Scaling from 1 to 10 to 50 Customers: Lessons from Okta CEO Todd McKinnon

Jan 12, 2021
Scaling from 1 to 10 to 50 Customers: Lessons from Okta CEO Todd McKinnon
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A new year means 9 full years of hosting the NY Enterprise Tech Meetup (NYETM) and a new epic lineup of 2021 speakers. This month, we kicked off 2021 with a NYETM in partnership with Sequoia Capital, featuring an anticipated fireside chat with Todd Mckinnon, Co-Founder and CEO of Okta.

It’s certainly been a wild 12 year ride for the Okta team, having raised over $225M in funding, an IPO in 2017, and over $580M in revenue today. Todd shared with us his top lessons from closing their 1st, 10th, and 50th customer, and what it took to get here today. See the full webinar recording here and the top takeaways from Todd’s journey below:

Lessons From Customer #1: Customer Feedback is 🔑

What really drove a lot of Okta’s early success was a customer-first philosophy. Before starting Okta, Todd’s original plan was to build a systems monitoring service for cloud apps. After continuously hearing how securely managing users given the rise of cloud applications was actually the much more acute pain point for CIOs, Todd and team pivoted the company to address cloud identity and access management.

“It was a deliberate plan to start a company where my background [at Salesforce] gave me an advantage — not just in the ability to build the product, but in selling to the first 10 customers. The first 10 customers are like evangelism.”

Todd was lucky in having already built credibility and a network of customers from Salesforce to tap into the early days as prospects, and he was eager to get the product to market quickly. From there, they continued listening to customer’s feedback and iterated on the product to better meet customer’s pain points. Counterintuitively, Todd learned the importance of saying “no” to customers who aren’t the right fit. This isn’t easy in the early days, but it’s an important skill to have in order to weed out any unhelpful signals and feedback from an irrelevant customer.

Conquering 2011’s Valley of Death: Todd explained that 2011 was a tough year for Okta — they had a couple customers, but were struggling to reach a milestone of 10. The turning point? Todd changed his leadership style. Instead of pretending he had all the answers (a culture most big tech leaders adopt), he exposed the company’s problems to the then 30–40 person team, setting sales targets and asking everyone, “How can we reach our goals?”. This method energized the team, motivating all of them to contribute, and played to each person’s strengths vs. Todd’s alone.

Lessons Scaling to Customer #10: Show Confidence in Your Value

Here’s where things can get challenging on the enterprise sales front. Many early-stage startups and founders struggle to prove their startups are big and sustainable enough to sell into enterprise customers. In Todd’s experience, he actually believes that counterintuitively at this stage, your advantage often lies in being small. This normally means you have unmatched passion and domain expertise, and a team willing to jump through hoops for customers. So find confidence in that fact.

To showcase their success, Okta focused on customer references and reference selling — plastering their website with early customer testimonial videos. There was no better way to prove to enterprise decision makers that they were making the right decision than to show them other customers had successfully come before them.

Taking on legacy tech competitors: On this front, Okta did well in getting out of “features and functions” or “feeds and speeds” mindset. While Todd was accustomed to following his technical roots to expand features and integrations for sales, he learned it was more important to find strategic and high value sales. To do this, he brought in a consultant to train Okta’s sales team on consultative selling and help them find the “buyer’s value perspective” and sell to that. In doing this, they were able to out compete large competitors with similar, cheaper products, who were often missing the mark in providing the top value customers were looking for.

This goes hand-in-hand with pricing your product and finding a budget within your customer’s businesses. Todd shared that if you’re selling to a customer with a non-existent budget for this type of product, it’s a good sign and means you’re the first to tap this space. If your product is valuable enough to them, they’ll find an adjacent budget somewhere else. Additionally, make sure you reflect your confidence in the value your product brings in your pricing. A common mistake many founders make is not charging enough off the bat, something even Okta faced in the early days.

Lessons Scaling to Customer #50 & Beyond: The Big Move from SMB to Enterprise

“I had a call today about a certain segment, a certain product and a certain geo and I’m thinking ‘why isn’t this repeartable yet?’ So your company will always be a little bit screwed up, no matter how big you get.” 😊

It went from “pretty bad” in 2011, to steadily meeting and exceeding sales goals in 2012. While Okta had started out doing SMB sales, a strategy Todd observed at Salesforce, customers 50–100+ were when Okta moved upmarket to larger enterprise customers, and enterprise sales really started to soar.

Todd was concerned about building a bespoke product, so starting out in SMB allowed Okta to adapt for different customer use cases. However, Todd made it clear that doing this sort of customization is only beneficial when you have “enough” customers — for Okta they had about 12 customers at the time, meaning they were able to continue their usual business without diverting for each customer’s unique needs too heavily.

At this stage Okta continued to be tactical in their sales pitch (this is our product, this is what it does, will that work for you?) versus vision selling. In hindsight, Todd believes Okta could have done a better job at vision selling once hitting 100 customers, but ultimately their status as a category creator established that on its own.

Check out Information Week’s recap here.

If you don’t already, follow our Enterprise Weekly Newsletter every Friday to stay informed on our monthly NY Enterprise Tech Meetup speaker lineup and must-follow enterprise startup demos. We hope to see you at the next one!

Huge thank you to Kira Colburn for her work on this piece.