Okta founder Todd McKinnon says that there’s no time like the present to launch your start-up

In the thick of the GFC, Todd McKinnon came home and told his wife and 6-month old daughter he was quitting his job to found what is now a $33bn company.

Okta CEO Todd McKinnon. Source: Supplied.

Conventional wisdom suggests now should be a dreadful time to start a business, with the economy devastated and consumer sentiment at historic lows.

Okta chief executive Todd McKinnon disagrees — and for good reason. He launched his Silicon Valley tech business during the global recession of the late-2000s, and says companies founded during economic downturns can be more successful and resilient as a result.

McKinnon, a former Salesforce executive, founded identity and access management provider Okta in January 2009, in the thick of the global financial crisis. It’s now worth about $33bn, with more than 2000 employees globally.

“When you’re in the guts of it, it’s pretty scary,” McKinnon tells The Deal. “A lot of people tend to think starting a business during a downturn is a bad time because it feels so scary and uncertain.

“My wife and I had a daughter who was six months old in 2009 and one day I came home and said ‘I’m going to quit my job’. She told me I was crazy for wanting do this, but I walked her through my arguments using a Google Sheets slide presentation. And it was called ‘Why I’m Not Crazy’. And we did it.

“Right now, it’s not any harder to start a company than it usually is. People shouldn’t be deterred.

Todd McKinnon at Okta’s Nasdaq IPO. Picture: Arion Doerr

“If you’re going to start a company, for the first couple of years the economy doesn’t matter that much anyway. You’re just building the basic product and getting things right and, if anything, you might have less competition for hiring people.”

McKinnon says that for Okta, launching during a downturn proved somewhat of a blessing, given the legacy software products he was competing with were far more expensive. At the time, Okta’s rivals were primarily clunky legacy systems, and customers were keen to at least hear McKinnon out.

“When the economy is tough, it’s far easier to make the argument to just try out a new company,” he says. “For us, we could say ‘See if you like us’, and the alternative is a $5m legacy software package that’s going to take you two years to get live.

“And by the time budgets opened up a couple of years later, the economy was more stable and we were more established.” McKinnon thinks the COVID-19 downturn will likely provide a strong catalyst for company creation, given the number of people laid off by the likes of Uber and Airbnb. That prediction is beginning to be borne out, with 140,000 new business ABNs registered here in the past three months.

“There is a tonne of new habits being instilled in terms of how we work, how we consume entertainment, and how we think about online and e-commerce and so forth,” McKinnon says.

“I think any time you have a massive shift like this, it creates a massive opportunity for new companies because old companies are often entrenched in old habits and inertia.

“Anytime you get a wholesale shift, opportunities for new innovation open up. In the next five years, we’ll look back at this as the germination of a tonne of interesting companies.”

For entrepreneurs keen to seize the moment, McKinnon says his main piece of advice is the same whether you’re starting a business during a downturn or not: It’s all about mindset.

“You have to set yourself up so that your expectations are that it’s hard, and the odds are low,” he says.

“The hardest thing about this is that you have to get lucky, right? That’s a hard thing for people to internalise and, at least for me, one of the hardest things about starting Okta is that before in my career, I felt like if I worked hard, and if I’m smart and a good teammate, there’s a very high chance that I would be successful.

“When you create a start-up, you have to get lucky. There has to be an industry trend that goes your way, and you have to make some early bets that turn out to be right.

“A lot of that is out of your control, so you have to just get comfortable with that. The other thing is that there’s no perfect time. You could say a recession is not a perfect time; you could say a roaring economy is not a perfect time.

“People always looking for the perfect time is a symbol to me that they’re not comfortable with that randomness or that element of chance that is going to come into it.”