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2017 IPO Prospects: Okta Files in Red Hot Identity Management Sector

Posted on Friday, Mar 31st 2017


A Markets and Markets report published earlier last year estimates the Identity and Access Management Market to grow 13% annually over the next five years to be worth $14.82 billion by 2021. The market was estimated to be worth $8.1 billion in 2016. The impressive growth rate has helped companies like San Francisco-based Okta deliver strong revenue growth. The company recently filed to go public.

Okta’s Financials

Okta was founded by alumni Todd McKinnon and Frederic Kerrest in 2009. It was initially set up to help companies with reliability of their services and SLA compliance before it pivoted itself to focus on identity management services. To develop the current version of Okta’s product, its founders had detailed conversations with a lot of potential clients based on a mock-up. They arrived at the identity management platform that gets rid of duplicative credentials and disparate authentication policies to help organizations simplify and scale their IT infrastructures more efficiently.

Through its Identity Cloud offering, Okta allows its customers to securely connect people to technology, anywhere, anytime, and from any device. It leverages cloud and mobile technologies while securing users and connecting them with the applications they need. As of October 2016, Okta had enabled integrations with over 5,000 cloud, mobile, and web applications. Its platform has been well received and today more than two million people use its platform. Organizations also use Okta to provide their customers with online experiences and to connect with partners to streamline operations. Developers leverage the platform to embed identity into their software.

Okta has more than 2,900 customers across multiple industries and across 185 countries. Its customers include 20th Century Fox, Adobe, MGM Resorts, Pitney Bowes, and Twilio to name a few.

It has seen strong revenue growth in the recent years. For the year ended January 2016, it recorded revenues of $85.9 million, growing 109% over the year. More recently, it recorded revenues of $160 million for fiscal 2017, translating to a 86% growth over the year. Despite increasing revenues, Okta is yet to turn profitable. For fiscal 2016, losses increased $76.3 million compared with $59.1 million a year ago. Losses for fiscal 2017 came in at $84 million.

Okta’s Expansion Plans

As part of its expansion plans, Okta recently announced the acquisition of certain assets of Stormpath. The acqui-hire move is expected to help Okta expand its emerging business of ID management across APIs and apps. Stormpath is an early mover in the segment and enables developers to implement authentication, authorization, and user management into web and mobile apps through an API and a small code. Okta has acquired 35 out of the 45 employee team of Stormpath along with the license to use Stormpath’s technology for an undisclosed sum. The move will help Okta improve its arsenal against competitors like Ping Identity.

Denver-based Ping Identity was founded in 2002 to address the same market as Okta. Ping Identity realized that while you could integrate applications sold by CA, IBM, and SAP and have single sign-on within the stacks, there were no single sign-on capabilities between the products. Till last year, Ping was gearing up to go public. According to market reports, it was trending at annual revenue rates of $100 million. But last year, the IPO market wasn’t looking up and its early investors were getting antsy. Ping Identity gave in to investor pressure and was sold to Vista Equity Partners for an estimated $600 million.

Okta has been venture funded so far with $228 million from investors including Altimeter Capital, Janus Capital Group, Khosla Ventures, Greylock Partners, Andreessen Horowitz, Sequoia Capital, FLOODGATE, SV Angel, Maynard Webb, Dharmesh Shah, Stephen Marcus, Avid Larizadeh, Ed Roberts, Tom Berson, and Jacques & Sandra Kerrest. Its last round of funding was held in September 2015, when it raised $75 million at a valuation of $1.2 billion. An earlier round held in 2014 had valued Okta at $600 million.

Earlier this month, Okta filed its S1. This week, it announced the pricing of its offering. It plans to sell its 11 million shares at $13-$15 per share. At the mid-point of the range, the listing will help Okta raise $160 million at a valuation of about $2 billion.

When I met with Okta’s co-founder Todd McKinnon in 2013, I was impressed by the way Okta was built by being in touch with its customers’ needs. Even then, Okta was never worried about bigger competitors like Computer Associates, IBM, and Oracle. It believes that while all of these players have identity management suites, their identity solutions have been assembled through several acquisitions. The big players never had a proprietary identity management system that was built for the Cloud. Okta, on the other hand, has been built for the cloud and mobile devices and acts as an “Active Directory of computing“.

Photo Credit: Natasha Mayers/

This segment is a part in the series : 2017 IPO Prospects

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