Hacking into poorly secured online accounts isn’t all that hard, as a few celebrities found out this week. One of the easiest ways to secure your accounts is by using two-factor authentication so that you have both something you know (your password) and something you have (the second, ever-changing security PIN). Authy, a Y Combinator-funded startup that specializes in two-factor authentication, today announced that it has raised a $2.3 million seed round from a variety of angel investors.
In addition, the company announced that it has hired Marc Boroditsky — the former vice president of Identity and Access at Oracle after he sold his two-factor service Passlogix to it — as its president and COO.
As Authy’s founder and CEO Daniel Palacio told me last week, the company managed to raise its round within a few days with the help of AngelList. Among the investors are Box CEO Aaron Levie, Match.com CEO Sam Yagan, CrunchFund, Winklevoss Capital, Digital Garage, Data Collective, Salesforce.com and AngelList through its MaidenLane fund (TechCrunch was founded by CrunchFund partner Michael Arrington, but he never talks to me and plays no role in our day-to-day coverage).
Palacio had nothing but praise for the process of raising a round on AngelList. The company had previously raised a seed round through the traditional process. “The idea was: let’s get some funding from angels and once we do that, we look at getting a Series A,” he told me. So he put his call for funding out on AngelList and within hours, the campaign hit its limit of around $250,000. Palacio kept raising the limit as the demand increased and within a day, his advisers persuaded him to push it up to $1.7 million.
“We were: this is so much better than doing an A round,” he told me. “We can do everything on AngelList.” He also noted that because AngelList ensures that investors make good on their promise to pay promptly (or otherwise a waitlisted investor get to take their place), the founder doesn’t have to spent time tracking down the individual investors for their checks.
In addition, he argues that because the startup sets its own terms and investors either accept them or not, they don’t have to deal with all the hassles that come with doing a Series A round where different investors may have different liquidation preferences etc.
In the end, Authy raised $2.3 million for its seed round, but that includes the $750,000 it had raised in its first seed round. The whole process took about two weeks in total.
With this round completed, Authy is now looking to expand quickly. The team recently moved into a new office in SF and the company is expanding its sales and marketing teams. Most importantly, though, Palacio believes that Authy is now ready to take on the enterprise. While Authy started as a relatively bare-bones system that was mostly focused on getting startups to adopt it, Palacio now believes that the service has the right tools in place to also go after the enterprise and getting Boroditsky on board as COO is part of this plan to gain expertise in this area and make Authy an enterprise tool.
“In two years, we will be the biggest company to offer two-factor authentication,” Palacio believes. One area outside of the enterprise Authy has made some real inroads, too, is Bitcoin (which also explains at least partly why the Winkelvoss twins invested). While Authy will emphasize enterprise adoption in the near future, Palacio did stress that he believes that “the really big growth is in developers adding 2-factor for their external users. And as they do that, they also add it for their employees.”