann says.
Farquhar has sat on the board of online gift company Red Balloon and also offers informal mentoring for various start-ups. "We went through a funding round at the start of the year and, through that whole time, Scott was proactively checking in with us . . . and only later did I find out that it was the same time he was in the States working on [the T. Rowe Price] deal for his business," says Dave Greiner, the co-founder of software start-up Campaign Monitor, who met Farquhar at a start-up social event six years ago.
VOICE FOR START-UPS AND ENTREPRENEURS
Both men, but particularly Cannon-Brookes, have taken on a de facto lobbying role over issues facing Australian entrepreneurs. They have made their case in the media and private meetings with government ministers, arguing passionately that Australia needs to build its technology industry and move to an information economy, rather than basing everything on mining and resources. The two issues they have been most vocal about are the restrictions on 457 visas for skilled workers and the tax rules around employee share schemes. Cannon-Brookes says a company such as Atlassian needs to recruit people from overseas because they have "battle experience" in solving bigger problems. "If you take that away, you're basically telling us to stop growing." Employee share options are also a big recruitment tool for start-ups and Cannon-Brookes says the industry is stymied by the tax rules; Atlassian pays the tax on behalf of its employees, but most start-ups could not afford that. Scevak says there is no doubt that the Atlassian founders speak on behalf of the start-up community. "Whenever they say something there's a lot of weight behind their comments and the problems they're speaking about are problems they've encountered themselves, so there's a lot of authority."
Farquhar and Cannon-Brookes met 16 years ago and, in another 16 years, will be 50, a fact both men find hard to imagine. "Fifty is a long way off, or at least it seems like it," Farquhar says, when asked where he imagines himself at that milestone. "But seriously, I'd still like to be involved with Atlassian or making a meaningful impact on the world in some way. What really excites me is seeing how philanthropic efforts, such as what we're doing through our Atlassian Foundation and Room to Read in Cambodia, are helping those less fortunate. I hope we can have a real, positive influence in the world."
Cannon-Brookes jokes he doesn't even know where he will be at age 40, but is keen to continue "creating amazing things and learning every day", whether at Atlassian, another business, through a philanthropic venture, or just learning about life from his own kids. "It will be awesome," he says.
This article originally appeared in the The Australian Financial Review Magazine in the August 2014 edition. The feature won writer Caitlin Fitzsimmons the Technology Industry Journalist of the Year award at the IT Journalism Awards (aka The Lizzies) in May 2015.