There are far fewer annoying things than managing their passwords.
There are a number of companies out there to help you try to do that. And there are also a number of companies that want to go a step further and eliminate the password completely.
Such a company, Stytch, just raised $ 30 million in a Series A funding round as it launches out of beta with its first API password-free authentication platform.
The round caught our attention for a couple of reasons.
First, this is the same startup that just months earlier announced that it had traveled a $ 6.25 million seed round led by Benchmark with the participation of Index Ventures and a number of angels, including Plaid co-founder William Hockey. That round was speculated to have valued the new company at a staggering $ 200 million (although it was never confirmed), and was actually raised last summer around Stytch̵
Also notable with this round is that Stytch was founded by two former Plaid employees, Reed McGinley-Stempel (CEO) and Julianna Lamb (CTO), who built user authentication features that “millions” use to connect bank accounts to apps like Venmo, Coinbase and Robinhood. The company was founded on the premise that passwords are no longer secure, making companies easy targets for hackers and exposing them to takeover risk.
Lamb says that when she and McGinley-Stempel worked together on Plaid on user authentication, they realized how frustrating it is to build a sign-in and sign-in flow.
“In addition to being complicated, building the house is resource-intensive and error-prone,” she told TechCrunch. “The other thing that really frustrated us was that the core building blocks that all companies use for authentication had very significant security and conversion issues. It struck us that the web has improved in so many ways in recent decades, but authentication is still stuck in the 1990s. ”
Thrive Capital led Serie A, which also included the participation of Coatue Management and existing supporters Benchmark and Index. The company declined to disclose its new valuation, even though sources only say it is “north of $ 200 million.”
Stytch claims that it simplifies the authentication process by providing developers and users with “tools and infrastructure to incorporate passwordless authentication methods into modern applications.”
In particular, the team creates “simple” APIs and SDKs (software development kits) that the founders say allow “any company to increase user boarding and storage by removing passwords from their application, while improving security and saving significant technical time in the process.”
During its first year of operation, Stytch released its product in beta to more than 350 developers who have added passwordless features such as magic links via email, SMS and WhatsApp passwords and one-click user invitations in user login and authentication. As mentioned above, Stytch launched out of beta this week to make all the features publicly available in connection with the funding announcement.
“What we found is that it makes more sense to be more flexible with developers,” Lamb told TechCrunch. “What even surprised us about the API-first approach is that we now also have a handful of Fortune 500 companies using the product, and the most important reason from their point of view was one of the simplicity of being set up on the platform. It took them an hour instead of the months they sometimes spent with other vendors. It’s also the direct API piece where there’s just a much more flexible way to think about workflows in boarding or logging in. ”
Nearly 65% of users use passwords across accounts, which can pose major security threats and breaches of commitment, according to a study conducted by Google. Also many people struggle to remember passwords and the process of resetting passwords can be so frustrating that many users just give up the account.
This can affect businesses that rely on e-commerce sites, which lose customers over that frustration negatively.
Thrive’s Gaurav Ahuja, who takes a seat on Stytch’s board with the funding round, believes that the start-up product is specifically designed to improve sign-up conversion and user retention, and the customizable front-end tools help companies get started “quickly”.
He said the company spoke to many developers who used it and saw “how impressed they were with the company’s best API documents and speed to go live.”
“In recent years, we have seen that most authentication systems are both outdated and pose a security risk to users, “Ahuja told TechCrunch via email. “Stytch addresses both of these issues.”
The new capital will be used to roll out several authentication options, including biometrics, WebAuthn, OAuth logins, QR codes and push notification logins. The company also plans to launch more user infrastructure functions and to expand session administration and advanced fraud detection solutions. Stytch also aims to hire 20 people by the turn of the year.
Stytch is not the only company killing the password. Boston-based Transmit Security in June raised massive $ 543 million in Series A financing in what was considered to be the largest Series A investment in cybersecurity history and one of the highest valuations for a start-up company. Microsoft has announced plans to make Windows 10 password-free, and Apple previewed Passkeys in the iCloud keychain, a method of password-free authentication powered by WebAuth.