1Password was profitable and self-funded for 14 years. Now Accel just wrote its biggest check ever to invest $200 million in the startup.
- 1Password, a fully-remote security startup, announced $200 million in Series A funding on Thursday. Silicon Valley venture firm Accel led the round, its biggest investment in the history of the firm.
- Cofounder Dave Teare originally came up with the password manager tool when he was helping run an online consulting business, but quickly realized that others likely had similar efficiency problems that this tool could solve.
- The company has been self-funded and profitable since Teare spun it off of his consulting business 14 years ago, and now offers tools for big businesses in addition to individual users.
- Although this is Accel's single biggest check ever written, partner Arun Mathew likens his investment to the firm's other bets on enterprise giants Atlassian and Qualtrics, which were bootstrapped and profitable well before Accel invested.
- 1Password CEO Jeff Shiner said that the big number was warranted because it represents the size of the opportunity for his company. Every company, and every person, that stores passwords on sticky notes is a potential customer, he said.
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My mother keeps her passwords simple. They are loosely organized on an array of colorful sticky notes on the wall in her basement, next to her aging desktop computer that is a relic of my childhood. She inevitably runs to the wifi router, with its own sticky-noted password, to remind me for the thousandth time how to connect to the outside world.
In Silicon Valley, my mother's password management technique might be horrifying. But to some investors and entrepreneurs, she is just one of more than a billion potential customers. And that opportunity is worth $200 million.
That's how much venture capital firm Accel is investing in 1Password, a password management startup that has largely self-funded while remaining profitable for the last 14 years. It's the single largest check Accel has ever written, Series A or otherwise, according to partner Arun Mathew.
"We are making a serious, serious bet here," Mathew said. "We don't want to burden the company with too much capital, but it's a problem that is felt by literally everyone. Your mom could be a customer. My mother is a customer. It's very rare we see a product and solution that's solving a pain point across literally everyone."
Big venture deals are nothing new in Silicon Valley, and early rounds are becoming increasingly large every day. But a nine-figure round Series A stands out, especially when you consider the recent headline grabbing flameouts of similarly well-funded startups like WeWork that grew too much too quickly, and buckled just as fast under outside scrutiny.
The difference with a bootstrapped startup like 1Password, according to Mathew, is that the founding team inherently knows how to stretch a dollar while growing at a reasonable pace. It's a type of investment that Accel has experience with, having invested in both Atlassian and Qualtrics years after the businesses had become profitable.
"When you have a company that's 14 years old before taking this much capital, the culture is already set because it has always, since day one, had to be focused on unit economics and profitability," Mathew said. "It's been trendy to burn money at the expense of unit economics in favor of rapid growth, but that's not who they are as a founding team."
A $200 million pivot
Dave Teare was working as a consultant building websites when he grew tired with entering credentials each time he wanted to log in to one of his several vendor websites. Together with a few business partners, he built a handy tool that could store and auto-fill the information he needed. Fourteen years later, that tool has transformed into a team of 170 people spread across the United States and Canada.
"We didn't even bother building a payment system for 1Password at first because we didn't really care. It was just a tool for ourselves," Teare told Business Insider. "But then something really cool happened. We got actual people using the actual app and giving us actual feedback."
Like Slack, another Accel portfolio company that recently went public via direct listing, Teare had stumbled into a lucrative market managing individual people's array of passwords for different services. By 2015, the demand was so high and 1Password so popular that CEO Jeff Shiner prioritized launching a service specifically for businesses, similar to what Okta has done for single-sign on dashboards for large organizations.
"I'm instinctively on the business-to-business side, and I started to see that growing. Companies would buy employees 1Password accounts for Christmas, and then it all changed," Shiner told Business Insider. "Companies realized they needed to buy it for themselves because, as humans, we are creatures of habit and employees were using personal accounts for the work accounts."
In just over 3 years, 1Password has signed on more than 50,000 businesses to its enterprise service and has its sights on even larger swaths of business and individual users. That's the key to nabbing such a big check from one of the most notable investors in Silicon Valley, according to Shiner.
"It still amazes me how many big companies are still using sticky notes and spreadsheets to store and share passwords," Shiner said. "This needs to change for everyone's sake."