Okta Acquires Auth0 for $6.5 Billion

Okta Acquires Auth0 in a $6.5 Billion Deal

Following today’s earnings report, Okta revealed its acquisition of cloud identity startup Auth0 for $6.5 billion. Auth0 previously held a valuation of $1.92 billion after securing $120 million in funding led by Salesforce Ventures last July.

Expanding Okta’s Identity Platform

The integration of Auth0 provides Okta with a company specializing in cloud identity solutions, enabling developers to seamlessly incorporate identity management into their applications. This addition significantly broadens Okta’s identity platform capabilities.

Okta’s co-founder and CEO, Todd McKinnon, believes this acquisition positions the company for comprehensive coverage within the identity sector. He envisions elevating identity management to a core cloud category, alongside infrastructure and enterprise software like CRM and collaboration tools.

The Importance of Comprehensive Identity Coverage

McKinnon emphasized the necessity of covering all identity use cases to achieve this elevated status. He explained that this includes both workforce and customer identity solutions. Traditionally, Okta’s focus has been on workforce identity, with customer identity being a more recent area of development.

The customer-facing aspect involves utilizing Okta/Auth0 to manage customer access to platforms, extending beyond simply corporate credentials. McKinnon expressed considerable enthusiasm regarding the comprehensive coverage offered by this combined approach.

A Powerful Combination

Eugenio Pace, co-founder and CEO of Auth0, views the merger with Okta as a synergistic opportunity within the identity management landscape. He stated that together, they can deliver workforce and customer identity solutions characterized by speed, simplicity, security, reliability, and scalability.

Pace further noted that this collaboration will accelerate customer innovation and their ability to address the evolving needs of consumers, businesses, and employees globally.

Auth0’s Background and Growth

Auth0 was founded in 2013 by Eugenio Pace and Matias Woloski, both former Microsoft employees. The company currently employs 800 individuals and is projected to generate $200 million in revenue this year.

McKinnon highlighted Auth0’s developer-centric approach, emphasizing its flexible, API-driven service and robust tools for customization. He stressed that this foundation is crucial and must be established from the outset.

Synergies and Market Opportunities

While some customers overlap, McKinnon anticipates acquiring new clients as well. The complementary nature of the two companies’ offerings allows for cross-selling opportunities, potentially providing a complete identity solution to both existing Okta and Auth0 customers.

As Eugenio Pace shared with TechCrunch in 2019, a core focus has always been on empowering developers.

Okta intends to maintain Auth0 as an independent unit while exploring integration strategies over the coming months. McKinnon’s long-standing relationship and trust with the founders further support a smooth transition.

Financial Performance and Market Reaction

Okta reported a strong quarter, with revenue reaching $234.7 million, a 40% increase year-over-year. However, Wall Street reacted negatively to the acquisition announcement, resulting in a 6.9% decline in the stock price during after-hours trading.

Auth0 secured over $300 million in funding since its inception in 2013, with investors including Salesforce Ventures, Sapphire Ventures, Bessemer Venture Partners, and Meritech Capital Partners.

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