Q&A with Auth0’s CEO after identity tech startup raises $103M and reaches elite unicorn status

Eugenio Pace, Auth0 CEO and co-founder. (Auth0 Photo)

Eugenio Pace knows the stats. The rate of survival for most startups is not pretty. In fact, his first attempt at building a company failed.

But the Auth0 story is different. Founded in 2013, the Bellevue, Wash.-based startup has grown into a leading identity authentication software provider and just raised a massive $103 million investment round that propelled the company to “unicorn” status with a valuation above $1 billion.

Eugenio Pace, co-founder and CEO of Auth0. (Auth0 Photo)

“I feel an enormous responsibility to deliver now that we have this chance,” Pace told GeekWire on Monday. “We are fortunate, but we also have a big chance to make an impact with literally hundreds of millions of people that are relying on our service to be protected every day.”

More than 7,000 customers such as Atlassian, SPgroup, fuboTV, and others across 70-plus countries use Auth0 to secure their web, mobile, and legacy apps. Auth0 combines existing login and identity verification options into a few lines of code that developers can quickly add to their applications. Its platform includes services like single sign-on, two-factor authentication, password-free login capabilities and the ability to detect password breaches.

Pace got his start as a tech entrepreneur in his native Argentina, where his first startup didn’t quite take off the way Auth0 did. He moved on to multiple roles at Microsoft over a 12-and-a-half-year period, became a U.S. citizen and decided it was time to gamble again on starting something.

Pace helped co-found the company in 2013 and took over as CEO in December 2017. He was a finalist for Big Tech CEO of the Year at last month’s GeekWire Awards.

Auth0 is currently ranked No. 10 on the GeekWire 200, our index of top Pacific Northwest startups, and is one of a just five unicorns in Seattle — Outreach, Convoy, OfferUp, and Rover are the others.

The company’s $103 million cash infusion is the second-largest investment round for a Seattle-area startup this year. Auth0 employs nearly 475 people across five offices worldwide; it has added 316 employees in the past two years and just opened a new floor at its Bellevue HQ.

Read on for more from our chat with Pace, who talked about Auth0’s competitors, its plans for growth, building a remote workforce, and more. (Interview edited for brevity and clarity)

GeekWire: Thanks for speaking with us, Eugenio. Let’s talk about the $103 million fundraising round. Why did you decide to raise this much at this time?

Auth0 CEO Eugenio Pace: It was a little earlier than expected. We were thinking about a possible fundraise later this year, but then we really had a strong beginning of the year and had discussions with existing investors. We decided that it was easier to do it now and focus back on business. This is a round led by our existing investors — no new or outside money — which in some ways makes it easier. It’s also good validation of what we’re doing. It was a really easy round.

The idea behind raising the round is simply to continue to fuel our momentum and push harder into our growth, our international expansion, and our product. We have planned investments on all fronts. It’s just a matter of continuing the momentum and growing as fast we can.

GeekWire: What is driving growth for Auth0?

Pace: Companies are more comfortable with the notion that you outsource your security or aspects of security to specialists like us. Ten years ago, the idea of running applications on someone else’s server was crazy. People would never give the keys to their applications to someone else.

But they have realized now that identity is a really hard domain and it’s really hard to do it properly. The scenarios have also been increasingly more complex over time. We have phones, computers, websites, thermostats, Alexa — this myriad of systems that we need to interact with. It’s only getting more complicated every day. Attacks have also been more sophisticated. It’s easier now to break into someone else’s credentials than it was years ago.

These are resources that take a disproportionate amount of effort for companies to fund [themselves].

The other aspect is that every company is really a software company. Development resources that companies have are better spent on things that make them better at their own domains.

All that combined has made us a really attractive service to rely on. The other aspect besides timing and the condition of the market is that we have a really different approach from the traditional approach to identity management. It has always been more of an infrastructure thing, as opposed to a developer thing.

Our take on the problem is very different. It’s with a developer mindset. It’s very similar to what other companies have done in others spaces — Twilio with messaging, Stripe with payments, SendGrid for emails. They all have taken the same approach that we have, which is taking complicated old stuff that every application in world requires and providing it with a developer experience, making it super easy for developers to build applications with us. It’s making it extensible and flexible.

(Auth0 Photo)

GeekWire: Talk a bit about the competitive landscape. There are giants such as Okta and Microsoft, as well as a flurry of smaller startups building their own identity authentication software. What makes Auth0 different?

Pace: Interestingly, our biggest competitor is not really any other company, but rather what is existing already. Most applications in the world already have an authentication system; very few can live without knowing who the user is. So our No. 1 competitor is the notion that I already have it, the notion that it’s a sunk cost. Why would I throw away what I built over the years for something like Auth0?

The reality is that identity management is never a sunk cost. It’s an ongoing cost. There are always new attack vectors and new things and new uses cases that your old system will not take into account. Invariably you always end up putting more time and effort than you want.

Fortunately for us, we do not need to convince people that it easier to buy this than to it is to build themselves anymore. We can do things that are really hard to replicate. We can do things that no company is in a place of doing by themselves, like anomaly detection features or breached password detection features. We can do all of that at scale because we operate at an aggregate number of users … our company processes 2.5 billion logins per month. That is a large number of interactions and gives us all the underlying intelligence to detect anomalies.

Having said that, there are other companies that do have services that are in this space. But their approach has traditionally been not from a developer point of view, but more as an infrastructure black box thing, like an Active Directory or LDAP servers.

GeekWire: Speaking of competitors, Microsoft recently unveiled a decentralized identity protocol that works atop the Bitcoin blockchain. What are your thoughts on that?

Pace: The two fundamental questions we answer are always the same. The first is, are you a legitimate user? The second is, what can you do? Those are two questions that applications need an answer for, and it’s essentially irrelevant for what mechanism you use to answer them. We don’t believe that there is only one way of addressing those two questions. People have been using username and passwords for a while; now we use phones with facial recognition; we use different biometrics; we use social networks; we use our corporate systems to ID ourselves as employees of somebody else.

Our point of view on the current space is that we are more agnostic of how the actual question is answered. We are about connecting applications easily to those methods. And we will evolve over time. We never designed Auth0 to work with Amazon’s Alexa; we started before Alexa came out. Yet we have a lot of customers deploying Alexa skills that are all secured with our system. That’s possible because we rely on industry standards, so [we are] interoperable by design.

The value is not in the connection; it is in the integration of the whole story. So if you log in with Alexa through us, and the conditions of that transaction change, we can detect that and add value around it so you’re still protected without putting your user experience in jeopardy.

So if blockchain technologies allow for a better experience, we will have an integration in the the same way we’ve recently shipped integration with WebAuthn, which is a new standard, for example.

The Auth0 team. (Auth0 Photo)

GeekWire: What does the future of password-free identification tools look like?

Pace: There’s not a very bright future for passwords in the long term, clearly. It will take us time to get there because many of the existing applications will take time to evolve. Fortunately, many companies are taking steps in the right direction and we are a component that allows them to make that transition, in some cases faster.

Once again, we don’t really care if you use a username and a password, because what we do is answer those two questions I mentioned earlier — how you end up answering those questions is sort of irrelevant.

Being in the middle allows us to make that transition for you without enormous investments later on. You can have an application today that uses a username and password and you connect your application to us. In the future, you can add layers or different mechanisms, and your applications are isolated from that because we take care of it.

In the future, if there is some new method invented, we can provide it for you and your apps just benefit from the fact that they are connected to us. In a way, we are agnostic to a company’s apps or services they use such as various cloud providers. We are independent of what they end up doing.

GeekWire: Talk a bit about the Auth0 culture and how you think about that as the company continues scaling. 

Pace: When people say the most important thing is your team, it’s true, but it requires a dedicated effort to make that statement true in everyday action. One of the things that makes us slightly different is that we have embraced a remote workforce. It started as a necessity — my co-founder lives in Argentina. We were far away from each other but we decided to make lemonade out of lemons and embraced these technologies that allow us to work as if you were next to each other. From Day 1, we hired for talent, for time zone, and for zip code — in that order. Being open about a global workforce essentially unleashes a pool of talent that otherwise would not be available for us.

Competing for talent in Seattle is very hard with Amazon, Microsoft, Facebook, and many other companies that are trying to hire a lot of people. In a way they constrain themselves somewhat artificially by only hiring people from one place. We have people in 35 countries. It’s not easy to make that team work at a high performance, but we have invested in the right character and right skill-sets.

Not everyone is comfortable with that type of arrangement but we invest in making that work. For example, the entire company just spent a week in Mexico for our annual get-together to look back at what we did, plan for the rest of the year, train ourselves, build connections between different teams, and come back energized. We also invest in more focused offsites that happen throughout the year. And we also have five physical locations, centers of gravity around the world.

We invest heavily in onboarding new employees. It’s silly that people hire new employees, give them a laptop and phone and say good luck. We invest a lot of time in making sure they are productive and they have good training and good understanding of our mission.

Underlying all that is a very, very deliberate effort in fostering and creating a culture that is our culture. We encode our values, we live up to our values, and we have people in the company full-time whose only goal is to create a rich, healthy, positive, productive culture for us.

GeekWire: Do you still feel a sense of connection to the Seattle region, given that it is your headquarters?

Pace: I moved to Seattle 15 years ago. Now my life is here. My children are here, educated in this state. I love this place and this is home. For Auth0, I’m very proud of being another growing company in the area. It’s true that our colleagues are in many countries, but 25 percent of them are still in the Pacific Northwest. It’s a very significant number of people that work in the Puget Sound area. We have roughly 100 people here and we are fully committed to continue to grow here. In fact, three weeks ago we opened a new floor at our office in Bellevue. We are expanding physically because we see it as an area with tremendous talent and a great ecosystem that is growing more and more.

Eugenio Pace, right, with his co-founder and Auth0 Chief Technology Officer Matias Woloski. (Auth0 Photo)

GeekWire: We recently interviewed Outreach CEO Manny Medina and he talked about how the pressure to perform financially increases after becoming a “unicorn.” Do you feel the same way?

Pace: Manny is a good friend. We share customers and investors. I highly admire what he has done at Outreach and wholeheartedly agree that as a company evolves and matures, the expectation is to become a profitable, self-sustaining company.

When you are in high growth, profit is typically not the focus. It’s easy to forget that companies are here to make money and to be a sustainable business. We live in a kind of artificial environment for a while, but efficiencies need to be present as we evolve more and more. It’s OK that we are still in high growth and investing every dollar we make back into the business, but we have to show over time that we are producing more with more, not less with more, which is a symptom of not scaling.

Expectations are high. Not many companies are fortunate to be in our position. The rate of survival for startups are gruesome. In a way, I feel an enormous responsibility to deliver now that we have this chance. We are fortunate, but also have a big chance to make an impact with literally hundreds of millions of people that are relying on our service to be protected every day.

GeekWire: Are you profitable? If not, when do you plan to be?

Pace: We are not. We don’t have a specific detailed plan. Our plan is to grow healthy. Leadership and trust are the two most important things for us. In our world, being a trustworthy vendor and service provider for others is table stakes for us. We also want to stay ahead of the curve in everything we do and provide a fantastic product for our customers.

We want to become more sustainable over time. Whether that happens in one year or two years or … we are still figuring that out.

GeekWire: Are you thinking about an IPO?

Pace: I get that question a lot. An IPO is a financing event that happens often with companies like ours. We don’t have a specific goal that we are after. I look at it more like, what does it take to be ready to be public? A public company requires a level of discipline, a level of maturity. It’s like saying, can you run a marathon? In order to be able to run a marathon professionally, you have to train a lot. You have to be very fit. So if we want to be able to go public, we want to develop all the muscles and capabilities in our company to be able to act as a public company. Being fit to run a marathon doesn’t mean you go run the New York City Marathon, but you are able to do it if that’s what you want. We have a desire to have that maturity and discipline, but going public might or might not happen.

After raising big round, Outreach CEO talks post-unicorn life, IPO plans, creating culture, and more

Outreach CEO and his dog Fitzgerald. (GeekWire Photo / Nat Levy)

The pressure is on at Outreach.

The Seattle startup took a break on Wednesday, hosting an open house party to christen its new headquarters overlooking Elliott Bay and celebrate a recent $114 million investment round that propelled the company to unicorn status.

But with a new valuation of $1.1 billion, there’s more at stake to produce, said CEO Manny Medina.

“It creates an additional level of pressure,” Medina told GeekWire on Wednesday. “The unicorn valuation is based on forward-looking revenue — it implies further growth on a number we haven’t hit yet. It’s a lot of pressure to make sure you deliver on those numbers.”

Outreach has been on a roll for the past few years with its software that uses machine learning to help customers such as Cloudera, Adobe, Microsoft, Docusign, and others automate and streamline communication with sales prospects. The technology offers one system to track all touch points, from phone calls to emails to LinkedIn messages, and integrates with existing tools including Salesforce and Gmail.

Outreach has three of five floors in this office building on Seattle’s waterfront. (GeekWire Photo / Nat Levy)

Medina, a former director at Microsoft, originally helped launch Outreach as a technical recruiting startup called GroupTalent in 2011. But he and his co-founders pivoted in 2014 to focus on building tools for salespeople.

The rest is history — Outreach now has more than 3,300 customer accounts and 50,000-plus users. It employs 350 people and plans to reach 450 by the end of 2019.

Read on for more from our chat with Medina, who talked about preparing for an IPO, creating the right culture, and more. (Interview edited for brevity and clarity)

GeekWire: Thanks for meeting with us, Manny. Let’s talk about the $114 million fundraising round. Why did you decide to raise this much at this time?

Outreach CEO Manny Medina: The capital markets are getting to a point where they’re recognizing the value of SaaS companies and they’re paying very high multiples for it. We had a conversation with Bank of America Merrill Lynch where they were saying that whoever invested in IPOs two years ago already made a 100 percent return on that investment, and whoever invested in IPOs a year ago are making anywhere between 60 and 75 percent returns within a year.

Those kinds of returns are forcing big financial institutions to come in earlier in the cycle and start making bets on companies pre-IPO. We decided that for us it would be good to take advantage of those favorable situations so that we can build out more of the customer engagement layer that we still have to build out. A lot of what we do is very sales-related. We need to continue to evolve into account management, customer success, etc., so that we can have the entire layer of customer-facing reps in power on Outreach.

GeekWire: With the exception of Microsoft Ventures, the investors in this round came from outside of Seattle. Does that say anything about the investment climate in Seattle?

Medina: I can’t speak to the Seattle VC community because I only run one company. I’m friends with Madrona and Ignition, the B2B investors here in town. Our last round was led by Lone Pine Capital, a hedge fund in New York, so it wasn’t even Silicon Valley money. Meritech, a Sand Hill Road firm, also participated, but the bulk of the investment came from New York. Our previous rounds did have DFJ, Sapphire, Spark — they are all Silicon Valley investors, but they have sizable investments here in Seattle. They are not based here but they are very familiar with Seattle.

I think it’s a myth to believe that because you’re in Seattle, you’re only going to take Seattle money. It’s a very short flight from here to wherever. With our last round in particular, investors came to us, so we didn’t have to travel anywhere. People know who we are. They know our traction. They come and visit, they see the numbers, and it’s a pretty straightforward decision.

For this round, we really wanted to have a bridge fund that can invest in both private and public markets, because they will stay on as we go public. What usually happens with VC-backed companies, is the moment they go public, you see a big sell-off for the VCs who are trying to get liquid. We wanted to have funds that will stay with us through the public markets and there’s not that many who do that.

Outreach reached unicorn status with its most recent funding round. (GeekWire Photo / Nat Levy)

GeekWire: How does the company think about this billion-dollar valuation? How does that affect your planning for growth and further ambition?

Medina: It actually creates an additional level of pressure. The unicorn valuation is based on forward-looking revenue— it implies further growth on a number we haven’t hit yet. It’s a lot of pressure to make sure you deliver on those numbers.

Financial results are an outcome of a bunch of other work that you did in the past, right? You build a great product, you build a good culture, you are able to maintain a vibrant community of users and customers and they’re getting results from that. There’s a lot of investments you have to make to get there.

But now you have to do it efficiently. In the past, growth at all costs was a fine way to grow. It’s no longer OK to do that. To be an IPO-ready company, you have to have market efficiency within a range, you have to have burn within a range, you have to have a path to profitability, you have to have top of the line retention, and so forth. So a lot of the unsexy things about growing a company have to happen now for us to prepare to go public.

GeekWire: Are you profitable?

Medina: No. We are investing in efficiencies right now that will get us to profitability in a couple of years. But nothing on the horizon. When you’re growing and you’re doubling, when you have the opportunity to capture that much market that fast, it’s really hard to solve for both profitability and growth. Right now we just need to capture so many areas of the workflow and so much pain within the customer-facing reps — we need to solve that first, and then become efficient later.

Outreach’s new Seattle HQ. (GeekWire Photo / Nat Levy)

GeekWire: You’ve mentioned an IPO — with the new funding, does that accelerate your timeline?

Medina: We don’t have a timeline, but it allows us to do it right, to think about public life at our own rate. As Anna Baird, our COO, would say: A public fundraising event is not an exit strategy — now you’re going from the road to one of the fastest freeways in a glass car. Everybody can see exactly how you’re doing and your numbers are transparent and you have to be transparent about the work.

There’s definitely list of things that we need to get done internally before going public. It’s being able to easily invoice in multicurrency; setting up tax entities in different countries; multi-language support; multi-cloud support — the unsexy stuff. The list keeps going and going. And in a world in which data privacy and security is very important, you want to be able to pivot quickly as regulation changes to put the data where the data needs to reside. That’s a thing that we have to be very conscious of as we continue to grow.

GeekWire: You and your company have pretty good ratings on Glassdoor. Outreach was also just named one of Inc. Magazine’s best workplaces. What are some leadership lessons that are important to you that have helped build the culture here?

Medina: There are lot of the things that you hear or you read that are true, but they’re just hard to apply. Of course there’s honesty and transparency and grit and being true to your cultural values. Those are important. But one of the things that I always sort of manage for is energy and passion. There are two types of people: there’s people who bring energy into the room and there are people who suck energy out of the room. And they’re both fine, right? They’re both people that you may need. But you need the balance for that. And you need to have more people who give out energy than people who suck out energy — people that will continue to bring vibrancy into groups. So solving for that is something that very few people do, that we have done carefully and very well over time, going from four to 350 people where we are right now.

New unicorn in Seattle: Outreach raises massive $114M round, pushing valuation above $1 billion

(Outreach Photo)

Seattle has a new unicorn.

Sales automation startup Outreach has reeled in a huge $114 million investment round that pushes its valuation to $1. 1 billion, joining an elite club of other fast-growing companies also valued above $1 billion.

Outreach CEO Manny Medina. (Outreach Photo)

“ That’ s right: Outreach is officially a ‘ unicorn’ and the only one in the rapidly growing sales engagement space, ” Outreach CEO Manny Medina wrote in a blog post .

Outreach has been on a roll for the past few years with its software that uses machine learning to help customers such as Cloudera, Adobe, Microsoft, Docusign, and others automate and streamline communication with sales prospects. The technology offers one system to track all touch points, from phone calls to emails to LinkedIn messages, and integrates with existing tools including Salesforce and Gmail.

Outreach more than doubled its revenue in 2018 and met all goals and metrics, Medina told GeekWire earlier this year. The company now has more than 3, 300 customer accounts and 50, 000-plus users. It employs 315 people and plans to reach 450 by the end of 2019.

Medina said the company will continue to invest in its hometown, with a goal of becoming “ the next enterprise beacon of Seattle. ”

Lone Pine Capital, a Greenwich, Conn. -based hedge fund manager, led the Series E round. Meritech Capital Partners and Lemonade Capital joined the round, as did existing investors DFJ Growth, Four Rivers Group, Mayfield, Microsoft Ventures, Sapphire Ventures, Spark Capital and Trinity Ventures.

Lone Pine Capital previously invested in Convoy, another Seattle startup that reached unicorn status last year . Other companies with valuations north of $1 billion in the Seattle region include Rover and OfferUp.

(Outreach Photo)

The $114 million round for Outreach follows a $65 million round that came in this past May. Total funding to date is $239 million.

“ This financing will enable us to infuse every aspect of the customer journey with the power of machine learning so organizations can identify the actions that move the needle in order to make better, faster decisions, ” Medina wrote in the blog post. “ We will also expand in the coming months by doubling our machine learning team, increasing our international footprint, and investing in our partner ecosystem,   Galaxy, as well as our recently announced  integration with Microsoft’ s Dynamics 365 for Sales. ”

Here are the 10 highest-valued startups in the Seattle area 

Medina told GeekWire in February that “ this upcoming year we will make more investments in scaling the business efficiently and prepare for an IPO a few years out. ”

Medina, a former director at Microsoft, originally launched a recruiting software startup called GroupTalent in 2011 with his co-founders Andrew Kinzer, Gordon Hempton, and Wes Hather.   But the entrepreneurs  pivoted   in 2014 to focus on building tools for salespeople.

“ Outreach is one of my favorite stories, ” Founders Co-op’ Managing Partner Chris DeVore, an early Outreach investor, told GeekWire earlier this year . “ The business they set out to build wasn’ t working, but because they stuck together as a founding team and kept adapting and learning, they figured out how to find a productive thing. But that wasn’ t because of where they started or the early metrics. It was because as humans, they were so committed and resilient and so gritty that they figured it out. ”

Outreach is ranked No. 23 on the GeekWire 200 , our index of top Pacific Northwest startups. Outreach is also a finalist for Next Tech Titan, a category at the upcoming GeekWire Awards that highlights future dominant forces in the Pacific Northwest tech scene.

Last year, Outreach leased a big chunk of office space   to upgrade its headquarters and made its first-ever acquisition. It was the only Seattle company to crack the top 25 in  LinkedIn’ s Top Startups   list for 2018.

Forbes and CBInsights previously predicted that Outreach would reach unicorn status. There are 341 unicorn companies worldwide, according to CBInsights , with nearly 30 startups reaching that milestone in 2019. Recode reported that 57 companies became unicorns in 2017.

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