Okta co-founders, Frederic Kerrest, and CEO Todd McKinnon, in the upper right, signing the agreement to acquire Auth0 with their co-founders, CEO Eugenio Pace, in the lower left, and Matias Woloski.
Okta
Okta, a publicly traded identity management company, is acquiring one of its main competitors, Seattle-based startup Auth0, in a $ 6.5 billion stock business, the companies announced on Wednesday. market.
The transaction will provide Auth0 with a fixed number of Okta shares at a price of $ 276.21 each, the companies said. Okta’s shares closed Wednesday at $ 241 per share, giving it a market capitalization of $ 31 billion. But shares fell more than 11% after hours, as Okta also reported quarterly revenue of $ 234.7 million, a 40% increase year over year, compared to $ 8 non-GAAP net income. million on Wednesday.
In an interview, Okta’s CEO Todd McKinnon said the move was part of the company’s effort to be one of the “five or six primary clouds” that customers will turn to as market leaders, citing Microsoft, Salesforce and Zoom like other competitors for such status.
“For us, identity has to rise to be one of those primary clouds, and if it doesn’t, it will just be subsumed into other clouds and Okta will not reach its potential,” said McKinnon.
Primarily a business tool for companies to help track and manage their employees’ identities and credentials when using work apps, Okta gains Auth0 a service that focuses more on how companies interact with their customers, said McKinnon, from I look at the developer community.
In other words, while Okta sells from top to bottom, to chief information officers or technical leaders, Auth0 builds its business from the bottom up.
At Auth0, co-founder and CEO Eugenio Pace said the two companies “agree on a vision” for this identity cloud of the future, or what Pace calls an “identity operating system”. In a common refrain for high-growth tech startups joining larger rivals, Pace noted that Okta was at least several years ahead of Auth0 at scale; joining forces, he insisted, would advance Auth0’s script in five to ten years.
“What excites me is that these companies are compatible, identity is not a division, a part of another group or a necessary evil. That is all we do. So, together, we have the opportunity to move the needle in terms of what we can offer our customers, ”said Pace.
Auth0 joins a company that reported revenue of $ 835 million in its most recent fiscal year and expects revenue of $ 1.08 billion to $ 1.09 billion for fiscal year 2022. Auth0, however, is expected to achieve a revenue execution rate (a 12-month projection based on the most recent month’s pace) of more than $ 200 million at the end of the year, McKinnon said.
Forbes heard rumors that Auth0 was on sale weeks ago, with two sources saying that Okta has emerged as the favorite buyer. But the deal did not close quickly, as Auth0 considered other options, including other potential buyers or continuing on the road to the IPO. An Auth0 investor who asked to remain anonymous said he expected the company to seek a public offering instead, given its potential and the recent favorable stock market valuations of public cloud computing stocks.
Founded in 2013, Auth0 had raised more than $ 330 million from venture capital investors who valued the company at around $ 1.9 billion in July 2020. Prominent investors included Bessemer Venture Partners, Trinity Ventures, Meritech Capital , Sapphire Ventures and Salesforce Ventures. The company appeared in 19th place on the Cloud 100 list of the world’s leading private cloud companies in September.
Antitrust concerns have also slowed the process, said a source Forbes before the business announcement. The acquisition, although agreed by both boards, is subject to regulatory approval, but is expected to be completed in the first half of the year, the companies said.
Asked what he would say to employees and supporters who expected Auth0 to test the public markets as an independent company, Pace said the result was “fantastic” for all concerned. “I certainly don’t see this as an outlet for Auth0,” he added. “We are just scratching the surface of what we do.”
Apply today to Touch of midas, your weekly guide to the world of venture capital and startup finance, with exclusive interviews, original reports and analysis and more.