Acquisitions and venture funding within an ecosystem

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Google "who acquired who this week" and you will find a plethora of articles rounding up the latest mergers and acquisitions, notably in the tech sector. Apparently, Apple buys a company every few weeks. Atlassian, too, is no stranger to M&A, but something potentially more interesting than these high profile acquisition stories is the number of companies acquired by other companies within Atlassian's own ecosystem.

Atlassian Marketplace is the app store for Atlassian products. The vast majority of the apps are built by third party developers, and many companies have formed around them as a result of the opportunity to tap into Atlassian's large customer base. How big of an opportunity? Well, Atlassian Marketplace just recently passed the $1B threshold for lifetime sales. 75% of this revenue has gone straight into the pockets of the developers who build the apps, and some of them have really made a killing: 50 of the companies that make and sell apps in the Atlassian Marketplace are grossing $1M or more in annually recurring revenue. All of this has made Atlassian's ecosystem ripe for venture capital money and acquisitions.

Better together: acquisitions upon acquisitions

One of the earlier acquisitions was Appfire’s purchase of Bob Swift Atlassian Apps in 2013. At the time, Appfire was a well known Atlassian Solution Partner providing services to Atlassian customers, but the founders were actively trying to become a 100% product-focused (i.e. app-focused) company. Bob Swift had created a range of automation, workflow, and business intelligence apps that made his own work easier as an Atlassian administrator, and as soon as the Atlassian Marketplace launched he listed them publicly. It quickly became a full time job to maintain them, so Bob was glad for the opportunity to gain additional traction and support with Appfire's team via an acquisition.

Two years later, Appfire acquired Wittified, another up-and-coming Atlassian Marketplace partner. Wittified's story is similar to Bob Swift’s: before the acquisition, Wittified was a two-person shop with a growing portfolio of apps. They needed help expanding support, marketing, operations, and more — and these were all things Appfire was able to provide. Joining the Appfire family allowed them to help more customers scale up their Atlassian platforms, faster and more effectively. Now Wittified's cofounders, Daniel and Julia Wester, are a year into their new venture: 55 Degrees. On why they started over, Daniel says, "Atlassian has grown a lot since we started Wittified and the opportunities have grown with it. The state of the Atlassian cloud today allows us the capability to build up a business primarily focused on cloud which is new and exciting."

As for Appfire, they have grown to nearly 100 employees with over 60 apps in the Atlassian Marketplace and are continuing to pursue additional app and partner acquisitions in 2020 and beyond.

This next acquisition is reminiscent of particularly famous Silicon Valley origin stories. Kanoah was founded by two developers in a garage in Brazil who sought to push the boundaries of what Jira can do. They developed Kanoah Tests, Kanoah CRM, and Kanoah Checklist as apps for Jira Server. 18 months after launching Kanoah Tests, they were acquired by Adaptavist and moved to HQ in London. Adaptavist was one of the first app developers to be really successful on Atlassian Marketplace with ScriptRunner, a tool that lets you customize the Jira workflow. Combine that with Test Management for Jira (rebranded from Kanoah), and you have a powerful automated test management framework right within your software planning tool. Since the acquisition, they have been able to serve even more customers by bringing TM4J to Jira Cloud.

This wasn't the only acquisition in the test management space. In 2018, SmartBear added Zephyr to its portfolio of test management tools for software teams. Zephyr is a test management tool that works natively inside of Jira, and it was one of the top-grossing apps on the Atlassian Marketplace at the time of acquisition. It even has its own API, ZAPI, for further customization should teams require it. Given Jira's popularity in the agile software development space, a tool like Zephyr was a must-have in SmartBear's tool belt. Justin Teague, CEO of SmartBear, said, "The acquisition of Zephyr will establish SmartBear as a leader in test management and broaden our portfolio of high-impact, easy-to-use tools, which includes SoapUI, TestComplete, SwaggerHub, CrossBrowserTesting, Collaborator, and AlertSite."

Gliffy is another top performer in the Atlassian Marketplace. This popular diagramming tool can be used standalone, but its apps for Confluence and Jira have been a key part of its success since its early days as a company. In late 2018, Gliffy was acquired by Rogue Wave, which in turn was acquired by Perforce Software a few months later. Perforce offers tools for all stages of the software DevOps cycle. Because Gliffy helps teams visualize their projects with things like flowcharts and wireframes — a key part of the DevOps loop — it made them (via Rogue Wave) a prime candidate for acquisition.

Capital investment for accelerated growth

Tempo was an early pioneer in the Atlassian ecosystem. What started as an internal tool for IT consultants to track their time in Jira soon became a top-selling app in Atlassian Marketplace called Tempo Timesheets. Tempo has since developed other tools for Jira around planning and budget management and has its own set of APIs for these tools. Tempo's apps make it easy for companies to manage resources, all with the power and familiarity of Jira, and is used by a slew of household name companies like Disney, Starbucks, and BMW. Enter Diversis Capital, which invests in middle-market companies to help bring them to the next level. In 2018 they acquired a controlling interest in Tempo and are now the majority owners alongside Origo, Tempo's original founder. Diversis co-founder Kevin Ma says, "Our investment into Tempo and the Atlassian Ecosystem has already been a strong addition to our portfolio. We are excited to see this accelerating early growth and have high expectations for 2020 and beyond." Tempo has NPS and CSAT scores in the top decile quarter after quarter.

Most recently, Australia-based ThinkTilt secured seed round funding from two co-investors plus the Queensland government via its Business Development Fund, totaling more than $1M USD. ThinkTilt is the maker of ProForma, an app that allows Jira users to create custom forms without having to navigate Jira's custom fields settings. ProForma has quickly been gaining popularity amongst non-technical teams and has the potential to expand to other Atlassian products, and fast. Their secret to rapid development? A single codebase that allows each app to work across all three of Atlassian's deployment options (cloud, server, and Data Center). With this new funding they have been able to expand the team, make improvements to ProForma's UI, and develop a second product which will launch in 2020.

As the proliferation of SaaS continues, we are seeing a landscape that is less a collection of monolith companies, independent and siloed, and more an interconnected web of ecosystems. The companies above are prime examples of this phenomenon, particularly those whose apps have their own APIs so that they can create connections with other Atlassian Marketplace apps (talk about meta!). They show that in order to be viable for mergers and acquisitions or capital investment, SaaS apps playing well with other SaaS apps is not a hindrance in today's market, in fact it's a requirement.

In addition, several of the examples above show how the founders didn't need to go "all in" on their first Atlassian apps; they were able to create them as side projects in tandem with their day-to-day work. That's because Atlassian makes it easy to get started building apps and integrations with our products through comprehensive documentation, support, and a massive community of 25,000+ developers. Get started building on Atlassian today.