Toronto password management company 1Password has raised US$100-million from its largest outside investor and several prominent software entrepreneurs, including the CEOs of Shopify Inc. , Slack Technologies Inc. and Squarespace Inc.
The funding, led by Silicon Valley venture-capital giant Accel, values 1Password, formally known as AgileBits Inc., at US$2-billion. That’s double its valuation from when Accel led a US$200-million funding in late 2019, the first time 1Password had taken outside capital since its founding in 2006.
It’s the first time 1Password has disclosed it had achieved “unicorn” status, a description accorded to technology startups that reach US$1-billion valuations. Actor Ashton Kutcher’s Sound Ventures and Skip Capital also invested.
The deal is the 25th nine-figure financing of a private Canadian technology company in 2021 – more than double the full-year record of 12 set in 2019, as software companies have benefited from increased use of online tools during the pandemic. It is also part of a recent trend that has seen fast-growing, commercially successful startups field unsolicited funding offers.
“We continue to be profitable, and as such weren’t seeking or needing a round of funding,” 1Password chief executive officer Jeff Shiner said in an interview. “Accel came to us looking to invest further in our success,” he said.
Accel partner Arun Mathew said his firm’s push to double down on 1Password amounted to “courage capital” for a profitable company that “didn’t need anything. … For us, leaning into this opportunity, making sure that every consumer, every enterprise out there is a 1Password customer, is a massive opportunity.” He said 1Password could use the capital – about half of the investment is going to the company and the rest to buy out shareholders – to make acquisitions, increase marketing or recruit talent, as it has done since Accel invested. “We want to be able to do that even more aggressively.”
1Password was founded by friends David Teare and Roustem Karimov, both developers, as a business to build websites. As a sideline, they developed a tool to store information – including passwords – so they could automatically fill forms and save time. As that product became popular, Mr. Shiner, a friend of Mr. Teare’s, joined in 2012 to lead the company.
1Password’s product automatically creates and stores complex passwords for users so they can auto-fill login credentials across websites and platforms. Users only have to remember one master password to unlock all their codes. The company started selling to individuals, then to corporate and government customers – protecting not only passwords but tokens, keys and certificates that guard confidential information underpinning their corporate digital infrastructure.
The company now has 90,000-plus enterprise customers, up from 50,000 when Accel invested, with growth driven by concerns about pervasive cyberattacks, Mr. Mathew said.
1Password said it generates revenue at an annualized rate of US$120-million. It has been profitable since its early days, spending little on sales and marketing historically. That is changing – since 2019, the company has bulked up its senior ranks, hiring veteran executives from big tech companies as its chiefs of product, finance, revenue and marketing, and nearly tripled its overall ranks to 480 people.
That has brought some cultural changes. 1Password employees historically portrayed themselves as cheerful, down-to-earth, customer-focused geeks, with irreverent, self-chosen titles such as “minister of magic,” “weaver of webs, “agile samurai” and “house elf.”
By contrast, the new executives have kept traditional “chief officer” titles, although Mr. Shiner still calls himself “chief eliminator of obstacles.” He said it has been extremely important for the company “to focus on attitude and aptitude as you hire and make sure [new hires] will fit in as people within the culture. On the opposite side, as we grow, you do have challenges – and as much as we enjoyed our fun names, we’ve also had to add with that real roles and levels. At some point, with so many people, you need to know who to go to for particular things.”
The company has also adopted formalized objectives and results targets. ”Everybody is looking to make sure they’re aligned with and understand where we’re going,” Mr. Shiner said.
Meanwhile, 1Password has sought to broaden its investor base with the new funding by bringing in entrepreneurs that similarly headed “product-led” software companies while self-funding their growth early on.
That included five executives from 1Password customer Shopify: CEO Tobi Lutke; president Harley Finkelstein; product vice-presidents Satish Kanwar and Brandon Chu; and Matt O’Leary, head of technology partnerships. Shopify, which invests in e-commerce-specific service providers, did not participate.
“Privacy on a consumer and enterprise level is just getting started,” Mr. Chu said, adding that 1Password “will be an important part of how every company runs. This is basic infrastructure for how employees access information and other applications securely.”
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