Accel and Atlassian: Tech Monogamy at Its Best

Phil Haslett
Dec 10th, 2015

In Silicon Valley, it’s all about your brand.

A venture capital firm’s brand and reputation are particularly important when it comes to deal flow. And so it should come as little surprise that Accel Ventures was flying high in 2010:
Accel was Mike Tyson in Mike Tyson's Punch-Out for Nintendo. And it's good to be eponymous with Mike Tyson's Punch-Out.

Fifteen hours and 7,419 miles away......
Atlassian founders Michael Cannon-Brookes and Scott Farquhar were quietly building a software empire in Sydney.

Not just a software empire, but a bootstrapped one at that. Thanks to a cheaper source of engineering talent (Aussie developers earn 23% less than their San Francisco brethren) and a salesforce-free distribution channel (75% of sales are generated directly from their website), Atlassian had just celebrated its 5th consecutive year of profitability in 2010. They had 11,000 paying clients. Life was good.

As it turns out, Atlassian's growth was not so quiet at all. Accel had actually been tracking the company's explosive growth from a distance, noting that "the vast majority" of their portfolio companies were paying for Atlassian's products. 

And Rich Wong, an Accel partner, did what Accel had to do to invest: he leveraged Accel's brand. Quietly, Accel and Atlassian announced a $60 million investment in July 2010. No valuation was discussed.

And Atlassian never took another Silicon Valley dollar leading up to today's IPO.

Show me the money

We had to know: how much money did Accel Partners, the only venture capital firm to invest in Atlassian before the IPO, really make?

Channeling our inner Michael Burry, we dove into Atlassian's recent filings to shed some light on Accel's initial investment of $60 million.

Based on EquityZen's analysis, Accel paid $2.23 per share of preferred stock in 2010, which would correspond to 26.9 million shares (based on the $60 million investment).

At the time of the IPO, Accel owns 23.468 million shares (data here). Additionally, it's noted in Atlassian's F-1 filing (similar to an S-1, but for foreign companies) that Accel sold shares in a tender offer to T Rowe Price and Dragoneer Investments in March 2014:

from Atlassian's F-1 Filing
If we assume that the difference in shares owned by Accel between 2010 (26.9 million) and at the time of the IPO (23.468 million) is the number of shares that Accel sold into the tender offer, then Accel already made:

3,437,480 shares sold * $16.00 per share = $54,999,674

Effectively, Accel got almost all of their initial money back ($55 million vs their $60 million investment) by selling the 3.4 million shares last year.

The remaining shares, at a $21 share price, will bring $493 million in value for Accel. 

All in all, the investment will return 813% in less than 6 years. And no other VC will be able to tout that. 

And that's why it's all about your brand.
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