Both GigaOm and TechCrunch are reporting that identity management startup Okta has raised $25 million in a new round of funding. The new C-round money brings the total funds raised to $52 million. Sequoia capital led the new round with existing investors Andreessen Horowitz, Floodgate, Greylock Partners, and Khosla Ventures, all in the mix as well.
While congratulations are in order for Okta, I can’t help wondering what the discussion was like in that pitch meeting and subsequent partner deliberations for this deal. On one hand, identity management is a HUGELY important part of the cloud computing infrastructure. For the cloud to thrive, we have to get past oodles of individual account name and password pairs for each service that we use. We need a strong, nearly-universal identity system. And Okta has a nice solution for that, particularly for SaaS applications. The problem for Okta is that everybody else realizes that as well and will be coming after the space.
Notably, there are elephants dancing around Okta’s tiny mouse: Microsoft, Google, and Facebook. Of the three, Microsoft has a 12-year head start and near-universal identity penetration in enterprise accounts with Active Directory. The company has also launched Azure Active Directory and Office 365, both with tie-ins to existing Active Directory deployments within enterprises. Google and Facebook are rapidly expanding their own identity footprint using OAuth-based mechanisms. It’s now possible to login to a variety of 3rd-party sites using your Google and Facebook identities. I’m skeptical that Facebook will gain much enterprise credibility, but Google has a toehold there with GMail and Google Drive/Docs, particularly in small to mid-sized enterprises.
So, the big question is, how does Okta compete with that? The boys at Sequoia are no dummies, so I’m sure there were lots of conversations on that topic before the term sheet was signed. It isn’t obvious what the answer was, however. We’ll continue to watch Okta with interest over the coming months and years to see if it can carve out a long-term niche between the larger players.