Atlassian's UK-IPO plans: Smart business isn't a disaster
Start-up advocates miss the point
Australia's IT patriots' heads are spinning today, with news that Oz innovation poster-child Atlassian is going to move its head office to London, in preparation for an IPO it plans later this year.
The move has triggered an epic bout of hand-wringing at Australia's inability to keep its entrepreneurs at home. This, inevitably, re-ignites the “why can't we imitate Silicon Valley”, along with accusations that companies move offshore because this country is “unfriendly to business”.
Before I discuss the “Aussie! Aussie! Aussie! Oi! Oi! Oi!” patriotism that clouds peoples' thinking on such topics, I'd like to address Australia's alleged unfriendliness to business, particularly relative to England, where Atlassian is relocating its headquarters.
Australia's GDP has grown each year since 2007 – and from 2009-2012, the World Bank states the average growth has been 2.4 per cent. In the same period, the UK's GDP growth has been an average of -0.575 per cent. I fail to see how an under-performing economy can be described as “friendly for business”, except in this one characteristic, that the UK has lower corporate taxes than Australia.
What Atlassian is doing, in other words, is choosing to file its corporate tax returns in a country where it's cheaper to do so (with, we must assume, advice from the two Accel Partners Rich Wong and Kirk Bowman who sit on its board, courtesy of their $US60 million investment in the company).
The possibility that an IPO might mean a move offshore should have been foreseen since at least 2010, when Accel Partners first took its stake, since it would be looking for the best possible payout for its investment.
As El Reg noted in 2012, the addition of ex-Microsoftie Doug Burgum as chairman also hinted that the outfit was looking at strategies other than life forever as a hipster start-up.
Whether or not it had firm plans to relocate its head office, Atlassian was still happy to wrap itself in the flag during 2012. Here's how it was describing the Australian scene to the Sydney Morning Herald last June:
“Atlassian sees being an Australian company as a competitive advantage because there is less competition for talented engineers here. But they still cast a wide net for employees, recently driving a bus around Europe looking to hire 15 engineers in 15 days (over 1000 people applied)” (emphasis added).
So the first take-out from the Atlassian move is that like any other company anywhere in the world, when IPO time comes, it's structuring the business for the most favourable domicile. If that means seeking a better corporate tax rate, that's what's going to happen.
The Australian press is quick enough to slam the likes of Apple and Google for structuring their operations to minimise tax – but when a local golden-boy company does likewise, it's because Australian governments don't support our local startups.
Vulture South would also note that there's no apparent threat to the company's Australian operations – stories such as this, from Bloomberg, do not mention any intention to dump any local staff. The domicile is, at this stage, merely a convenience in the C-suite.
If Atlassian were to relocate its developers, it probably wouldn't be to London. The company already has operations in San Francisco, Amsterdam and Tokyo – but not London.
But that's purely speculative – and it's not something that would be accomplished easily. Given its oft-stated focus on the quality of its products, it would be foolish for Atlassian to sacrifice the continuity of its best and brightest.
As Vulture South has already noted, the relentless calls for Australia to try and recreate one of history's great accidents, Silicon Valley, are fruitless. Silicon Valley wasn't built by government or policy, and every attempt by governments to replicate the Valley experience has been a failure. ®