DevTools Brew #61: Okta story: from doubt to building a 30B+ Company, 7 things I've learned about pricing while growing Qovery...
Hey folks, welcome to DevTools Brew Newsletter #61!
If you're new here, my name is Morgan Perry, co-founder of Qovery.
Every Saturday, I share the stories, strategies, and insights behind the most successful devtool companies. Subscribe to receive weekly stories :)
Also, follow me on Linkedin if you don’t already!
In this Issue #61:
📈 From doubt to building a 30B+ Company: Okta story
📕 7 things I've learned about pricing while growing Qovery
⭐ Star History Weekly Pick
Let's dive in!
📈 From doubt to building a 30B+ Company: Okta story
Today, let’s spotlight Okta’s journey. Todd McKinnon CEO & co-founder, has transformed a bold idea into a leading Identity & Access Management company. Before founding Okta, Todd was VP of Engineering at Salesforce, where he played a crucial role in leading Salesforce into a multi-product leader. Today, Okta boasts over 2,000 employees, serves more than 10,000 organizations worldwide and handles billions of logins annually. The company raised over $229 million in venture funding before going public in 2017 (with a market capitalization of $30B+). Let’s dive into the story of Okta, from doubt to market dominance. Let's go👇
Key Insights:
Genesis of Okta
Leaving Salesforce: Todd had a successful career at Salesforce, where he led the engineering team and launched multiple products. Observing the potential of cloud computing in 2008, he saw a significant opportunity to create transformative companies. In 2009, Todd left his role at Salesforce to start Okta.
Convincing His Wife: Todd had to persuade his wife, who was initially skeptical, about the decision to leave Salesforce and start a new company. He created a PowerPoint presentation titled "Why I'm Not Crazy" to outline his plan and mitigate her concerns.
Initial Vision and Pivot: Initially, Okta aimed to solve systems management problems but quickly pivoted to focus on identity and access management for cloud applications. This pivot was driven by customer feedback and the recognition of a significant pain point.
Early Stages and Product Development
Initial Vision and Pivot: Initially focusing on systems management, Todd and his co-founder Freddie Carist pivoted to identity and access management for cloud applications. This shift was based on customer feedback and the realization that identity management was a significant pain point.
Customer Development: Influenced by Steve Blanks's “Four Steps to the Epiphany”, they emphasized customer interviews and iterative development to find product-market fit.
Early Challenges & Product-Market Fit
Fundraising Struggles: During the 2009 financial crisis, raising funds was challenging. Despite many rejections, Todd and Freddie secured investment from Andreessen Horowitz and Floodgate, who believed in their vision and capabilities.
First Customers: Okta’s initial focus was on getting their product live with early customers. Their first customer, Xactly Software, marked a pivotal moment, leading to further adoption and a successful Series A funding round. Okta started with a minimal viable product and secured early customers by addressing immediate pain points related to cloud identity management.
Gradual Product-Market Fit: Achieving product-market fit was a gradual process. Early success with customers who had significant cloud adoption validated Okta’s value proposition and set the stage for growth.
Valley of Despair: 2011 was a particularly tough year for Okta, missing sales targets and facing internal skepticism. Todd emphasized the importance of maintaining belief and pushing forward despite doubts.
Breaking Through: Okta began to see positive signs when they met their sales targets in Q3 2011 and closed several significant deals. This success helped build momentum and confidence.
Building a Strong Team
Recruitment Challenges: Recruiting for a startup was harder than anticipated. Todd learned the importance of patience in hiring and the value of building a strong foundational team.
Leadership and Culture:: Okta’s culture emphasizes transparency and shared ownership of problems and solutions. Todd believes in empowering employees to feel emotionally invested in the company’s success.
Strategic Decisions
Focus on Enterprise: Initially hesitant to target large enterprises, Okta eventually embraced this market, leading to substantial deals and establishing Okta as a critical player in cloud identity.
Competitive Validation: Microsoft’s entry into the cloud identity space validated Okta’s market potential and confirmed their strategic direction.
Lessons from Todd (Okta CEO)
Persistence and Belief: Entrepreneurs must believe in their vision, even during tough times. Success often requires pushing through doubts and maintaining conviction.
Customer-Centric Development: Iterative development and customer feedback are crucial for finding product-market fit and building a product that truly solves customer pain points.
Team and Culture: Building a strong, motivated team and fostering a transparent, inclusive culture are essential for long-term success.
Role of Luck and Timing: Todd acknowledges the role of luck and timing in Okta’s success. He encourages founders to believe in their vision and persist through challenges, understanding that success often requires a bit of fortune.
Todd’s story offers great lessons for founders on the importance of conviction, perseverance, and strategic pivots in building a successful company.
📕 7 things I've learned about pricing while growing Qovery
Today, I've decided to share some hard-earned lessons learned while building and scaling Qovery as co-founder. We’ve iterated on our pricing strategy (and still do). Throughout many iterations, I’ve identified seven key lessons that I hope can be valuable to other founders or devtools operators. Let’s dive in!
1. Treat pricing as a product
Aligning your pricing with user needs is key. In the same way as releasing new features, pricing must be aligned with the value you bring to your users, and evolve over time.
2. Prioritize adoption over immediate revenue
As an early-stage startup, don't let pricing be a barrier. Focus on getting users to adopt your product first. A free tier that offers real value ensures users experience the benefits without any initial cost, paving the way for a natural progression to paid plans.
3. Learn early, optimize later
In the early stages, focus on learning rather than immediate revenue optimization. This gradual approach will allow you to refine your pricing strategy over time, eventually eliminating manual sales processes and introducing appropriate minimums.
4. Commit to transparency, trust, and self-service
Clear, upfront pricing eliminates the need for lengthy sales discussions. A self-serve model allows users to address immediate needs and become paying customers on their own terms.
Very important to continuously work to standardize and clarify your pricing and upgrade benefits, ensuring transparency and trust with your users.
5. Simplify upgrades
Make it easy for users to upgrade, providing a frictionless transition from free to paid features. Avoid minimum spend and default annual contracts to reduce customer risk.
6. Balance accessibility with premium value
Something I've learned the hard way but oh so important. Disproving the idea that easy beginnings mean a cheap product. Provide a clear path to your features to enhance premium offerings, allowing usage to grow with your users.
7. Tailor pricing for larger customers
Don't treat pricing the same way for individuals, teams, and enterprise users. For large customers, implement logarithmically declining pricing, ensuring that as usage scales, incremental costs decrease. This prevents large customers from feeling overcharged.
———
There's no one-size-fits-all approach to pricing, but following some key principles can help to craft your own successful model.
I've continually learned and iterated on pricing while growing Qovery, but I hope these insights can help others.
⭐ Star History Weekly Pick
The Star History Weekly Pick is:
OpenPanel: “All the goodies from both Mixpanel and Plausible combined into one tool.”
⭐️ 2.5k stars reached
It’s already over! If you have any comments or feedback, you can reach out to me on LinkedIn or Twitter.
Thanks for reading,
Morgan