I cofounded Okta — now a $26 billion company — during the 2008 recession. I've learned that while passion is critical, it won't be enough to drive success during a downturn.
Frederic Kerrest is the executive vice chairman, chief operating officer, and cofounder of Okta, a San Francisco-based identity and access management company. Kerrest says passion will only get you so far during an economic downturn. He shares four lessons he learned personally while starting up Okta during the 2008 recession. He recommends evaluating your product, focusing on foundation, prioritizing customers, and keeping your eyes open for any strong talent to recruit, especially those who have been laid off by other companies. Visit Business Insider's homepage for more stories.
Starting a company is challenging and anyone who tells you differently hasn't done it. One report found that 500 startups failed in 2019, but I suspect the number was actually much higher, maybe even in the thousands or tens of thousands. Over 500,000 businesses are started each month and research shows more than half of them will go out of business within five years. My own experience with failed companies started young: in elementary school, I tried my hand at a neighborhood soda can recycling side hustle, and at a tennis racket restringing business in high school, both of which went "bankrupt." Later on, I cofounded a South American high-tech consulting firm that barely made it through the dot-com bubble bursting as well as the Argentine revolution before we transitioned our remaining customer contracts to larger competitors and quietly shuttered the business without returning a dollar of investor capital. Building a business can feel particularly difficult during an economic fallout, like the one we're experiencing now. But I'll let you in on a little known fact: a downturn is an opportune time to start a company. Many iconic technology brands were founded during recessions, such as Google, Microsoft, Oracle, IBM, and more recently, WhatsApp and Venmo, to name a few. I can empathize; my cofounder and I started Okta during the 2008-2009 recession and went public in 2017, just a few years ahead of the current economic downturn. We've weathered storms and learned a few lessons along the way about what to prioritize if you want to make it through the tough times and come out in good shape on the other side. 1. Start with a real problem When you're starting any business in any climate, you need to consider whether you want to spend the next five to ten years entirely focused on making that business a success. If you don't then that isn't the right idea for you. Passion is critical, but during a downturn, it won't be enough to drive success. You also need to evaluate your idea by understanding what your customers really need. Every organization in the world is trying to do three things: reduce costs, enhance revenue, and mitigate risk. If your business and product will help them do one of those three things, you'll find many opportunities, even during a recession. In tough times there is a flight from "vitamins" to "pain killers," so if you take the time to figure out what your customers can't live without, regularly converse with and listen to them, then test out different ideas, you'll set yourself up for success. 2. Focus on the foundation Taking time to figure out what your customers want will also allow you to gather valuable feedback and refine your product, which will help you build a foundation. A strong foundation — your culture, team, product and infrastructure — is always essential, but building one during a recession will acquaint you with what your customers need during their most challenging times. In the long run, this means you'll be well equipped to support your customers through any ups and downs. With the economy where it is, you'll likely have a trickier time selling your product to buyers that have cut their budgets and reduced spending. But that doesn't mean this period will ultimately go to waste. Use your extra time to build and iterate on your product, and you'll come out of the downturn stronger. 3. Go all-in for your customers After you've identified what your customers want, it's time to go the extra mile to get them to commit — something I have first-hand experience with. In Okta's early days, I scheduled a trip to Tulsa, Oklahoma, to pitch a big prospective customer. Little did I know I was about to go above and beyond to get that win. At the last minute, I realized that I had booked a flight to Tulsa for the wrong day. I had to schedule a red-eye flight to another nearby city to get there in time for the pitch. When I arrived, there was a massive snowstorm, and I couldn't get a cab from my hotel. But we needed this customer, so I walked down the side of the highway to make it to their office and arrived soaking wet and shivering. Years later, after we'd won the business, the customer told me he never forgot the sight of me walking into the office dripping in snow and with determination. You should always put your customers first, and that applies now more than ever. If you're offering a product that can help them through struggles, lean into that, and go above and beyond to show that you're there for them. 4. Talent is out there: accept outside help and offer an opportunity One of the biggest hiring challenges you'll face as a founder is not knowing what a successful person in the role you're hiring for will look like. You'll be more familiar with positions related to your background, whether that's in sales, engineering, or something entirely different, but of course, you can't know everything. That's why it's critical to accept outside help. Find someone in your network who knows what to look for in the role, and ask them to help you with interviews. I do this often for startup founders to help them find good sales leaders for their business. During a recession, keep your eyes open for strong talent hit by hard circumstances. Anyone who's worked at a company that's gone through COVID-19-related layoffs knows even your hardest-working or smartest employees can't always stay with the business in a tough economic climate. While this is unfortunate, it means more talented people are looking for jobs right now and if you're building a team, you can offer them an entrepreneurial opportunity. You'll encounter many obstacles on your journey to IPO, but don't be discouraged. Persistence, a strong belief in your mission, and a focus on real customer needs will help you make it. And although we're going through a challenging economic downturn, it's a great time to start a business that fits a significant market need. Frederic Kerrest is the executive vice chairman, chief operating officer, and cofounder of Okta.SEE ALSO: I launched Okta during the 2008 recession, and it's now a $25 billion company. Here are my 4 recommended steps for starting a business during an economic downturn. Join the conversation about this story » NOW WATCH: Epidemiologists debunk 13 coronavirus myths
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