Auth0 Sells For $6.5 Billion: The Power of “Nerdy and Early” Investing
Learn what signals drove the investment decision to lead their 2014 seed round of funding
In June 2014, while at Bessemer, I had the privilege of partnering with Jon Gelsey, Eugenio Pace, and Matias Woloski by leading the first $2 million seed round of financing in Auth0. This afternoon, the Auth0 announced its sale to Okta for $6.5 billion. It’s incredible that this team of identity and authentication nerds has been so effective at realizing their vision and achieving today’s amazing milestone. Under the leadership of CEO Eugenio, CTO Matias, and former CEO Jon, Auth0 has transformed from a 5-person startup in 2014 to the world’s leading platform for identity and authentication today.
As Auth0’s first VC investor at seed, first board member, and eventually their Series A lead as well, I want to share what I’ve learned from their journey (starting with our first meeting back in 2014), and reflect on how being “nerdy and early” played a major role in this early investment.
This seed investment occurred during my time at Bessemer (2011-2017). When I chose to launch Ubiquity Ventures in July 2017, having to step off the board of Auth0 was one of the toughest parts of leaving Bessemer. I’m lucky to say that many from the Auth0 board and founding team have continued to support me as LPs/investors in Ubiquity Ventures. I don’t have any information about the company’s operations since 2017 and haven’t spoken with the company about this blog post.
While Auth0 wasn’t a Ubiquity investment, this story of Auth0’s seed does fit within Ubiquity’s model of “nerdy and early” investing, so let’s dive in:
Behind the 2014 Seed Investment Decision: Pairing a “Prepared Mind” with “Prepared Hands”
Since the scientist Louis Pasteur first said “chance favors the prepared mind”, a large number of VCs describe their investing as starting with a “prepared mind”. What they mean is that they select a focus area in advance, read everything they can about it, and then bring that preparation to meetings with startup teams in the sector. This may sound like an obvious strategy, but it’s worth noting that some VCs have the opposite model: the “generalist” who invests across sectors by looking for momentum or a similar in-the-moment signal.
But it was by neither a “prepared mind” nor a generalist approach that Auth0’s seed round happened; it came down to having “prepared hands”.
What do I mean? Let’s go back to the progenitor of this quote, Louis Pasteur, who had more than just a “prepared mind”. Day in and day out, he was in the lab, immersed in the latest science using his own two hands to run experiments. In this way, Pasteur advanced from having a “prepared mind” to also having “prepared hands”. By getting hands-on and into the weeds, he was able to discover that microorganisms cause fermentation and disease and then invent pasteurization as a way to destroy these microorganisms in our food (your milk and orange juice are probably pasteurized).
Having “prepared hands” and understanding the sector as a result of personal on-the-ground experience was critical to my early investment in Auth0. Today, I refer to this idea as “nerdy and early” investing, but it still means that I prefer to have hands-on experience with something before I invest in it.
In the case of Auth0, I had only to think back to my own time coding at my last startup, Triangulate (2009-2011), to recall the pain of handling identity and authentication code for our app. I remember the perils of SQL injection attacks on a login screen, incorrectly salting passwords, or having bugs in authentication code. My own “prepared hands” had felt this pain directly, and as a result, I evaluated and engaged with Auth0 well before the emergence of traditional traction signals.
How it Happened: Moving at Founder Speed (10 days)
In late June 2014, I met Jon, Eugenio, and Matias in an extra conference room at Simply Measured’s offices in Seattle. Just 10 days later, I had completed our diligence, drafted a 20-page investment memo, and had secured Bessemer partnership approval to lead this seed round.
In those 10 calendar days, we held several meetings with Auth0 team members, made dozens of diligence calls with experts and users, and spent hours using Auth0’s technology ourselves. This is what I mean by “moving at founder speed”, and—contrary to popular opinion—speed does not have to come at the cost of thoroughness or accuracy.
Because of a “prepared mind” and “prepared hands”, this first Auth0 pitch meeting shifted tone within just five minutes. It started as then-CEO Jon Gelsey pitching a VC financier, but quickly became a group of engineers trading war stories back and forth. It was developer-to-developer as we listened to Jon share his team’s vision for Auth0, debated how to architect its plumbing, and brainstormed a roadmap of future features. The conversation moved seamlessly from Jon to Eugenio to Matias and back and forth. Once we all dropped our guard, we were able to cover several meetings’ worth of data sharing and relationship building over the course of that one-hour meeting.
Together with my former Bessemer colleagues David Cowan and Peter Lee, we used our experience investing in developer tools (such as Twilio and Sendgrid, among others) to accelerate our diligence further. The summer prior, we had already given the 50-person Bessemer partnership a “prepared mind” when another colleague and I presented the “10 Laws of Investing in Developer Tools Startups” at our annual firm-wide offsite. I later shared most of these insights in the inaugural episode of Heavybit’s “Venture Confidential” podcast (Heavybit is the leading developer tools startup incubator).
After investing, I joined Auth0’s board and we moved quickly to ship more features and spread the word further. This included creating some of the best developer documentation as well as stirring up some press (USA Today in September 2014). Early on, we added top-notch board members like Monica Enand and Peter van Hardenberg. Sales accelerated further with the addition of Dave Wilner as then-Head of Sales (now CRO), and we as Bessemer chose to step up again and lead their $9 million Series A (with apologies to my wife who allowed me to spend the first three hours of our honeymoon negotiating this Series A). All of this happened within about 12 months of that fateful June 2014 meeting—further proof that the company kept moving at founder speed!
To this day, I prefer to talk with and invest in founders who discuss timeframes in days and weeks, not quarters and years. This requires that they have a clear focus, “prepared hands”, and the confidence to move quickly. In turn, I aim to offer the same and move at founder’s speed, as was the case with Auth0.
How it Happened: Being Obsessed With Customers
You will not find another person on Earth that cares more about understanding someone and communicating something clearly than Auth0 CEO Eugenio Pace. And that doesn’t just mean when talking about identity and authentication. Whatever the topic, Eugenio places the utmost importance on understanding and connecting with his audience. I’ve seen it firsthand in a wide variety of settings, but it has played a major role in Auth0’s success. It was even clear from that first meeting back in 2014, by which point Eugenio had already chosen to step back from CEO to be “VP of Customer Success”(an uncommon title in a seed stage startup; Eugenio later returned as CEO in 2018). Eugenio is authentically invested in his customers’ success.
More broadly, Jon, Eugenio, and Matias have been obsessed with the problem to its core. Eugenio and Matias literally wrote the book on identity (that’s not hyperbole—here is the 2013 book they authored that you can still buy on Amazon: “A Guide to Claims-Based Identity and Access Control”). They brought a decade of identity experience to the founding of Auth0. These are the folks who stay up late working on identity. They nerd out on identity and want to explore every crevice of every element of it.
In a recent blog post titled “Why I’m Obsessed With Nerds”, I wrote:
“A nerd is someone who is obsessed with a topic, whether it be optimizing ML hyperparameters, welding Burning Man art, or dissecting classical music. They dive 100x deeper than the average person into their chosen topic, often immersing themselves to the point of losing track of time. They understand everything about it from the bottom-up and top-down. They know every technique, every major historical figure, and even where that area is heading next.”
Eugenio and Matias are the world’s biggest identity and authentication nerds, and THIS is what Auth0 customers are buying—not just a technical product. They are buying the intelligence, the care, and the passion that this team has for identity and authentication. They are buying their well-informed opinions of how to set up identity and authentication. To paraphrase Simon Sinek, Auth0’s customers aren’t buying what Auth0 does, they are buying why they do it.
Congratulations to Eugenio Pace, Matias Woloski, Jon Gelsey and the entire Auth0 team!!!
More fun photos from the Auth0 journey
Are you a founder in the smart hardware or machine learning sector? Let’s talk! Leave a comment or get in touch with Ubiquity Ventures.
Ubiquity Ventures — led by Sunil Nagaraj — is a seed-stage venture capital firm focusing on early-stage investments in software beyond the screen, primarily smart hardware and machine intelligence applications.