Okta co-founders Frederic Kerrest and CEO Todd McKinnon, top right, signing the agreement to acquire Auth0 with its co-founders CEO Eugenio Pace, bottom left and Matias Woloski.
Okta
Publicly traded identity management company Okta acquires one of its biggest challengers, the Seattle-based start-up Auth0, in a $ 6.5 billion share transaction, the companies announced on Wednesday. .
The transaction will give Auth0 a fixed number of Okta shares at a price of $ 276.21 each, the companies said. Okta shares closed at $ 241 a share on Wednesday, giving it a market capitalization of $ 31 billion. But shares traded down more than 11 percent after the program, as Okta also reported quarterly revenue of $ 234.7 million, up 40 percent year-over-year, on non-GAAP net income. $ 8 million on Wednesday.
In an interview, Okta CEO Todd McKinnon said the move is part of the company’s pressure to be one of the “five or six primary clouds” that customers will turn to as market leaders, citing Microsoft. , Salesforce and Zoom as other competitors for such status.
“For us, the identity has to rise to be one of those primary clouds, and if it doesn’t, it will just be kind of subsumed into other clouds and Okta won’t reach its potential,” McKinnon said.
Primarily a business tool for companies that helps track and manage the identities and credentials of their employees when using work applications, Okta gains in Auth0 a service that has focused more on how companies interact with their customers, he argued. McKinnon, with a focus on the developer community.
In other words, while Okta sells from the top down, to chief intelligence officers or technical leaders, Auth0 has built its business from the bottom up.
At Auth0, co-founder and CEO Eugenio Pace said the two companies “agree with a vision” for that cloud of identity of the future or what Pace calls an “identity operating system.” In a common refrain for high-growth startups joining larger rivals, Pace mentioned that Okta was at least a few years ahead of Auth0 in scale; joining forces, he insisted, would advance Auth0’s roadmap by five to ten years.
“What is interesting to me is that these companies are compatible, the identity is not a division, part of another group or a necessary evil. That’s all we do. So, together, we have this opportunity to move the needle in terms of what we can offer our customers, ”said Pace.
Auth0 is joining a business that reported revenue of $ 835 million for the most recent fiscal year and forecasts revenue of $ 1.08 billion to $ 1.09 billion for fiscal year 2022. Meanwhile, Auth0 is expected to reach a revenue turnover rate (a 12-month projection based on the pace of the most recent month) of over $ 200 million by the end of the year, McKinnon said.
Forbes heard for the first time rumors that Auth0 was sold a few weeks ago, two sources saying that Okta appeared as the favored buyer. But the deal did not end quickly, as Auth0 considered other options, including other potential buyers or continuing on the path to the IPO. An Auth0 investor who asked to remain anonymous said he hopes the company will pursue a public offering in return, given its potential and recent favorable valuations of the public cloud computing stock market.
Founded in 2013, Auth0 raised more than $ 330 million from venture capital investors who recently valued the company at approximately $ 1.9 billion in July 2020. Prominent investors included Bessemer Venture Partners, Trinity Ventures, Meritech Capital , Sapphire Ventures and Salesforce Ventures. The company ranked 19th on the Cloud 100 list of the world’s leading private cloud companies in September.
Anti-trust concerns have slowed the process, a source said Forbes before the announcement of the transaction. The acquisition, although approved by both councils, 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 hoped Auth0 would test public markets as an independent company, Pace said the result was “fantastic” for all stakeholders. “I certainly don’t see this as an outlet for Auth0,” he added. “We only scratch the surface of what we do.”
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