20VC: Okta Founder Frederic Kerrest on Why You Want To Be A Monopolist In A Small Market, The Biggest Challenges in Scaling Okta To IPO and Being a16z's First Ever Fund Check

Frederic Kerrest is the Founder & COO @ Okta, the independent and neutral platform that securely connects the right people to the right technologies at the right time. To date Frederic has raised over $415m with Okta from some of the best in the business including Doug Leone @ Sequoia, Marc Andreessen @ a16z, a dear friend of the show in Mike Maples @ Floodgate, Aneel Bhusri @ Greylock and Vinod Khosla, just to name a few. Okta IPO'd in April 2017 at a stock price of $17, today they sit at $102. Before founding Okta, Frederic enjoyed roles with Hummer Winblad on the other side of the table as a VC and also at Salesforce and Sun Microsystems on the operations side. In Today’s Episode You Will Learn: 1.) How Frederic came to found the now public Okta having spent time with Salesforce, Sun Microsystems and Hummer Winblad as a VC? 2.) What about an idea makes it worth pursuing and investing in? Does Frederic agree with the advice he was given, "it is 70% market, 20% people and 10% product"? When evaluating a market, what characteristics make for the most attractive markets? How does Frederic think about insertion points into markets? How does he evaluate market adjacencies? Why is it so good to be a monopolist in a small market? 3.) What were some of the hardest times Okta went through? How does Frederic determine the balance between vision and realism? How does Frederic as the leader personally deal with these challenging times? How can a founder determine from their hiring process whether they have product-market fit? What were the key turnings points that contributed to Okta's success? What did you have to get right to keep scaling? 4.) A little birdy told me there was an amazing story behind the a16z investment, what is that story? How did Frederic meet Marc and Ben and how did his relationship with them evolve over time? When analysing his investor base, where did each add real strategic value? What advice does Frederic give to founders today on the theme of investor selection? What should the core considerations be? Items Mentioned In Today’s Show: Frederic’s Fave Book: Battle Cry of Freedom: The Civil War Era As always you can follow Harry, The Twenty Minute VC and Frederic on Twitter here! Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Welcome back to the 20 Minute VC with me, Harry Stebbings. It would be so great to see you behind the scenes here at the show, where you can hit me with all your feedback on @HStebbings1996 with two Bs on Instagram. I really would love to see you there. But to our guest today, and for me, when thinking what makes the very best guest? It's energy, it's charisma, and it's contrarian thinking. And today's guest has all of these in buckets. And so I'm super excited to welcome Frederic Kerrest, founder and COO at Okta, the independent and neutral platform that securely connects the right people to the right technologies at the right time. And to date, Frederic's raised over $415 million with Okta from some of the very best in the business, including Doug Leoni at Sequoia, Mark Andreessen at Andreessen Horowitz, a dear friend of the show in the form of Mike Maples at Floodgate,

• 0:43Harry Stebbings?

  Anil Bhushri at Greylock, and Vinod Coesler, just to name a few. Okta IPO'd in April 2017 at a stock price of $17. Today, they sit at $102. I think that is a mic drop moment if ever there was one. And before founding Okta, Frederic enjoyed roles with Hummer Winblad on the other side of the table as a VC, and also at Salesforce and Sun Microsystems on the operations side. I'd also want to say a huge thank you to Pat Grady at Sequoia, Maynard Webb, Mike Maples at Floodgate, and Dharmesh Shah for such fantastic questions and suggestions today. Really, I so appreciate it, and the episode would not have been the same without them. But before we dive into the episode today, I'm always focused on scaling my time, and I was always crap at travel booking and management. Well, not anymore. Why? Because I now use TravelPerk, the business travel management platform that even I love.

• 1:27Harry Stebbings?

  It's just so super easy to book travel, and actually quite fun. And my favorite? No back and forth with travel agents or your finance team. But it gives you the best of both worlds. Companies don't just get happy travelers, but also easier management, and as much as 20% in savings with 100% in compliance. Got to tick that compliance box these days. And even better, no one is going to chase people for receipts or worry about splurging on overly expensive penthouse suites. Finally, I have to say, the support is just number one rated. So you get 24/7 travel experts ready to deal with forgotten passports. Yep, I had that one before. Unexpected flight cancellations, oversized baggage requests, vegan meal options, whatever you can think of, they have you covered. And the 20 Minute VC listeners can score a free lounge pass to over 12

• 2:10Harry Stebbings?

  1500 airports for a whole year. That's quite astonishing. I'm quite jealous. I quite like that. All you need to do is go to travelperk.com/20vc. That's travelperk.com/20vc. Give them the name of the person who runs travel at your company. And if they book a demo, the lounge pass is yours. And if TravelPerk allows me to scale my time, a lot of what we do on the 20 Minute VC is discuss scaling businesses, talk to experts, pick the brains of founders and investors who tell us about the trends to watch out for, offer tips on fundraising, and teaches how to excel at any company stage. But there's no playbook for building a great business, but we can certainly learn from people who've done it before. Beyond listening to this podcast and talking to mentors and advisors in your own network, it's important to have resources you can turn to when you're tackling a new challenge.

• 2:53Harry Stebbings?

  And Stripe has built those resources for you, whether you'd like to learn how to run a pricing experiment or build a knockout landing page. Stripe gives you the information you need to start, run and scale a technology company. And their guides are often written by or feature people like Elad Gil, experts in their space who you've probably heard on this very podcast. And you can read my favorite guide on scaling engineering organizations and many more on stripe.com/20vc. That's T W E N T Y V C. And last but by no means least, to scale, you need customers. And Intercom offers a new and better way to acquire, engage and retain customers. They've built a suite of messaging-first products from chatbots to a totally reimagined business messenger that modern internet businesses use to accelerate growth across the customer lifecycle,

• 3:36Harry Stebbings?

  from acquisition to engagement and support. And over the past eight years, they've totally reimagined what a business messenger can be, which is way more than simply live chat. Today, Intercom is used by the world's most forward-thinking companies. 84% of Y Combinator companies that use a messaging or live chat tool use Intercom. Astonishing fact, that one. And they have over 30,000 customers, including larger companies too, like New Relic, Atlassian and Shopify, and also smaller companies like Airtable and Coda. But now you've heard quite enough from me, so I'm delighted to hand over to Frederic Kerrest, founder and COO at Okta.

• 4:12Speaker 01

  You have now arrived at your destination.

• 4:16Harry Stebbings?

  Frederic, it really is such a pleasure to have you on the show today. I've heard so many great things, both from Mike Maples and Don Meschar. So, thank you so much for joining me today, Frederic.

• 4:24Speaker 02

  Thanks a lot for having me. It's great to be here. I'm super excited about it, Harry.

• 4:26Harry Stebbings?

  Well, so am I, but I would love to get the ball rolling today with a little bit on you. So, tell me, Frederic, how did you come to found the very public now Okta?

• 4:34Speaker 02

  Oh, we did. So, we founded Okta 10 years ago, as you mentioned. I have a co-founder. He's slightly taller than I am, but not as good-looking, because we all have our things. His name's Todd McKinnon, and the two of us met at Salesforce.com back in the day. So, I started there in 2002, when there's a couple hundred people there, and Todd started in 2003. We worked together for about five years and obviously had a front-row seat to the transformation going on from on-premises software that you implemented and managed yourself to cloud services. We drank a lot of Kool-Aid at Salesforce.com, and we came out of there and said, "Look, I think there's going to be a huge opportunity. Software-as-a-service, infrastructure-as-a-service, there's just much better technology for the economy out there." But to do that, there's going to have to be an enabling layer, and there's going to have to be a lot of new technology to enable all of this software-as-a-service

• 5:19Speaker 02

  to go into these companies. We looked around, we talked about it a bunch, and we saw that identity was going to be a huge opportunity. That identity has always been around. It's something that's been in an industry for a long time, but it's been baked inside the platforms, and we saw it was going to come out of the platforms, and we took a bet on that 10 years ago, and so far, so good.

• 5:36Harry Stebbings?

  Now, I hope it's okay to go off schedule this early, but you mentioned the five years at Salesforce and kind of seeing that incredible hypergrowth in those early days and those five years. What were the biggest takeaways from you from seeing that firsthand?

• 5:48Speaker 02

  Well, the first thing is, as a young guy in my career, seeing that growth is extremely exciting. It's very invigorating. You feel as though anything's possible. There's a lot of opportunity to try new things, to push the lever. The case like that, software-as-a-service, obviously was brand, brand-new. When I started Salesforce, it was $50, $100 million revenue company. So, you were trying new things, and you really got to innovate in a lot of different ways. Obviously, the software and the technology itself, but also the business models and partnerships and go-to-market approaches. And so, just that kind of innovation was very invigorating. And then, secondly, I also saw what value companies got. Out of using Salesforce.com. So prior to that, my background, I started as actually as a software developer. I got a computer science degree and I started writing software in the client services or on premises traditional model.

• 6:33Speaker 02

  And so I kind of had seen a little bit of that in my early career, but seeing the value that companies were getting out of Salesforce.com, out of a service that you could subscribe to over the internet. And you could just start using right away as opposed to spending all of your precious resources, implementing software, getting it right, deploying it to servers, putting it in data centers. Just that value, the return on investment, the time to market, the total cost of ownership was such a clear, powerful mission that that was actually what really got us started on Okta and has us where we are today.

• 7:02Harry Stebbings?

  Incredible to hear and quite funny for me because I've actually never worked in a world of on-prem. And so I have actually only worked in a world of software as a service.

• 7:10Speaker 02

  You're a lucky man. Harry, keep it that way. Don't change anything.

• 7:14Harry Stebbings?

  But I do want to start today, Frederic, on the element of the idea. We're often told ideas are worthless and it's all in execution. Today it seems that there's little in the way of truly new and innovative ideas. Is that in your mind? What about an idea makes it worth pursuing and investing in? Let's start with that.

• 7:30Speaker 02

  Yeah, that's a, that's a great question. I was fortunate some years ago to meet a gentleman named David Morgenthaller, who started Morgenthaller Ventures in the late 60s, early 70s, one of the first real industry venture capitalists, actually did it out of the Midwest, but built a great organization over, it's coming up on 40 years. And David said to me, hey, look, I look back at the history that I've done over the last 30, 40 years. And basically it's been 70% market, 20% team, 10% product. And so what he was saying was you want to invest in very big markets that are growing, right? You don't want to invest in large markets that are very stable. You want that growth in there. Number one, number two, you want fantastic teams. And then number three, you want that product.

• 8:10Speaker 02

  But if the market's really big and growing and you have a great team, they're going to be able to pivot and find the right exact fit for that product.

• 8:16Harry Stebbings?

  I do have to dive in on that because we often discuss the importance and where we place emphasis, me and my partner Fred, that is, market, people, products. And we often say that backing truly special people leads to them finding the market, so to speak, if it's not maybe originally there. How would you respond to this and maybe our waiting of seventy, twenty, ten? And is that maybe wrong of us?

• 8:37Speaker 02

  No, look, don't get me wrong. Founders are essential. Founder, key piece of the puzzle. I was reading the other day, someone had looked back on their career, one of the investors from, I think it was Sequoia, who'd invested in Cisco and Apple and all these other well-known brands. And they'd said, look, I might have been even more successful if I'd thrown away all the business plans and just read the resumes. So what they were saying was it was actually all about the entrepreneurs. And whether they had the idea right or they had the market right, they would figure it all out. So clearly, someone who's had that amount of success would definitely agree with you. But I think it's a combination of the two, right? You can have a super special founder, but if you don't have that big market opportunity and there's not that opportunity to create the growth and to figure out the go-to-market strategy and all these other things,

• 9:19Speaker 02

  I think you're going to be kind of constrained in how great that founder can make that business, just because of the market dynamics. So I think they go hand in glove. I don't think you're going to be able to do one without the other. But I do think that you want to have that big, powerful, growing market, where a lot of the incumbents are not able to react, they're not able to change what they're trying to do. And then also have those founders who know how to take advantage, how to capitalize on those moments.

• 9:40Harry Stebbings?

  Can I ask, we're often here today about founder-market fit. I think to say PillPack with TJ being brought up in the world of pharmacy and then starting PillPack. But then I had Marco at Thumbtack on the show, who said that actually you can be a consultant coming out of Bain and do a SWOT analysis and come up with an idea that maybe doesn't have such founder-market fit. How do you think about the two different sides there and the need for founder-market fit necessarily?

• 10:04Speaker 02

  Yeah, well, I'm an enterprise software nerd, so I'll admit that upfront. I learned to write enterprise software, you know, twenty, twenty-five years ago. I really enjoyed that process. I loved getting into businesses and seeing how they worked. And then I loved being on the other side and providing some of that software back to companies to see how they would grow and how they take advantage of it and the opportunities that were there. So I'm very focused on a specific market, which is enterprise software. I think in enterprise software, you do have to have a lot of knowledge about the market. You have to have a lot of experience, a lot of understanding and a lot of vision, frankly, of where it's going to go. I think if you look at successful enterprise software founders, whether it was Marc Benioff and Parker Harris. Or whether it was Neil Bushery and Dave Duffield at Workday or whether it was Fred Luddy at ServiceNow.

• 10:46Speaker 02

  These are all folks who did not start as twenty somethings out of college with an idea. These are folks who'd seen how businesses work, who'd seen the opportunities to improve the processes, the systems that were happening, and who'd seen a way to move all these companies forward. Now, don't get me wrong, I would be the worst person in the world to start a consumer company. I'm basically a Luddite. I basically only survive on email and calendar these days. So I would have no idea of what the new thing is that the new millennial generation wants. So I think you just have to balance that out with what's the market, who's the person, and what's that timing and that fit, right?

• 11:16Harry Stebbings?

  I love that realization on your fit to consumer. But I do have to ask, we mentioned the market there. Peter Fenton said on the show, he always laughs when he hears investors look for big markets. And then Sarah Tavell said that she looks actually for these niches or insertion points into small markets that actually open up into much bigger ones when you layer on additional products. How do you think about market sizing and the potential to really expand into the larger, larger TAMs?

• 11:40Speaker 02

  Yeah, I read Peter Thiel's Zero to One a couple of years ago, which I think is a very good book and I recommend people will read. There's a bunch of good knowledge in there about everything from sales to go-to-market motions to engineering to, in this case, actually markets. He had a very good point, I thought, when he said that what he's looking for, and I agree with this, you want to become a monopolist in a small market with a lot of adjacencies. Now, I'd love to tell you that that was the plan when we started Okta a decade ago. I think Peter only wrote his book a couple of years ago, so it's kind of like trying to fit that in after the fact. But that's basically what we did. We started Okta with a very focused market around web single sign-on. We became monopolists in that market, and then we found a lot of adjacencies around multi-factor authentication, so strong authentication, around lifecycle management, so provisioning and de-provisioning of users and roles.

• 12:24Speaker 02

  And now we see more and more market opportunity around us. Once you start, in particular in enterprise, finding these point solutions where you can be a very, very strong player, and then build the kind of platform, both technology and business, where you can build out from there and provide other solutions on top of that. If you make your customers successful, they're going to come back for more and more time and time again.

• 12:43Harry Stebbings?

  And speaking of them coming back for more and more time and time again, that leads to the scaling process. And I wanted to discuss the scaling process, which I've actually labeled as the chapter in this. Round being the Mike Maples suggestion round because he gave so many good suggestions.

• 12:55Speaker 02

  Oh, boy.

• 12:56Harry Stebbings?

  The first one from Mike, and it's a tougher one than I was asking. What were the hardest times Okta went through pre-reaching product market fit?

• 13:04Speaker 02

  Thanks for that, Mike. I really appreciate it. Well, I think early on in the company, look, we had a good idea. But you've got to remember, we started 2009, 2010. These were not the best years in the economy. People were not investing in new kinds of technologies. The world was trying to figure out how it was going to come out of the Great Recession. And then also when you're building an enterprise infrastructure platform like we built, it takes a couple of years. So getting that going and then trying to get customers to adopt it while you're doing that, that can be very hard. Frankly, if I look back at 2011 and I look at what our revenue projections were versus how they actually ended up. The projections, of course, were up and to the right. The results were actually pretty flat. And those were very, very tough times. And we questioned everything. We questioned, did we have the right product? We questioned, did we have the right approach to the market?

• 13:48Speaker 02

  We had to be candid and transparent with ourselves, both Mike O'Farrell and I, but also with our team. Because at the time, we had 20, 30, 40 folks. You're all working in one room that's, you know, a couple thousand square feet with open desks. And things aren't going very well and everyone's asking themselves questions. And there were tough times. We had a top engineer who left the company. We had some customers who couldn't get deployed. And I think just by being transparent and by sharing with the company, we still have to this day. That's when we actually started doing a weekly all hands with the company at that time in those tough moments in 2011. We still do that today. Every Friday morning, a high def audio video around the world, all hands. One hour with the entire company, just talking about what's going on, being transparent. When you hire awesome people, they just want to know what's going on. They want to get information. They want to get data and they want to be able to make decisions.

• 14:31Speaker 02

  And then finally, I think at the end of the day, it's about perseverance. And it's about, you've got to keep going, you know, when the going gets tough, the tough get going. You've got to keep grinding at it. You've got to keep pushing through. You've got to keep finding those different ways to do things. And I think, you know, we were successful. We came out on the other side and things started to go well.

• 14:48Harry Stebbings?

  I mean, I'm so pleased you said that about perseverance because it's always such a tough question for me. I always think when you have a company that maybe is struggling to find that product market fit in the early days. How can founders determine whether to stick to their guns, stick to their mission and really go for what they originally? Believed in versus actually whether they need to be realistic and change their strategy and potentially pivot.

• 15:07Speaker 02

  Yeah, I mean, that's the the ultimate question, right? And so you have to have a certain amount of conviction as a founder. Because if you're gonna build a very large independent public company like we have here at Okta, you're gonna start, everyone's gonna tell you it's a bad idea. The incumbents are gonna say that's terrible. We've got a giant monopoly here. The industry analysts are gonna say, no way. I mean, think about this. This is 10 years ago. People were just getting to saying, okay, I'll put my sales data in the cloud. Putting my identity in the cloud, that's crazy. And so everyone is really pushing against you and saying, no way, not gonna happen. Hard to find customers, hard to find employees to join you in your mission, hard to find investors. I mean, we had dozens and dozens of investors turned us down when we got going with the company. And so you do have to have a certain amount of conviction. At the same time, you can't walk around with blinders on. You have to be sensitive to gain that feedback.

• 15:50Speaker 02

  And frankly, that's a huge power if you have the right investors, which we did. We had Ben Horowitz, obviously, who built LoudCloud to a public company and then sold to HP. We had a Neil Bushery, who'd previously been part of building PeopleSoft and was at that point starting to build Workday. Those were two of our board members in 2010, 2011, who really said to us, hey, you need to think about this differently. Your go-to-market fit, we don't think it's the right one. And those are not easy times. I mean, we definitely had tough times through 2011. I remember I was personally asked to leave at least one board meeting because things weren't going well and the discussions were pretty tough. And ultimately, look, they were right. We did pivot the company. That was one of the big inflection points. We went from focusing on small, medium businesses to focusing more on mid-market companies and a little bit upscale, because those companies, A, had more pain, B, they had more budget,

• 16:33Speaker 02

  and C, they were looking for solutions like the ones we had, and they were right. And I'm glad that we had that kind of advice and guidance on our board, and I think it obviously has worked out very well.

• 16:43Harry Stebbings?

  Hindsight is always a wonderful thing, but I have to pick up on a couple of elements related to you there. You mentioned the tougher times. How do you, as the leader, personally deal with those moments of really intense pressure and scrutiny?

• 16:54Speaker 02

  It's not easy. Hopefully, you have a co-founder, right? I think if you look at the data, the data says that solo founders always have a tougher time. I think you really see a lot of success in the two through four group of co-founders. I think once you get five co-founders or more, there's just too many cooks in the kitchen. No one can make any decisions and move forward. But I mean, in our In our case, we were fortunate, we had someone else. So you're not in it by yourself, right? You're able to at least look at someone else and ask the hard questions. Are we doing the right things? Having some of that debate. In our case, it was actually even better because we weren't necessarily best friends when we started. We were acquaintances, but in a business capacity. So we knew each other and obviously we got along very well, which we still do today, a decade later. But it was really more about how are we going to build this business together and what are some of these things? Maybe taking a little over the emotion out of it, which I think is still very hard to do, but it was really hard.

• 17:39Speaker 02

  You'd work, you know, 12, 14, 16 hours a day. You'd be there Saturdays and Sundays trying to figure it out. You know, the customers weren't coming, the revenue numbers weren't there. Obviously, we were a venture capital funded company, so we had to raise the next round of venture capital, which we did in the summer of 2011. And I'll always be grateful to David Widen and Coastal Ventures for helping us put that round together. But, you know, we, we just kind of had to keep going and got to stay positive and, and find some of the nuggets. But yeah, there's no doubts about it. Very, very tough times.

• 18:06Harry Stebbings?

  So if that's kind of how you kept going during those tough times, another one from Mike is a challenging one. What did you have to get right to keep scaling as founders?

• 18:15Speaker 02

  So I think the biggest thing for us in building a venture backed software company, Harry, was that we knew that we were going to keep growing and we're going to keep growing aggressively. Look, that's not the only kind of business to build. You can build a lifestyle business. You can build a cash flow business. You can build businesses where it's a very good way of building a different kind of business. And you're not going to be hiring aggressively. You're not going to be growing into new markets and into new businesses and into new geographies. But that's not the business we were in. We were in the high growth business and we have been, right? So if you look at what we were trying to do, when we started the company, I was the head of sales. I was the CFO. I was the general counsel. I was the head of HR. You kind of go down all the list. And then all of a sudden, you know, you start being able to hire people who are better than you in these other jobs.

• 18:58Speaker 02

  And that's how you start to scale. So it's kind of thinking about how can I hire myself out of these jobs by hiring experts? So we hired a head of sales. I mean, one of the big turning points in 2012 frankly, was we hired a professional head of go to market and a professional head of engineering, because my co-founder Todd was also doubling his head of engineering at that time. And over the years, we've had a fantastic general counsel join us, a great CFO has joined us, fantastic head of HR. You kind of go down the list and you're hiring these experts who know what to do so much better than you that you're like, not only am I okay giving that up, I'm excited because I know that that's going to move us forward. I think one of the biggest things is just being introspective enough and knowing what you're really good at and what others can be better at and when it's time to hire yourselves out of those jobs. And I think we've done a very good job with that.

• 19:40Harry Stebbings?

  I am super interested. You said there about the incredibly aggressive growth that you enjoyed in the early days and throughout the journey, to be fair. So what is then does capital efficiency play into one's mindset when they are growing as aggressively as you are?

• 19:52Speaker 02

  I mean, the capital efficiency is key, right? I mean, in these markets, we certainly live in a capitalist world where growth is king and you see that whether it's in the private markets or the public markets, growth is what people get paid for. That being said, you still have to build a long-term, sustainable, independent company. And to do that, you really have to think about growing. And we talk about growing aggressively, but running the company like adults. So what does that mean? That means that you have to have certain ratios or certain ideas or frameworks around how fast you're going to grow, around what your willingness span, around what the right ratios are, whether it's cost of sale, cost of goods sold, you know, whatever any of those quote unquote magic numbers that people talk about today are, cost of customer acquisition, lifetime value, whatever makes sense for your business. I know there's a whole staple of these numbers today. I don't know that

• 20:36Speaker 02

  they all apply to all the businesses. And I talked to plenty of startups where the founder will say, you know, it's too bad that these are kind of the standard numbers because my business is a little bit different. Well, that's okay. Use whatever numbers make sense for your business. Just realize you're going to have to explain that to others, which is fine. And if you really believe in that, that'll go very, very well. In our case, it was always about how fast can we grow, but we want to have a certain amount of payback on the investment that we made in sales and marketing. So we kind of had a governor on how long it was going to take to get paid back for a dollar invested and go to market. And in our case, it's an enterprise business. And so you have three and five year contracts and you know those are committed contracts. So when you invest, you get that one dollar, you're actually going to get it for a few years down the road, which helps with all those numbers. But that's how we thought about it. We thought about it as how fast can we grow while still doing it in a mature way. And if you've looked over the last couple of years as a public

• 21:20Speaker 02

  company, we've continued to get that leverage more and more inside the business and we're getting much, much more efficient at running, even as we grow and continue to scale.

• 21:28Harry Stebbings?

  And speaking of that capital efficiency, it's often a big topic with ...to venture funding and choosing that venture model. You obviously chose the VC route and A16Z were one of the investors that you worked with. I've heard there's a good story about A16's check into Okta. So can you tell me, Frederic, how that came about and maybe why it was special?

• 21:46Speaker 02

  Yeah, absolutely. So if you roll back the clock to about 2005, I actually was fortunate enough to meet Marc Andreessen at a social event. And we chatted for a while and we got along and he and I stayed in touch. And then we started the company Okta in 2009. And we were very fortunate, our friends at Jawbone, Hussein Rahman and Alex Isale, who were the founders of Jawbone and who are friends of mine from college. They were kind enough to give us a few desks in their office to start building Okta. So we said, great. And then we slowly started building our team there and building our company actually inside their offices. And then Ben Horowitz was actually a private investor of Jawbone's as an angel. And so we met Ben through Alex and Hussein. And then we went down and Ben said, hey, we're starting a venture fund. We'd love to talk to you about it. We said, great. We actually went down, Todd and I, to meet with Marc and Ben and Scott Cooper. At the time, it was the three of them in their office.

• 22:30Speaker 02

  At that time, they didn't even have a sign on the office. So it was a piece of paper that was kind of taped to the window with an arrow that said, Andreessen Horowitz, this way. And then we went in and we had this meeting. And I remember saying, wow, you guys, it looks like you just moved in. They said, how do you know? And I said, well, we're sitting at a Costco table. And I know because I own one of these in my house. And so Marc and Ben started laughing about that. They literally had, didn't even have furniture yet. When we got to meet them, we were the first check that they wrote out of their first fund in the summer of 2009 was into our seed round. And then obviously they led our series A in 2010. It's been a fantastic partnership since then. Ben Horowitz is still on our board, so we've really benefited from his advice. But yeah, we've kind of seen the path of Andreessen Horowitz growing up over the last 10 years, right alongside Okta growing up, which has certainly been pretty special and we have a great relationship there.

• 23:13Harry Stebbings?

  I mean, what an incredible story. I do have to ask you, because I see a lot of first time founders today who get offers from incredible VCs and storied VCs who are operators, maybe not in a similar ilk to quite Marc and Ben, because that is a special one, but still kind of prestigious and storied in many ways. Was it challenging for you in terms of sitting in the same room and not feeling intimidated and feeling like you could not only manage the people, but manage them as investors, so to speak?

• 23:37Speaker 02

  Oh, yeah, absolutely. I mean, when you're getting started, especially when you're really first time. Time technology founders like we were, I had a little bit of past history building much smaller companies previously. But this was really the first time we're going to try and build a very large, independent, public software company. That we were going to raise venture capital. Over the years, we ended up raising about $230 million from Andreessen, Sequoia, Greylock. And then obviously we went public and we've done well in the public markets. It's easy to forget what it was like 10 years ago. It was definitely intimidating. I mean, you're trying to figure it out. We were getting a lot of no's. So we were visiting a lot of the existing venture capital folks and they were saying, no, we're not sure this is a good fit. Are you guys the right guys? Is this the right market? Todd and I frankly are not very good drawers, so our PowerPoints were terrible, our pitch decks.

• 24:22Speaker 02

  And in fact, Mark said to us, hey, your pitch deck's not good. Why don't you just tell us the story? And so we actually told them the story of how we came to meet each other, why we thought this was going to be a big business, how we were going to get started, what our plan was and where we're going to go at the very beginning. And that actually worked out pretty well. But yeah, totally intimidating when you're trying to build your first big technology company and you're sitting there trying to get five, 10, 15 million dollars to get going as a company. Very, very intimidating. Absolutely.

• 24:48Harry Stebbings?

  Yeah, no, I'm sure. I can absolutely understand that. We mentioned Andreessen there, though. I know we mentioned Mike at Floodgate earlier. In terms of investor selection, how did you select the investors that you chose to work with? And maybe what advice would you give to founders who are contemplating their raise today?

• 25:03Speaker 02

  As you said, we've been very, very fortunate. I mean, the support that we got from Mark and Ben and Andreessen Horowitz, that we got obviously from Mike at Floodgate, from Aneel and the entire team at Greylock, and then from Vinod and David Wyden at Cosla. Those were the major backers that we had through the first couple of years of the company. And then we were fortunate enough to partner with Sequoia Capital. They led our CRD and our E and then we were kind of off to the races there. So that's obviously a great group of folks. You know, what we were looking for primarily were people who had a lot of experience doing exactly what we were trying to do. So operators who knew how to build independent, large, hopefully public enterprise software companies. So again, we went through and built Opsware, which became LoudCloud, which became Opsware. Aneel had a lot of practice at PeopleSoft, which became Workday.

• 25:44Speaker 02

  And then obviously the folks at Sequoia had a ton of experience in seeing all of these large companies. You can go down the list of what they've supported and what they backed. Over the years. And so we tried to put folks around the table who were operators, who had the experience doing exactly what we were trying to do, who weren't necessarily exactly the same Venn diagram overlap in terms of what they brought to the table. So that there was a lot of complementary approaches, whether it wasn't go to market, whether it was in how to build products in engineering, whether it was how to think about markets, whether it was how to think about our specific technology products and platform that we were building. So there's a lot of different things there. So we were very fortunate, obviously. When I talk to other entrepreneurs today and we talk about it, again, it's going back to what kind of business are you looking to build? How fast are you looking to grow? What kind of industries are you going to go into? What kind of expertise are you looking for?

• 26:28Speaker 02

  And then there's a whole bunch of other things like it's a personality fit, right? I mean, you're trying to build this company. It's a very hard thing to do. You're going to spend a lot of your time. This is going to be one of the only folks who really has the same vested interest as you do in building this kind of company. You have to make sure that the culture is right. You have to make sure they share the same values. You have to make sure that they can bring a lot of these different things, whether it's networks and hiring, whether it's networks and customers and prospects. You just want to find people who are going to help you complement and who have the same vision and are going to be there with you to build because as we've already talked about, look, things don't always go smoothly. I'd love to tell you it's like easy and up and to the right every single time. That's not the case. So you want to make sure that there are people who are going to have the intestinal fortitude to say, hey, we know things aren't going to go perfectly smoothly, but we are here with you. We see that right vision. We've got the same culture and we

• 27:12Speaker 02

  want to go into business together. And if you can do that, that's a great way to start.

• 27:16Harry Stebbings?

  I mean, my word, Frederic, this really is one of those episodes I rue calling it the 20 minute VC. But I do want to move into a quick fire around with you now. So as you know, I say a short statement, you give me your immediate thoughts. Are you ready to rock and roll?

• 27:27Speaker 02

  Sounds great. Let's do it.

• 27:29Harry Stebbings?

  Okay. So your favorite book and why? What must I read?

• 27:31Speaker 02

  You know, the thing is I read a ton of books. I read a little bit less over the last few years. I have three kids under the age of six, but it's hard to think of one recently. Here's some of my favorite recent books. How about that? Battle Cry of Freedom. It's a Pulitzer Prize winning book by James McPherson. It's a very long book, but it talks about the US Civil War. So it just gives you an idea of what was going on before the Civil War, what actually happened in the war, what happened after the war. People forget America's only 150 years old. So if you look back, or 250 years old now, but the Civil War is 150 years ago. So if you look back at when that That happened and how that shaped things. I mean, that is pretty recent history. Compare that to what happened in Europe and it's so influential in actually how America operates today. Good, bad and ugly. And I think particularly in today's political environment and what's going on.

• 28:13Speaker 02

  It's just good to have that historical basis and it's been super valuable to me recently.

• 28:17Harry Stebbings?

  Tell me, what would you most like to change about technology and Silicon Valley?

• 28:21Speaker 02

  I think that there's a lot of sizzle and not enough steak in Silicon Valley. So I really would like us to see an increased attention on substance over flash. I think that comes from the investors. I think it comes from the entrepreneurs. I think it comes from the media that does the same thing. We really need to focus on significant impactful innovation that is moving industry, economy and the world forward. And less on a lot of these flashes in the pan.

• 28:45Harry Stebbings?

  I personally blame the podcast as if you ask me. Tell me Frederic, hire fast, fire fast, agree or disagree?

• 28:53Speaker 02

  I'm in the middle. Hire slowly and fire fast. I think the problem with hiring too fast is you're going to end up getting someone in the role, which is great. And look, in a high growth environment, we have to hire, you know, north of 900 people this year. So that's a lot of people over four people every business day. But if you work too hard just to get people in the seat every time, you're not going to get the right people. And if you don't get the right people, that is actually going to push you back, you know, 12 or 18 months. Because it's going to take you a few months to figure out it's not the right person. It's going to take you a few months to exit them properly out of the company. It's going to take you a few months to get the search started back up again, to get the new person in the seat. So I'm really a big fan of hiring slowly. Look, you gotta hit your hiring targets, don't get me wrong. But hiring slowly, making sure you get the right person in the seat. But then when you know it's not a good fit, look, that other person also knows it's not a good fit. So just have that conversation and figure out a way to go forward.

• 29:37Harry Stebbings?

  What motto or quote do you frequently revert back to?

• 29:40Speaker 02

  Oh, there's a few of them. First of all, keep the main thing, the main thing. This is a big truism in building technology startups. I think there's a lot of things that are going to come at you. You gotta just remember, what are you trying to do? What's the main goal? What's the thing that's going to move the dial 80% this year versus like the 20% that's noise? And really, at the end of the day, as a startup founder, there's probably three or five major decisions you have to get right every year. And that will really dictate what's going to happen with your company in the future. So just make sure you get those right. That's one I love. The other one is actually a quote from Herb Keller, founder of Southwest Airlines. He had a great quote, which is, we have a strategic plan. It's called doing things. And I highly recommend entrepreneurs to think about that, in particular in the early days. Because, look, again, you can have all these plans and you can have all this vision and you can have all these strategic roadmaps of where you're gonna go.

• 30:25Speaker 02

  At the end of the day, you gotta show up every day and you gotta deliver. And you gotta keep moving and you gotta keep going. And even if you make a mistake, that's okay. Hit the wall, take a right and keep going, but you have to keep doing things. That's the name of the game.

• 30:37Harry Stebbings?

  A good decision made today is better than a perfect one made tomorrow. Agree?

• 30:41Speaker 02

  I agree. I think life is all about momentum. I think life in building technology startups is all about momentum. Look, you're not gonna make all the perfect decisions. And by the way, you're never gonna have the perfect data. So if you're waiting to make that perfect decision, you're gonna wait forever to get the data. And by then, you're already long gone. I mean, your competition's gotten in front of you. You missed the market opportunity. You didn't get that awesome customer, whatever the case is. Make good decisions as quickly as you can with the best amount of high fidelity data you have at the time. But it's never gonna be perfect and you gotta just keep moving.

• 31:10Harry Stebbings?

  This is a tough one. What do you know now that you wish you'd known at the start of your Okta journey?

• 31:14Speaker 02

  Well, I think I wish I'd known that it was a marathon, not a sprint. But you still have to run six minute miles. Okay? So it's a marathon. You gotta play the long game. You can't be sprinting every single day, but you do have to run pretty fast the whole time. So kind of getting that right balance going. Because you gotta remember, building a large, independent, successful company, it's gonna take three, five, 10, 15, 20 years. It's not something that's gonna be done overnight. But you gotta show up every day. You gotta put your hat on. You gotta put your boots on and you gotta get back to work.

• 31:45Harry Stebbings?

  I mean, listen, I'm not sure I've ever run a six minute mile, so.

• 31:48Speaker 02

  I haven't either, but it sounds like a great idea.

• 31:52Harry Stebbings?

  But I wouldn't finish today. The next five years for you and for Okta, what's that big roadmap ahead?

• 31:57Speaker 02

  Well, look, I'm excited every day to come to work because I feel like we're just getting started. The markets that we're in around workforce identity management, around customer identity and access management, these are markets that are tens and tens of billions of dollars being spent on legacy infrastructure software, which I think is a huge opportunity. And we're really helping companies take care of these three big waves they're riding, which is everyone's moving to the cloud and using more software and infrastructure as a service. Every organization has to become a technology organization. Right. Every company has to become a technology company, figure out the way to do digital transformation, better connections with their customers, their partners, their vendors. And then finally, everyone's really worried about security and that priority only increases every day. So these are three big waves that we're riding and the last five, 10 years have been very exciting, but I think the next five and 10 are going to be way more exciting than they have been.

• 32:39Harry Stebbings?

  Listen, Frederic, you said at the beginning that you're an enterprise nerd. I'm an ultimate enterprise nerd and so this was a huge honour to have you on the show today. So thank you so much for joining me.

• 32:48Speaker 02

  Thanks for having me, Harry. I really appreciate it.

• 32:51Harry Stebbings?

  I mean, what a hero and I look very forward to running our first six minute mile together. And if you'd like to see more from Frederic, you can find him on Twitter at F Karist. Likewise, it'd be great to see you behind the scenes here at the 20 Minute VC. You can do that on Instagram at H Stebbings 1996 with two Bs on Instagram. Again, it would be great to see you there. But before we leave you today, I'm always focused on scaling my time and I was always crap at travel booking and management. Well, not anymore. Why? Because I now use TravelPerk, the business travel management platform that even I love. It's just so super easy to book travel and actually quite fun. And my favourite, no back and forth with travel agents or your finance team. But it gives you the best of both worlds. Companies don't just get happy travellers, but also easier management and as much as 20% in savings with 100% in compliance.

• 33:35Harry Stebbings?

  Got to tick that compliance box these days. And even better, no one is going to chase people for receipts or worry about splurging on overly expensive penthouse suites. Finally, I have to say, the support is just number one rated. So you get 24/7 travel experts ready to deal with forgotten passports. Yep, I had that one before. Unexpected flight cancellations, oversized baggage requests, vegan meal options, whatever you can think of, they have you covered. And the 20 Minute VC listeners can score a free lounge pass to over 1,200 airports for a whole year. That's quite astonishing. I'm quite jealous. I quite like that. All you need to do is go to travelperk.com/20vc. That's travelperk.com/20vc. Give them the name of the person who runs travel at your company. And if they book a demo, the lounge pass is yours.

• 34:17Harry Stebbings?

  And if TravelPerk allows me to scale my time, a lot of what we do on the 20 Minute VC is discuss scaling businesses, talk to experts, pick the brains of founders and investors who tell us about the trends to watch out for, offer tips on fundraising and teaches how to excel at. Any company stage, but there's no playbook for building a great business. But we can certainly learn from people who've done it before. Beyond listening to this podcast and talking to mentors and advisors in your own network, it's important to have resources you can turn to when you're tackling a new challenge. And Stripe has built those resources for you. Whether you'd like to learn how to run a pricing experiment or build a knockout landing page. Stripe gives you the information you need to start, run and scale a technology company. And their guides are often written by or feature people like Elad Gil, experts in their space who you've probably heard on this very podcast.

• 35:02Harry Stebbings?

  And you can read my favourite guide on scaling engineering organisations and many more on stripe.com/20vc, that's T W E N T Y V C. And last but by no means least, to scale, you need customers. And Intercom offers a new and better way to acquire, engage and retain customers. They've built a suite of messaging first products from chatbots to a totally reimagined business messenger that modern internet businesses use to accelerate growth across the customer lifecycle from acquisition to engagement and support. And over the past eight years, they've totally reimagined what a business messenger can be, which is way more than simply live chat. Today, Intercom is used by the world's most forward-thinking companies. Eighty-four percent of Y Combinator companies that use a messaging or live chat tool use Intercom, astonishing fact that one.

• 35:45Harry Stebbings?

  And they have over 30,000 customers, including larger companies too, like New Relic, Atlassian and Shopify, and also smaller companies like Airtable and Coda. As always, I so appreciate all your support and your listening and I can't wait to bring you another set of phenomenal episodes next week.