Okta’s $6.5 billion stock deal for Bellevue, Washington-based Auth0 isn’t just one of the largest cybersecurity M&A deals in years, but also a further illustration of a growing hunger for identification and authentication solutions as people work, buy and play more and more online.

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According to Crunchbase numbers, venture funding has poured into identity management companies since 2019. While 2018 saw only $370 million invested in the space, 2019 witnessed $1.1 billion flow into authenticating and protecting identities. Last year that total stayed nearly the same with $1 billion of funding coming into startups and private companies.

Some of the largest rounds since the start of last year have been: Auth0 raising $120 million in July 2020; CLEAR securing $100 million in February; Payfone closing a $100 million round in June 2020; Onfido snagging $100 million in April 2020; ForgeRock raising $93.5 million in April 2020; and Beyond Identity securing $75 million last December.

“No matter if you’re on-prem, on the cloud or hybrid — identity has become very important,” said Umesh Padval, a venture partner at Thomvest Ventures.

Managing identification and authentication had been popular in cybersecurity for years, as more companies moved their systems to the cloud and employees needed to access networks from phones, tablets and their own personal computer. That movement was only accelerated by the pandemic, which forced many to not just work at home, but also buy groceries, stream movies and even keep in touch with friends all via the internet.

“It’s both the pandemic and the overall trend of moving to the cloud,” Padval said.

With large companies like OneLogin, Ping Identity, Okta and even Cisco providing a robust identity and access management platform, Padval said he is looking at a variety of things in the space such as privileged management providers, authorization and contextual authentication as areas for possible investment.

Next-generation companies that work in the identity ecosystem, like Arizona-based Trusona, England-based Callsign and Newport Beach, California-based Obsidian Security, all could be watched in what is becoming a heated market.

“You are just seeing the acceleration of digitization and there is a need for security,” Padval said.

Illustration: Dom Guzman