Unpacking Atlassian’s Acquisition Of Trello
Wrapping up my first CES/Vegas retreat, I boarded the plane to check Twitter to see — lo and behold — that Trello had been acquired by Atlassian for $425M in a great, quick early-stage venture outcome. There’s quite a bit to unpack here, so I’ll just leave a few thoughts here but would love to hear more from the crowd about the implications of this move:
1/ Accidental Happenings and Side Projects: I do not mean to suggest Trello’s success and outcome is accidental, but rather that it doesn’t appear (from afar) that Trello had a normal birth or childhood. Trello was created inside Fog Creek Software, co-founded by Joel Spolsky, and then spun out in 2014 and funded by a mix of seed investors and early-stage VCs. Spolsky became CEO of Stack Exchange and was Chairman of Trello, and I believe another Fog Creek founder ran Trello. As it started to grow, someone else ran Fog Creek. This may be fodder for another post at a later date, as the genesis of this outcome seems both accidental and also a bit looser, more creative than the traditional business rigidity with which we read about in countless startup “how-to” blogs. (Fun update: Per my friend, Sean Rose: “when Trello was still part of Fog Creek, it was funded via Fog Creek employees opting to have their bonuses go to the project.”)
2/ Cross-Platform Architecture, Mobile Card Format, and Business Integrations: Slack launched cross-platform from day one, on web and mobile. I am not exactly sure of Trello’s history — it seems if they were web-first, mobile responsive, and then launched for iOS. Additionally, the interaction model of Trello featured boards (like Pinterest), which displayed nicely as cards in a mobile app. Finally, the Trello team had quietly built many storage and business process integrations into their offering, giving some of them away as a hook and charging larger teams for the privilege to stack them up. (Trello also didn’t have thousands of integrations, but enough to make customers happy — more integrations likely doesn’t mean they’re all useful.)
3/ Consumerization of Enterprise: This has been an “eye-rolling” buzzword, but we have to accept it is an apt descriptor. Following the success of prosumer designs in apps like Slack, Asana, Wunderlist, and others (more on this below), Trello’s design delivers a lightweight experience to users with enough infrastructure and power to fuel large teams across many different platforms. Trello simply feels like a consumer product, something that may have been designed inside Google or Facebook — but much better, cleander.
4/ Capital Efficiency: Assuming Crunchbase and my sources are correct, Trello is (relatively) a modern case study in capital efficiency. Having only raised about ~$10M, Trello seemed to not only grow its team (over 100) and its user base (19M+) quickly, they also marketed a three-tier freemium product that charged more to small businesses and even more for enterprise customers. In VC-math terms, Trello likely produced a 8.5x realized (mostly in cash) exit for its investor in less than three (3) years (which positively impacts IRR) and didn’t have to raise round after round of capital. Compared to some of its peer products like Asana and Wunderlist, among others, Trello has been relatively capital efficient relative to its exit value. (A reader notes that it’s spinout from Fog Creek also adds to its capital efficiency.)
5/ Enterprise SaaS consolidation: For years now, we have witnessed different varieties of M&A across enterprise SaaS, whether it’s an incumbent like Salesforce scooping up new products or private equity shops buying small-cap public companies, there’s more and more pressure in the environment for the larger companies to expand their offerings to grow, as well as financial incentives for buyouts led by managers who can profit from creatively rolling-up disparate end-point solutions. In a world where collaborative products like Slack or Facebook @ Work or Microsoft Teams are growing and/or boast infinite financial resources, other growing incumbents (like Atlassian) need to prepare for a long-term product and mindshare battle and scooping up Trello is a good step in that direction. As Fred Wilson predicted a few days ago for 2017, “The SAAS sector will continue to consolidate, driven by a trifecta of legacy enterprise software companies (like Oracle), successful SAAS companies (like Workday), and private equity firms all going in search of additional lines of business and recurring subscription revenue streams.”
6/ “If I Can Make It There, I’ll Make It Anywhere” – Another solid exit for the NYC startup market, and there are bigger ones to come. Despite Trello being young and a SMB/enterprise product from NYC, it recently internationalized to a few non-English-speaking markets worldwide. As a bonus, while I don’t know the team, from what I hear from friends, Spolsky, Pryor, and their team are well-respected and seem to have done things the right way — their way. Congrats on building a great product.