Password startup wins $200M investment as it shifts focus to enterprises
TORONTO 1Password announced Thursday that it has raised $200 million in venture capital — the first outside investment the startup has taken in its 14-year history — as it shifts from consumer markets into the rapidly growing enterprise segment.
The Toronto-based company offers a password-management service that generates unique, complex passwords and stores them so that a user can easily log into various accounts.
The service is available for individuals and families, but 1Password chief executive Jeff Shiner said that in the past few years the real growth in the company has come from businesses adopting the service for their employees.
“We started off as a consumer app, but over the last five years we’ve spent a huge amount of time and effort to build out the sophisticated tools that businesses need for password managers — reporting, auditing, provisioning and advanced permissions,” Shiner said.
“Businesses now understand the need for enterprise password management. They understand that it’s a real challenge for their employees to try and follow crazy things like password rules, but at the same time they need to protect their IP.”
The company says that it currently has “millions of users and over 50,000 companies” on the service, and that the enterprise business has grown by more than 300 per cent in the past two years.
The $200-million investment is the latest in a steady stream of massive venture capital raises for Canadian tech startups in the past year.
Quebec-based Element AI announced a $150-million investment round in September, while a second artificial intelligence company in the province, Coveo, announced a $227-million investment round earlier this month.
Also in September, legal software startup Clio raised $250 million.
But Shiner downplayed the
importance of the money, saying that the advice and connections that investors can offer is more important.
“It’s actually having a partner who can bring us the experience, bringing us the relationships, bring us the knowledge,” he said. “It’s more than just the money itself.”
Shiner said that marketing 1Password to businesses instead of individuals means they need to develop different marketing tactics, and different sales channels.
“We really feel like everybody needs 1Password, but from a growth point of view, the B2B side, that’s where there’s a big opportunity, but that’s also where we need help going after that opportunity,” Shiner said.
Arun Mathew, a partner at Accel, the lead investor in 1Password, said that they believe there’s a huge opportunity, because business operations are becoming more and more dependent on cloud services.
“If you look at the rise of cloudbased services, especially in the enterprise, we believe that password management has become even more critical,” Mathew said. “Employees are using more products than ever before across a variety of different devices, and CISOs and IT teams aren’t able to oversee the use of all applications accessed across their enterprise.”
Mathew said he expects the funding to allow 1Password to sell to bigger enterprise customers.
“The enterprise password management category presents a massive opportunity, and this investment will enable the 1Password team to work with larger enterprises and to integrate more deeply into platforms their customers use daily.”
Within the technology sector, security is a major area of emphasis right now, with nearly every company playing up their diligence and competency at securing data against bad actors and hackers.
Shiner said he thinks that passwords remain a weak link for a lot of organizations.
“We talk to a lot of companies, obviously,” he said. “The one thing I’m still amazed by is how many of these companies are still doing things like using sticky notes, they’re still using spreadsheets to share passwords and remember passwords.”