How this Seattle VC missed out on Auth0’s seed round, but persisted and landed a big payoff – GeekWire
Seattle venture capitalist Chris DeVore felt something special when he first connected with Auth0 co-founder Eugenio Pace.
DeVore, an early-stage investor and managing partner with Founders’ Co-op, knew he wanted to get in early on Pace’s entrepreneurial journey as it was taking root in the 2013 to 2014 timeframe.
There was just one problem.
Founders’ Co-op already owned a stake in an Auth0 competitor, an early-stage San Francisco startup by the name of Meldium that also helped companies more securely manage apps, passwords and other login information.
As a result, DeVore had to take a pass on Auth0’s seed round, which drew a $2.4 million investment in 2014 from the likes of Bessemer Venture Partners*, Portland Seed Fund, K9 Ventures and NXTP Labs.
It was a tough deal to miss out on, but DeVore said that they always try to avoid overlap in the portfolio.
“We need to be all-in on each team and what they’re doing and it just doesn’t work to have members of a high-trust, high-transparency founder community competing with each other,” DeVore told GeekWire this week.
However, the tides turned for DeVore in September 2014 when Meldium announced its acquisition by LogMeIn for $15 million. It was a nice little exit for Founders’ Co-op, but nothing compared to what lie ahead with Auth0.
Freed from his commitments to Meldium, DeVore connected again with the Auth0 team, which at the time was being led by CEO Jon Gelsey. Dusting off his contacts, DeVore re-engaged and participated in the company’s $6.9 million Series A round in 2015.
It’s a good thing DeVore returned. In one of the largest acquisitions of a privately-held Seattle area tech company in recent years, Auth0 announced Wednesday that it was being acquired by Okta for $6.5 billion.
Looking back at that early Series A investment today, DeVore bluntly notes: “We’re hugely grateful to both Jon and Eugenio for letting us come along.”
The $6.5 billion deal is a blockbuster — especially considering that Auth0 was valued at $1.9 billion just eight months ago after its last $120 million venture capital round.
DeVore declined to disclose the financial payoff that Founders’ Co-op received, but he did note that it was the “highest cash-on-cash return multiple ever” for the firm.
And what would have happened if Founders’ Co-op would have snuck into the seed round? DeVore tells us it would have doubled the firm’s return.
Even still, most venture investors would be pretty happy with a $6.5 billion exit in the portfolio. And DeVore said he’s certainly glad they persisted, and got into the later round of funding in 2015.
“We had deep conviction in both the team and opportunity, and when that happens we have a hard time letting it go, even if we have to pay a little more to participate,” said DeVore, whose firm is also an early backer of Seattle-area unicorns Remitly and Outreach.
*(Interesting side note, venture capitalist Sunil Nagaraj, who was at Bessemer at the time, first connected with the Auth0 team in the offices of Simply Measured, a Seattle company co-founded by Aviel Ginzburg, who is now a general partner at Founders’ Co-op. Nagaraj writes about the early days of Auth0 here).