Arik Hesseldahl

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Seven More Questions for Okta CEO Todd McKinnon

todd_mckinnon-featureIt has been more than two years since we first came across Okta, the startup that aims to make it easy for companies to manage who can and can’t sign in to all the cloud computing services they use. The company has been going places since then.

Late last year, it landed a significant round of venture capital funding, a $25 million Series C led by Sequoia Capital. Prior investors Andreessen Horowitz, Greylock Partners, Khosla Ventures and Floodgate all participated, too. The round nudged Okta’s total capital raised to north of $52 million.

The funding announcement was accompanied by a larger vision statement about what Okta aims to achieve. In that statement, CEO Todd McKinnon argued that “identity is central to how work gets done in a business,” meaning that Okta aims to be a lot more than the company that makes it easy to manage account credentials.

I recently had a chance to catch up with McKinnon in New York to talk about what he meant by that, and to flesh out what he sees happening at Okta in the coming year.

AllThingsD: You’ve just landed a big C round investment, but it coincided with the publication of a big vision statement. What is the vision statement all about?

McKinnon: I think people misunderstand a lot of things about our company. The first thing they think is that we’re just for cloud stuff. And CIOs and other people thinking about building the next generation of their IT environment don’t want two identity systems. They don’t want the old that barely worked, and the new one that doesn’t talk to the old one. They want one. And we’re positioned to build that. We’re trying to be more aggressive at communicating that.

Initially, everyone understood the identity layer to be a simple manner of managing all the credentials for using cloud services. Now you’re reaching into more on-premise products. How much of a pivot is that for you?

The vision has always been about a single identity layer for everything. The reality is that we started as a little cloud company; the most receptive buyers were companies doing a lot of cloud stuff. So that was how we communicated about ourselves to the marketplace. And now the product has matured to a point where we can really communicate about the vision, about a unified way of managing identity.

Give me some sense of momentum. Funding is certainly an indirect indicator, but what else is going on?

We have, in the last year, added 140 enterprise customers, which brings us to more than 200. We’ve added 300,000 end users. Those are paid enterprise-user seats, which means there’s real money behind them, and that has brought our total user footprint to 500,000.

The obvious thing that people start wondering about a company like yours is when you might be ripe for acquisition, or if you’re going to go the distance. I can think of a handful of cloud and software companies, like Salesforce.com or Oracle or IBM, that could be logical buyers. What are your thoughts about this?

We’re building the identity layer for the next generation of corporate IT. Everyone is going to want to do something like this. You saw Saleforce’s announcement that they want to do this, too. This is clearly something strategic. The value of our product comes from it being in the hands of a neutral party. Our customers want Switzerland; they don’t want someone like, say, a Salesforce.com or a Google, because it would be beholden to their own apps.

I’m reminded that David Sacks, the CEO at Yammer, used to say something similar about being Switzerland when asked about being acquired. Look what happened there: Yammer is now part of Microsoft. Couldn’t the same thing happen to you? And what would it mean if it did?

It’s different for us. If you never connected Yammer to anything, it could be valuable. If any one of our integration partners, say, Jive or Box, or any one of those companies cuts us off, the value of the product goes down. So it’s different in that regard. The Yammer platform is still valuable with no integrations. Our platform is not. So I think that’s a big difference. It gets back to the funding. We’re venture-backed. At the end of the day, I have a responsibility to my shareholders, and we have to build enough momentum in the company to have the outcome of not being acquired, to be superior in the minds of my shareholders than the outcome of being acquired. Clearly at Yammer, they couldn’t do that.

Now you jumped ahead to my next question. Salesforce’s Marc Benioff announced a plan to create a competitor to Okta, and we talked about it at the time. How far, to the extent that you’re aware, has that effort come along? Are you worried about it?

Anytime a big company announces they want to compete with you, you should be worried. They said they’re going to build a product, and that’s definitely going to be a competitive threat. The reality is that Salesforce is doing a lot of things, and they’re spread very thinly. I don’t think they’re going to make the kind of investment necessary.

What will you do with the money?

The big thing is to build out the product. Right now, it’s robust, scalable, used by tons of customers live. But there’s a lot of work to do on it. We have 2,000 connectors to different applications and services, but there’s more than 2,000 of those. We need 20,000 connectors and then we need 50,000. We need to really expand that number and connect to everything. Every device, every application, every platform. So we’re going to use the money to build the product in that way. If a customer has an application that’s built by some regional provider, with maybe 50 customers in some niche business, to a customer in a certain vertical, that application is very important. They don’t want to have some kind of one-off situation where they can sign in to everything they use, but not this one thing. And it’s not economical for us to go out and build the connector ourselves. So we need to have a platform where someone can go and build the connector themselves and share it with anyone who might need it. The thing about our platform, because it’s based in the cloud, is that it can be maintained and supported over time. There’s also some exciting things we can do with helping companies collaborate with each other. So if two companies are using Okta, they can connect their systems across firewalls more easily. That’s the identity network we’ve been talking about.


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