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.
“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.
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.
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.
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.