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May 3, 2019 · 36m · 20vc

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 · 22m spoken Harry Stebbings · 11m spoken
0:00 / 0:00

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In this episode of The 20 Minute VC, Okta co-founder and COO Frederic Kerrest joins host Harry Stebbings to discuss the strategic and operational journey of scaling Okta from an early seed-stage cloud concept into a multi-billion-dollar public company. Kerrest shares valuable insights on enterprise market sizing, founder-investor alignment with Andreessen Horowitz, go-to-market pivots, capital efficiency, and executive leadership.

How this conversation actually went

Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 34.2% of the talking time here. How this is scored →

Harry as informed peer 3.3 Guest teaching 3.5 Guest disagreement 1.2 Harry pushing back 2.5
05100:0010:0020:0030:004:16–7:15 · Harry as informed peer 2/10 The Founding Story of Okta and Early Salesforce Lessons Harry asks open-ended questions about Okta's origin story and early lessons from Salesforce hypergrowth. Frederic warmly explains the macro shift from on-premises software to cloud services and jokes with Harry about never experiencing on-prem.7:16–11:21 · Harry as informed peer 5/10 Evaluating Ideas, Large Markets, and Founder-Market Fit Harry actively challenges the 70/20/10 market-team-product framework cited by Frederic, arguing that backing special people lets them find the market. Frederic nuance-reframes the dynamic, arguing enterprise founders specifically require deep domain maturity.11:21–18:15 · Harry as informed peer 4/10 Overcoming Early Scaling Challenges and Executing Pivots Harry cites venture investors Peter Fenton and Sarah Tavel to ask about market expansion and knowing when to pivot versus sticking to original convictions. Frederic candidly recounts early scaling friction, 2011 board pressure, and pivoting target customers from SMBs to mid-market.18:15–21:28 · Harry as informed peer 3/10 Scaling Leadership Teams and Disciplined Capital Efficiency Harry prompts Frederic on scaling leadership and maintaining capital efficiency during aggressive expansion. Frederic explains the discipline of hiring domain experts to replace founders in core functions and managing payback periods on sales and marketing spend.21:28–27:23 · Harry as informed peer 3/10 Andreessen Horowitz's Early Investment and Investor Selection Strategy Harry asks about managing high-profile venture investors and investor selection criteria. Frederic shares the founding story of taking Andreessen Horowitz's first fund check at a makeshift Costco table and emphasizes choosing experienced operator-investors.27:23–32:49 · Harry as informed peer 3/10 Quick Fire Insights on Leadership, Hiring, and Future Roadmap During the quick fire round, Harry pushes binary prompts on hiring and decision-making speed. Frederic pushes back politely on the phrase 'hire fast, fire fast', arguing that hiring fast causes severe long-term debt.4:16–7:15 · Guest teaching 3/10 The Founding Story of Okta and Early Salesforce Lessons Harry asks open-ended questions about Okta's origin story and early lessons from Salesforce hypergrowth. Frederic warmly explains the macro shift from on-premises software to cloud services and jokes with Harry about never experiencing on-prem.7:16–11:21 · Guest teaching 4/10 Evaluating Ideas, Large Markets, and Founder-Market Fit Harry actively challenges the 70/20/10 market-team-product framework cited by Frederic, arguing that backing special people lets them find the market. Frederic nuance-reframes the dynamic, arguing enterprise founders specifically require deep domain maturity.11:21–18:15 · Guest teaching 4/10 Overcoming Early Scaling Challenges and Executing Pivots Harry cites venture investors Peter Fenton and Sarah Tavel to ask about market expansion and knowing when to pivot versus sticking to original convictions. Frederic candidly recounts early scaling friction, 2011 board pressure, and pivoting target customers from SMBs to mid-market.18:15–21:28 · Guest teaching 4/10 Scaling Leadership Teams and Disciplined Capital Efficiency Harry prompts Frederic on scaling leadership and maintaining capital efficiency during aggressive expansion. Frederic explains the discipline of hiring domain experts to replace founders in core functions and managing payback periods on sales and marketing spend.21:28–27:23 · Guest teaching 3/10 Andreessen Horowitz's Early Investment and Investor Selection Strategy Harry asks about managing high-profile venture investors and investor selection criteria. Frederic shares the founding story of taking Andreessen Horowitz's first fund check at a makeshift Costco table and emphasizes choosing experienced operator-investors.27:23–32:49 · Guest teaching 3/10 Quick Fire Insights on Leadership, Hiring, and Future Roadmap During the quick fire round, Harry pushes binary prompts on hiring and decision-making speed. Frederic pushes back politely on the phrase 'hire fast, fire fast', arguing that hiring fast causes severe long-term debt.4:16–7:15 · Guest disagreement 0/10 The Founding Story of Okta and Early Salesforce Lessons Harry asks open-ended questions about Okta's origin story and early lessons from Salesforce hypergrowth. Frederic warmly explains the macro shift from on-premises software to cloud services and jokes with Harry about never experiencing on-prem.7:16–11:21 · Guest disagreement 2/10 Evaluating Ideas, Large Markets, and Founder-Market Fit Harry actively challenges the 70/20/10 market-team-product framework cited by Frederic, arguing that backing special people lets them find the market. Frederic nuance-reframes the dynamic, arguing enterprise founders specifically require deep domain maturity.11:21–18:15 · Guest disagreement 1/10 Overcoming Early Scaling Challenges and Executing Pivots Harry cites venture investors Peter Fenton and Sarah Tavel to ask about market expansion and knowing when to pivot versus sticking to original convictions. Frederic candidly recounts early scaling friction, 2011 board pressure, and pivoting target customers from SMBs to mid-market.18:15–21:28 · Guest disagreement 1/10 Scaling Leadership Teams and Disciplined Capital Efficiency Harry prompts Frederic on scaling leadership and maintaining capital efficiency during aggressive expansion. Frederic explains the discipline of hiring domain experts to replace founders in core functions and managing payback periods on sales and marketing spend.21:28–27:23 · Guest disagreement 1/10 Andreessen Horowitz's Early Investment and Investor Selection Strategy Harry asks about managing high-profile venture investors and investor selection criteria. Frederic shares the founding story of taking Andreessen Horowitz's first fund check at a makeshift Costco table and emphasizes choosing experienced operator-investors.27:23–32:49 · Guest disagreement 2/10 Quick Fire Insights on Leadership, Hiring, and Future Roadmap During the quick fire round, Harry pushes binary prompts on hiring and decision-making speed. Frederic pushes back politely on the phrase 'hire fast, fire fast', arguing that hiring fast causes severe long-term debt.4:16–7:15 · Harry pushing back 1/10 The Founding Story of Okta and Early Salesforce Lessons Harry asks open-ended questions about Okta's origin story and early lessons from Salesforce hypergrowth. Frederic warmly explains the macro shift from on-premises software to cloud services and jokes with Harry about never experiencing on-prem.7:16–11:21 · Harry pushing back 5/10 Evaluating Ideas, Large Markets, and Founder-Market Fit Harry actively challenges the 70/20/10 market-team-product framework cited by Frederic, arguing that backing special people lets them find the market. Frederic nuance-reframes the dynamic, arguing enterprise founders specifically require deep domain maturity.11:21–18:15 · Harry pushing back 3/10 Overcoming Early Scaling Challenges and Executing Pivots Harry cites venture investors Peter Fenton and Sarah Tavel to ask about market expansion and knowing when to pivot versus sticking to original convictions. Frederic candidly recounts early scaling friction, 2011 board pressure, and pivoting target customers from SMBs to mid-market.18:15–21:28 · Harry pushing back 2/10 Scaling Leadership Teams and Disciplined Capital Efficiency Harry prompts Frederic on scaling leadership and maintaining capital efficiency during aggressive expansion. Frederic explains the discipline of hiring domain experts to replace founders in core functions and managing payback periods on sales and marketing spend.21:28–27:23 · Harry pushing back 2/10 Andreessen Horowitz's Early Investment and Investor Selection Strategy Harry asks about managing high-profile venture investors and investor selection criteria. Frederic shares the founding story of taking Andreessen Horowitz's first fund check at a makeshift Costco table and emphasizes choosing experienced operator-investors.27:23–32:49 · Harry pushing back 2/10 Quick Fire Insights on Leadership, Hiring, and Future Roadmap During the quick fire round, Harry pushes binary prompts on hiring and decision-making speed. Frederic pushes back politely on the phrase 'hire fast, fire fast', arguing that hiring fast causes severe long-term debt.

speaking balance: gold is Harry, purple is the guest (3 minute bins)

0:00 · Harry 100% · guest 0%0:00 · Harry 100% · guest 0%3:00 · Harry 53.1% · guest 46.9%3:00 · Harry 53.1% · guest 46.9%6:00 · Harry 24.9% · guest 75.1%6:00 · Harry 24.9% · guest 75.1%9:00 · Harry 26.3% · guest 73.7%9:00 · Harry 26.3% · guest 73.7%12:00 · Harry 17.9% · guest 82.1%12:00 · Harry 17.9% · guest 82.1%15:00 · Harry 10% · guest 90%15:00 · Harry 10% · guest 90%18:00 · Harry 11.2% · guest 88.8%18:00 · Harry 11.2% · guest 88.8%21:00 · Harry 22.9% · guest 77.1%21:00 · Harry 22.9% · guest 77.1%24:00 · Harry 7.9% · guest 92.1%24:00 · Harry 7.9% · guest 92.1%27:00 · Harry 15.4% · guest 84.6%27:00 · Harry 15.4% · guest 84.6%30:00 · Harry 19.2% · guest 80.8%30:00 · Harry 19.2% · guest 80.8%33:00 · Harry 100% · guest 0%33:00 · Harry 100% · guest 0%36:00 · Harry 0% · guest 0%36:00 · Harry 0% · guest 0%
Sharpest disagreement ▶ 28:53 Rejection of 'hire fast, fire fast'

Frederic directly reframes Harry's prompt on 'hire fast, fire fast', arguing that hiring fast causes immense organizational setback when wrong hires must be replaced.

 Hardest push from Harry ▶ 8:17 Challenging Morgenthaler's market-first ratio

Harry pushes back directly against David Morgenthaler's 70/20/10 market-first ratio, asserting his firm's belief that exceptional founders find or create markets.

 Biggest teaching moment ▶ 10:04 Enterprise founder maturity vs consumer founders

Frederic educates Harry on why enterprise software creation requires experienced domain veterans who understand business workflows, contrasting it with consumer tech.

 Harry holds his own ▶ 11:21 Comparing Fenton and Tavel on market expansion

Harry demonstrates strong investor knowledge by contrasting Peter Fenton's market sizing skepticism with Sarah Tavel's strategy of capturing small market insertion points.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
The Founding Story of Okta and Early Salesforce Lessons 2301 Harry asks open-ended questions about Okta's origin story and early lessons from Salesforce hypergrowth. Frederic warmly explains the macro shift from on-premises software to cloud services and jokes with Harry about never experiencing on-prem.
Evaluating Ideas, Large Markets, and Founder-Market Fit 5425 Harry actively challenges the 70/20/10 market-team-product framework cited by Frederic, arguing that backing special people lets them find the market. Frederic nuance-reframes the dynamic, arguing enterprise founders specifically require deep domain maturity.
Overcoming Early Scaling Challenges and Executing Pivots 4413 Harry cites venture investors Peter Fenton and Sarah Tavel to ask about market expansion and knowing when to pivot versus sticking to original convictions. Frederic candidly recounts early scaling friction, 2011 board pressure, and pivoting target customers from SMBs to mid-market.
Scaling Leadership Teams and Disciplined Capital Efficiency 3412 Harry prompts Frederic on scaling leadership and maintaining capital efficiency during aggressive expansion. Frederic explains the discipline of hiring domain experts to replace founders in core functions and managing payback periods on sales and marketing spend.
Andreessen Horowitz's Early Investment and Investor Selection Strategy 3312 Harry asks about managing high-profile venture investors and investor selection criteria. Frederic shares the founding story of taking Andreessen Horowitz's first fund check at a makeshift Costco table and emphasizes choosing experienced operator-investors.
Quick Fire Insights on Leadership, Hiring, and Future Roadmap 3322 During the quick fire round, Harry pushes binary prompts on hiring and decision-making speed. Frederic pushes back politely on the phrase 'hire fast, fire fast', arguing that hiring fast causes severe long-term debt.

Statements from this episode (10)

Insight
Kerrest: Exceptional Founders Are Constrained Without Large, Growing Markets
“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, I think you're going to be kind of constrained…”
Frederic Kerrest May 3, 2019 ▶ 9:11
Insight
Kerrest: Successful Enterprise Software Founders Are Industry Veterans, Not 20-Somethings
“I think if you look at successful enterprise software founders, whether it was Mark Benioff and Parker Harris, Salesforce, or whether it was Anil Bushri, And Dave Duffield at Workday or whether it was Fred Luddy at ServiceNow, these are all folks who did not s…”
Frederic Kerrest May 3, 2019 ▶ 10:37
Insight
Kerrest: Startups should dominate small markets with adjacent expansion opportunities
“What he's looking for, and I agree with, is you want to become a monopolist in a small market with a lot of adjacencies.”
Frederic Kerrest May 3, 2019 ▶ 11:52
Assertion Not checkable as stated
Okta revenue performance in 2011 was flat despite aggressive projections
“Frankly, if I look back at 20 11 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.”
Frederic Kerrest May 3, 2019 ▶ 13:31
Assertion Supported
Okta pivoted from small businesses to mid-market and enterprise in 2011
“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, and C, they were looking for solutions like the ones we had”
Frederic Kerrest May 3, 2019 ▶ 16:25
Insight
Kerrest: Two to four co-founders is the optimal startup team size
“I think if you look at 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.”
Frederic Kerrest May 3, 2019 ▶ 16:57
Disclosure
Kerrest: Okta restrained sales spending with a mandatory payback governor
“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 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 g…”
Frederic Kerrest May 3, 2019 ▶ 20:52
Assertion Partly supported
Okta was Andreessen Horowitz's first fund investment check in 2009
“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.”
Frederic Kerrest May 3, 2019 ▶ 22:52
Prediction Didn’t hold up
Kerrest: Okta planned to hire over 900 people in 2019
“And look, in a high growth environment, we have to hire, you know, north of 900 people this year.”
Frederic Kerrest May 3, 2019 ▶ 29:01
Insight
Kerrest: Founders only need to make 3 to 5 key decisions annually
“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.”
Frederic Kerrest May 3, 2019 ▶ 29:56
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