Okta, co-founders Frederic Kerrest and CEO Todd McKinnon, top right, sign the agreement to acquire Auth0 with co-founders CEO Eugenio Pace, bottom left, and Matias Woloski.
Okta
Publicly traded identity management company Okta is acquiring one of its leading challengers, Seattle-based startup Auth0, in a $ 6.5 billion deal, the companies announced Wednesday.
The transaction will net Auth0 a fixed number of Okta shares at a price of $ 276.21 each, the companies said. Okta’s shares were closed on Wednesday at $ 241 a share, giving it a market cap of $ 31 billion. But shares were down more than 11% after business hours as Okta also reported quarterly revenues of $ 234.7 million on Wednesday, up 40% year-over-year, with non-GAAP net income of $ 8 million Wednesday.
In an interview, Okta CEO Todd McKinnon said the move was part of the company’s drive to become one of the “ five or six primary clouds ” that customers will move to as industry leaders, becoming Microsoft, Salesforce and Zoom. named as other contenders for such status.
“For us, identity has to arise to become one of those primary clouds, and if it doesn’t, it’s kind of subsumed into other clouds and Okta won’t reach its potential,” McKinnon said.
Primarily a business tool for companies to track and manage their employees’ identities and credentials when using work apps, Okta in Auth0 is getting a service that focuses more on how companies interact with their customers, claimed McKinnon, with the developer community in mind.
In other words, while Okta sells top to bottom to chief information officers or technical leaders, Auth0 has built his business from the bottom up.
At Auth0, co-founder and CEO Eugenio Pace said the two companies “agree on a vision” for that identity cloud of the future, or what Pace calls an “identity operating system.” In a common chorus for fast-growing tech startups joining bigger rivals, Pace noted that Okta was at least several years ahead of Auth0 in size; Joining forces, he emphasized, would advance Auth0’s roadmap by five to ten years.
“What excites me is that these companies are compatible, identity is not a division, part of another group or a necessary evil. This is all we do. So together we have this opportunity to get the needle moving in terms of what we can offer our customers, ”said Pace.
Auth0 joins a company that reported revenue of $ 835 million for the most recent fiscal year and forecast revenue of $ 1.08 billion to $ 1.09 billion for fiscal 2022. by the end of the year, McKinnon said.
Forbes had first heard rumors that Auth0 was on sale a few weeks ago, with two sources saying Okta had become the buyer of choice. But the deal was not quickly closed, as Auth0 considered other options, including potential other buyers or moving on to IPO. An Auth0 investor who wished to remain anonymous had said they hoped the company would pursue a public offering instead, given the stock market’s potential and recent favorable valuations of public cloud computing stocks.
Founded in 2013, Auth0 had 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 was ranked # 19 on the Cloud 100 list of the world’s leading private cloud companies in September.
Anti-trust issues also slowed the process, a source said Forbes prior to the announcement of the deal. The acquisition, although approved by both boards, is subject to regulatory approval but is expected to close in the first half of the year, the companies said.
When asked what he would say to employees and supporters who may have hoped Auth0 would test the public markets as an independent company, Pace said the outcome was “fantastic” for all stakeholders. “I certainly don’t see this as an output for Auth0,” he added. “We’re just scratching the surface of what we’re doing.”
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