On Friday morning, Okta crossed over from the startup world into the big-leagues and became a public company.
Its stock market debut went well, with shares pricing at $17 and opening up 40% at $23.56.
It’s been an exciting journey for Todd McKinnon and Freddy Kerrest, who launched their company in 2009 right after the economy melted down.
Okta offers companies a way to manage all their employees’ passwords to other cloud services. It makes it easy for IT departments to add or remove employee access to accounts like Office 365, Google Apps, Salesforce, and the like.
McKinnon and Kerrest were early employees at Salesforce, but when they left to do their startup they did not get Salesforce CEO’s Marc Benioff’s blessing, or any of his angel cash (even though he’s an avid angel investor and frequently backs his former employees’ startups).
That didn’t hurt Okta in the long run. It became the first cloud company that VC Andreessen Horowitz backed, and that was back when it was just a startup, too, not the powerhouse it is today.
Ben Horowitz wrote Okta a check before his office had furniture, Okta tells us.
But while Andreessen Horowitz chipped in half of Okta’s seed money, $500,000, the other half came from tech angels in the industry and lots of friends and family who wrote “$50,000 and $25,000 checks,” McKinnon told Business Insider.
Okta was one of the first companies really tackling the cloud password problem back then, and people really didn’t understand what it was trying to do.
“When it was just Freddy and me, you had to really believe. No offense to my cofounder and myself but [success], it was a long way out,” McKinnon says.
Among the believers and angel investors was Kerrest’s younger brother, “who was really supportive,” McKinnon says.
Interestingly, none of the wealthy execs at Salesforce – their former coworkers – were willing to pitch in save one: super angel Maynard Webb, a Salesforce board member.
As Okta proved itself over the years, it was able to raise gobs of money, over $230 million with a valuation of $1.1 billion. It also gained big competitors, including Salesforce and Microsoft.
Webb and Kerrest’s brother kept their faith, as did all the early seed investors, who still have their stakes today, McKinnon says. Many of them, including Webb, came to New York to celebrate the IPO, too.
And they were rewarded. With the healthy IPO, Okta’s valuation hit over $2 billion.
“Believe me, the company is worth a lot more now than it was back then.” Todd says.
That’s true. In 2010, for instance, right before VCs made their first fund investment of $11 million, they valued Okta at $24 million, according to PitchBook.
And there was one particular moment when McKinnon and Kerrest knew their first day as a public company would be a good one, a great big thank you to these early investors, as well as to the new ones they were bringing on as a public company: they literally received a sign from the heavens.
They had just completed their two-week road show. (“It was a whirlwind. 60 1:1 meetings, five lunches, eight cities in eight days,” McKinnon describes.)
On Thursday, the day before the IPO, they and their bankers were on the 43rd floor of the Goldman Sachs building on Wall Street, sorting through the list of bids from institutional investors. They were debating their opening price, with some arguing to charge more, some lobbying to charge less. Okta had already raised the range from $13-$15 to $15-$17.
It had been rainy and cloudy all day so “you couldn’t see anything” out of the windows, McKinnon describes.
“And finally we settled on $17 because it was the best price for the long-term shareholder base we’re trying to build,” he said.
And at that exact moment, “The clouds lifted and the sun came out. Not lying. It was like ta-da! We took a picture.”
Less than 24 hour later, that omen proved true.
At $23 a share, McKinnon’s 9% stake is worth over $198 million. Kerrest’s nearly 6% stake is worth $118 million. So it wasn’t a bad day for the founders either.
Here’s the photo:
- Todd McKinnon