SaaStr Podcast #410: 10 Learnings from Talking with Todd McKinnon, CEO of Okta

Todd McKinnon, CEO of Okta, for the first time joined us at a SaaStr event, SaaStr Scale 2020.  The session is here below in video and podcast form, and let me summarize my Top 10 Learnings Below:

1. Okta didn’t win (in the early days) on features — it won on being “the most enterprise”.  We’ve talked a lot about how to carve out “the most enterprise vendor” segment in a competitive space in the earlier days but I didn’t really know quite how successfully Okta had executed on it.  It wasn’t the most feature-rich vendor in the early days, but (1) it was the more secure, and never went down — a huge deal if you are managing log-ins and are a security vendor, and (2) the used a large, aggressive enterprise sales force to penetrate larger accounts.

2.  Okta still felt small and vulnerable all the way up to $30m-$40m ARR or so. This is a feeling that always worried me, of the Big Guys crushing you, or some other big externality that could somehow take you down.  Todd felt it even at tens of millions in ARR when Microsoft became a direct competitor.  In fact, he didn’t feel they couldn’t be killed until $30m-$40m ARR or so.

3.  Customers believed in the early days — but many investors and potential hires often didn’t.  The customers in the early days got how important identity and a single, federated log-in for Cloud apps was.  But VCs and many potential hires thought the space was too small and simple in the early days.  That it was “just a widget.” Fast forward to the present, and Okta is a $30B+ company.

4.  Be very respectful of your partners — but don’t take it too far.  Todd had been the VP of Engineering at Salesforce and was sure Salesforce would be a big partner, so he was careful not to hire even a single ex-employee for 4 years.  In the end, Salesforce became a competitor and it didn’t really matter that he didn’t hire anyone from his old team.

5.  You don’t have to be early to everything — but you do need to get an A+ on one big trend.  Okta won on Cloud identity but was slower to nail mobile and slower to focus on developers.   But being #1 on Cloud meant, in the end, it was OK to be slower than they would have liked getting the other segments nailed down.

6.  Once you own a segment, start re-defining it.  Todd spoke a lot about the freedom you begin to have once you are a category leader.  They redefined their space to be more about Zero Trust Security.

7.  You scale with your brand.  Most customers can’t learn everything about your product.  Your brand is a proxy for trust, and for solving a big problem.  Security is too complicated for every customer to really understand what Okta does here.  But they trust the brand.

8.  With customers, employees, investors, and more — Truth is Your Friend.  We discussed how Todd handled a small shift in one analyst’s ratings — by addressing it head-on, on Twitter.  His point was that 99 times out of 100, Truth is Your Friend.  When you hit a stumbling block or an issue, don’t worry about drawing attention to it (a natural response).  Instead, people can take it.  When you share more of your challenges with your team and customers, they’ll know what is urgent and what isn’t.  Err on the side of sharing challenges, and watch the team and your customers rally behind you.  Hiding doesn’t help.

9.  Their “second product” is now 25% of their revenue.  We’ve talked a lot on SaaStr about how, at least as you approach $1B in ARR, you’re likely going to need a second product. Their Customer Identity product is now up to 25% of their revenue.

10.  The Cloud makes many spaces much larger. We all know this, but Todd gave us a good reminder here.  The old on-prem identity space wasn’t new, but it was niche and often tied to a single vendor.  The Cloud allowed you to federate many Cloud apps in one identity vendor.  The Cloud made an old, niche space 100x, maybe 1000x larger.

Published on December 18, 2020

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