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Okta<\/a> came out of the gate strong today in its Wall Street debut, attracting the type of institutional investors CEO Todd McKinnon<\/a> says should be around for the long haul. This IPO comes at a time when Wall Street appears ready to embrace enterprise technology companies<\/a>.<\/p>\n Okta set its price yesterday at $17 a share, raising at least $187 million<\/a>. The firm could raise more if its underwriters trigger\u00a0their ability to buy more shares at the original IPO price, which seems like a no-brainer, given Okta\u2019s strong first-day performance.<\/p>\n Okta is a cloud identity management company that helps large companies\u2019 users connect securely to cloud services, while easing the burden of signing into multiple applications. The unicorn is a pure cloud company with a classic subscription model, an approach that seems to be finally well understood<\/a> by public market\u00a0investors.<\/p>\n It\u2019s been quite a year so far for enterprise IPOs, as Okta joins Alteryx<\/a> and MuleSoft<\/a> in going public, with Cloudera (which filed a week ago<\/a>) and Yext<\/a> on deck.<\/p>\n McKinnon said with the dearth of IPOs last year, he felt like there was pent-up public market demand for new offerings, something that worked in his favor. But it was more than that. The CEO also noted that institutional investors came ready to play in his company\u2019s IPO, and they had done their homework regarding the state of cloud technology.<\/p>\n \u201cWhat was interesting was the number of high-quality long-term mutual funds that were interested,\u201d McKinnon told TechCrunch. \u201cIt\u2019s a testament to what we\u2019ve done and the knowledge of this model, the cloud in general and why we are important to that story long term,\u201d he said.<\/p>\n McKinnon admitted that portfolio managers\u2019 high-level knowledge of the cloud took him somewhat by surprise. Perhaps that\u2019s because nearly everyone in the business world today uses one cloud application or another. It\u2019s hard to avoid Office 365, G Suite, Salesforce, Box, Workday and the other large cloud services.<\/p>\n Certainly managing identity is paramount to that story, and a technology that crosses every cloud service. It\u2019s imperative to ensure that only an authorized individual can sign into a particular service. Yet you also need to make it simple enough to access multiple applications without putting undo hardship on the user \u2014 and McKinnon found in conversations with potential investors, as cloud users themselves, that this was clearly understood.<\/p>\n That Okta had a solid first day result<\/a>\u00a0shouldn\u2019t have come as an incredible surprise. Companies that raise their IPO range pre-debut shows that there is enough demand for their shares in the market, allowing them to\u00a0raise the price without\u00a0putting at risk the number of shares they had hoped to sell.<\/p>\n By pricing at the upper-end of its extended range, Okta made the point all the more obvious.<\/p>\n Jason Lemkin<\/a>, a well-known SaaS venture capitalist, told TechCrunch that one reason for Okta\u2019s popularity today was that its growth \u201cis insane,\u201d and that the company has \u201cthe full package.\u201d<\/p>\n What Lemkin saw was a company growing around 15 percent over its last two reported sequential quarters, <\/i>a pace of growth that many other companies at Okta\u2019s age (founded in 2009<\/a>) and scale (nine-figure revenue) would kill for<\/a>.<\/p>\n As for the full package, Lemkin was referring to the fact that Okta is moving both its top and bottom lines in the correct directions. So, from its fiscal quarter ending October 31, 2016 to its fiscal quarter ending January 31 2017, Okta saw its revenue grow from $42.3 million to $48.8 million, while at the same time it saw its net loss fall from $21.9 million to $18.2 million.<\/p>\n Growing revenue quickly in combination with falling losses is a potent\u00a0mix \u2014 and one that points to (eventual) profits.<\/p>\n While Okta had a great debut, it doesn\u2019t necessarily follow that all subsequent enterprise-facing IPOs will have a similarly stellar performance. What today\u2019s IPO does show is that the market is welcoming for enterprise-facing cloud companies, especially if their financials look positive. If not, then Lemkin justifiably wonders if they can do as well.<\/p>\n Gene Munster<\/a>, a former Apple analyst turned venture capitalist, thinks even the poorer-performing companies could do well under the correct market conditions. Speaking yesterday on TechCrunch\u2019s Equity podcast<\/a>, Munster indicated that the shift that took place through 2016, which saw the value of enterprise-facing revenues increase<\/a>, will hold, as long as public-market investors continue to covet \u201cvisibility.\u201d<\/p>\n Visibility in this case means predictability; companies that sell products on a recurring basis, as SaaS firms do, often have very predictable growth. That consistency helps investors place bets with more confidence, allowing for slightly richer valuations than other companies with similar revenue figures, but non-recurring sales, could command.<\/p>\n Asked if the technology IPO market was in fact as strong as some observers view it to be, Munster said that he believes it is for now, but that could change for some public market investors if Congress fails to enact tax reform.<\/p>\nBatter up<\/h2>\n
Loading the bases<\/h2>\n
Bringing it home<\/h2>\n