The 1Password bubble?

From Bloomberg:

[1Password’s] founders have agreed to sell a $75 million stake to a fund established earlier this year by Utah Jazz owner Ryan Smith and Accel partner Ryan Sweeney.

The Halo Fund founded by Smith and Sweeney contributed the largest investment in a $100 million secondary sale in which investors including Flume Ventures bought stakes from 1Password founders, according to the company.

Under the terms of the transaction, the implied value of the password manager and digital security firm remains consistent with its last primary funding round that valued it at $6.8 billion, the company said.

My first reaction to this went something like this: “We can safely forget all of the hullabaloo going around about AI-related capex and runaway valuations. This right here is proof of a bubble. Run for the hills! There is no way on God’s green earth that 1Password is worth $6.8 billion! The end is nigh!”

And, indeed, the only linked post on Techmeme about this is basically the same. From Ian Betteridge:

Nothing against 1Password, which I used to use and like, but on what planet is a company that makes a password manager worth SIX POINT EIGHT BILLION DOLLARS?

Let’s do the math. In 2023, 1Password’s ARR was $250M:

TORONTO–(BUSINESS WIRE)–1Password, a leader in identity security, today announced it has surpassed $250 million in annual recurring revenue (ARR). Revenue growth has been bolstered by 1Password’s business segment momentum, with business-to-business revenue growing 50% year-over-year and comprising two-thirds of the company’s total revenue.

I’m also assuming that B2B revenue accounted for the vast majority of overall revenue. By doing this, I’m kind of hand-waving other revenue streams away. Sue me.
If you take that 50% year-over-year growth number at face value, then you’re looking at around $563M ARR for 2025. That’s around a 12X revenue multiple, which—isn’t that crazy?

Like, it’s high, sure, but I don’t think it’s super-outlandish. Multiples suggests that publicly-listed horizontal software companies range from around a 3-5X NTM revenue multiple up to the 14-17X mark.

And I’m switching to iCloud keychain and it can’t even store my credit card data or do secure notes!
More troubling is that single person I know is in the process of migrating off of 1Password. For me, it’s because 1Password’s browser autofill tools fail for me more than half the time now. It’s crazy. Since 1Password’s initial capital raise and their moved off of native and onto Electron their quality has taken a clear hit.

Paradoxically, the more they run towards the more lucrative enterprise market to justify this valuation, the more I expect their user experience will deteriorate. There’s no turning back now.