This week brought interesting news about two well-known business-software companies, Atlassian and Zendesk, that are great examples of next-generation SaaS companies making all the right plays.
In my first “Software Entrepreneur’s Playbook” post here, I wrote about Atlassian, which sells popular software-development and collaboration tools. Earlier this week, the Wall Street Journal reported that Atlassian had raised $150 million in new money from very smart public investors like T. Rowe Price, valuing the company at $3.3 billion. Wow!
But I’m not surprised by this huge valuation. Atlassian, whose founders started the company in Australia, is a classic SaaS winner for today’s market: Its products, including Jira, Confluence and Hipchat, are impeccably designed, for one thing, making them easy and intuitive for techies and novices alike to use as they create software. They’re also sold through a freemium model, and Atlassian has racked up impressive revenue to date without employing a traditional software salesforce. This company has never had a need to saddle salespeople with aggressive quotas and send them out golfing with big-time corporate execs; Atlassian’s products are so good they basically sell themselves. In other words, their products are bought – not sold.
Another great software company with foreign roots, Zendesk, announced yesterday it had filed for a $150 million IPO. Founded in Copenhagen in 2007, Zendesk—which reported revenue of $72 million last year—makes online help-desk software for businesses, helping them deal with customer-service issues online and over the phone. Zendesk’s business has exploded, and it has taken market share from competitors ranging from old-school, help-desk software companies like Remedy, Scopus, Vantive and Clarify to even newer, cloud-based products like Salesforce’s ServiceCloud.
Why is Zendesk winning? Because, like Atlassian, Zendesk sells well-designed, easy-to-use products; they are simple to implement; they are sold through a freemium model; and they are optimized for mobile.
These two companies are great templates for software entrepreneurs to replicate if you want to make it to the big time.