Weekly Update #125: Atlassian's IPO

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Hello Investors,
 
Atlassian: the Australian tech company going public this week
In what will probably be the last tech IPO of a slow 2015, Atlassian will begin trading on Thursday at an estimated $4.1 billion valuation. Here are some important facts about Atlassian:
  • Cash-flow positive: Atlassian has been profitable for the past 10 years of its existence, relying on a supremely scalable business model that involves easy sign up and conversion and zero salespeople. In fact you could argue they didn't even need to IPO, as the company was still sitting on $208 million in cash.
  • Consistently growing revenue: trailing twelve-month revenue has grown 50% compared to a year ago, which should satisfy public market investors when coupled with the company's profitability. Sales growth has been scarily consistent over the past 10 quarters as well:
  • Home-grown growth: the company's two founders will still own nearly 87% of the company after the IPO! In fact, the company only appears to have taken outside capital once in its history, from Accel Partners (known as one of the early backers of Facebook) back in 2010. To put this in context, Renaud Laplanche, the founder of LendingClub, only owned 4.1% after his company's IPO in December 2014.
  • Speaking of Accel Partners: the only venture capital firm to invest in Atlassian will generate quite the return. Their $60 million investment will be worth $512 million at the slated IPO price. Note that this takes into account that Accel quietly sold a small stake in a private secondary deal to T Rowe Price and Dragoneer Investment Group in 2014 for $16/share (the IPO is planning to price at $19-$20/share).
 
Many of today’s unicorn companies are staying private longer than in the past, which means they’re putting off the day when their finances and operations are subjected to the scrutiny of public markets.
 
Alphabet, Google’s newfangled conglomeration, arrived in August, but we will not see its first financial figures until January, when the company reports two sets of earnings — Google and the “other bets.
 
Hang around venture capitalists in Silicon Valley and a clear sense of fear pervades the air. The main topic of conversation these days seems to be of humbled or fallen unicorns. Many are writing down the value of their holdings. This correction is driven by the impact of global macro changes on the late stage funding environment.
 
Thanks,
Phil Haslett | Founder & Head of Investor Relations | EquityZen 
 
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