Passwordless authentication enhances security by eliminating the vulnerabilities associated with traditional passwords, such as phishing and credential stuffing, while also improving user experience through faster and more convenient logins. The market for passwordless authentication is rapidly growing, with a projected compound annual growth rate (CAGR) of 18.2% from 2022 to 2030, driven by the increasing need for secure and user-friendly authentication solutions, especially in an era where AI-generated attacks are becoming commonplace. HYPR is an identity assurance platform that enables seamless and user-friendly passwordless authentication. The company offers passkey multi-factor authentication (MFA) solutions that reduce the risk of phishing and credential-based attacks, whether through smartphone authentication or the company’s Affirm solution that incorporates more sophisticated biometrics using chat, video, and face recognition into a unified and holistic solution. HYPR serves over 25 million deployed users across its customer base, which has seen a 98.4% reduction in account takeover fraud.
AlleyWatch caught up with HYPR President and COO Roman Kadinsky to learn more about the business, the company’s strategic plans, latest round of funding, which brings the company’s total funding raised to $122.1M, and much, much more…
Who were your investors and how much did you raise?
The new investor is Silver Lake Waterman, which is part of Silver Lake, a global private equity firm focused on technology and technology-enabled companies. The Silver Lake Waterman strategy focuses on providing growth capital to later-stage growth companies. This investment is considered a type of mezzanine financing which is primarily long-term debt financing.
This is our first major investor from the West Coast and we’re very fortunate to have built a strong brand together with investors so far including Advent International, Point 406 Ventures, RRE Ventures, RTP Global, Top Tier Capital Partners, BoldStart, Alumni Ventures Group and several others.
Tell us about the product or service that HYPR offers.
Identity-based attacks have been experienced by 78% of companies, but many organizations struggle to even implement legacy MFA due to challenges with the user experience. HYPR Identity Assurance Platform is built on the foundation of phishing-resistant passwordless authentication, eliminating one of the largest attack vectors and improving the end-user experience
HYPR provides the most comprehensive identity security platform for workforce and customer use cases.
With identity as the new perimeter and the growing strategic initiative, it is crucial for organizations to verify who is accessing their resources and ensure that the presented identity matches the individual.
What inspired the start of HYPR?
HYPR started around the problem of credential reuse and fraud. With Founder Bojan Simic’s vision, we became early advocates for the emerging FIDO Alliance standard and focused our efforts on the elimination of shared secrets – the most common being the password. This is a problem we like to say is easy enough our parents can understand and is something we all experience today. Whether as victims of fraud, or as end users excited about the idea of logging into a web or mobile experience and running into a poor user experience, the password is pervasive and at the foundational level of these scenarios.
How is HYPR different?
Comprehensive Identity Assurance built for trust in today’s complex environments.
Modern identity fraud requires a complete end-to-end-solution. By unifying phishing-resistant passwordless authentication, adaptive risk mitigation, and automated identity verification, HYPR ensures secure and user-friendly experiences for all.
Mitigates Risk with no Shared Secrets
According to a recent HYPR report, 91% of breached organizations name credential misuse or authentication weaknesses as a root cause of at least one breach. With this in mind, HYPR continues to firmly focus on emphasizing the need for True Passwordless Security® built around open standards and frameworks such as the FIDO Alliance, and Public-key cryptography. While market participants emphasize the convenience of passwordless in various implements, HYPR’s customers believe it is critical that the fallback to a passwordless experience cannot be a password.
Continuous Identity Security for a Seamless User Experience
Identity security risks are constantly changing as users perform new actions or take on new responsibilities. Identity Assurance complements the strongest authentication with continuous monitoring that utilizes risk signals across endpoint, cloud, and mobile sources. Together with comprehensive identity verification, high risk activities no longer have to be high risk.
Creating intuitive authentication requires providing users with choice, which is why HYPR supports external authentication methods including Windows Hello for Business, Apple TouchID and FaceID, Yubico keys, and Idemia smartcards.
What market does HYPR target and how big is it?
HYPR is an identity security company which sits at the intersection of solutions like identity and access management, authentication, identity threat detection & response, identity verification, endpoint and more. Several of these pockets alone are $10 to $20B+ total addressable markets and growing. We complement and work with many of the leaders in these respective sectors, enabling enterprises to modernize and achieve more value out of the tools and systems they already use, while providing users with an intuitive and secure experience. HYPR solutions today are found in two of the four largest banks and many other complex environments available for both workforce access and customer facing use cases.
What’s your business model?
HYPR is a SaaS-based service that is B2B2E and B2B2C. We work with Fortune 500s and mid-size/emerging companies who acquire licenses based on their user populations and deploy our solutions to workforce or customer-facing use cases.
How has the business changed since we last spoke in 2021 after your Series C?
HYPR continues to focus on listening to our customers and the market. In 2023, HYPR widened its focus beyond authentication and released two new products, the HYPR Adapt risk engine, and the HYPR Affirm identity verification solution. These products round out the company’s focus on the identity lifecycle, providing a complete solution that addresses customer use cases starting from day 0 interviewing and onboarding, throughout a user’s lifecycle at a company or with a product they like.
Under the leadership of Bojan Simic, our CEO, and Roman Kadinsky, our President & COO, the company remains firmly rooted in New York, and continues to hire across the country and globally. We’re excited to share that we recently made a few hires in Ukraine as we continue to do what we can to support free market competition and its benefits over authoritarian / closed-off systems.
What was the funding process like?
At this stage of our growth, we periodically check in with investors we are building long-term relationships with to understand the current state of the market and how they are thinking about things. It is clear from many angles that traditional venture capital investing is unlikely to return to past levels of revenue multiples and transaction activity for quite some time, if at all.
Beyond that, the market has changed substantially in what it looks for, with “growth at any cost” entirely out of topic, and sensible, and efficient growth strongly desired. This opens the door for many of the mezzanine and long-term debt financing type rounds to take a central place in growth as the incentives to build a cash-flow sustainable business aligns with these investors’ criteria together with the market’s expectations more than it has in a long time.
I recently read a piece in Fortune, quoting Jyoti Bansal of Harness, which raised $150M from First Citizens-owned Silicon Valley Bank and Hercules Capital. As he put it eloquently “it’s a question of what the lowest cost of capital is for us…Capital is a means to an end. A lot of founders, especially in tech, treat fundraising like it’s the goal…”
With Silver Lake Waterman joining us, we are excited to partner with a true innovator and leader. Silver Lake as a whole is well known for supporting many of today’s tech leaders and Silver Lake Waterman is known for advancing financing towards many of the companies building tomorrow today. That means Silver Lake Waterman has a wide degree of versatility and liquidity to scale growth with companies over the long term, an important criterion we think about when partnering with anyone – how involved can they be through the next cycle. We’re proud to be among the companies they chose to work with and excited about the opportunity to work more closely together.
With Silver Lake Waterman joining us, we are excited to partner with a true innovator and leader. Silver Lake as a whole is well known for supporting many of today’s tech leaders and Silver Lake Waterman is known for advancing financing towards many of the companies building tomorrow today. That means Silver Lake Waterman has a wide degree of versatility and liquidity to scale growth with companies over the long term, an important criterion we think about when partnering with anyone – how involved can they be through the next cycle. We’re proud to be among the companies they chose to work with and excited about the opportunity to work more closely together.
What are the biggest challenges that you faced while raising capital?
The biggest challenge in any capital raising process is the time component and what it may take away from focus that can be turned inward towards our customer success and innovation. Our advice to entrepreneurs at any stage is to 1) cultivate good relationships over time so that you have a good network to turn to as you consider the timing – and can get honest feedback about market conditions and your positioning. 2) always have a good “data room” that you can share with the parties you are in advanced talks with. Leveraging your past round diligence requirements or checking in with your current investors on what they may now care about that they did not before, can help provide a good framework to this part of the process far less stressful on everyone.
What factors about your business led your investors to write the check?
The category we are in is certainly an important part of this. The need for solutions in this space, and the threat from malicious actors grows by the day together with advancements in AI for deep fake technologies and brute force/phishing attacks.
Beyond that, we continue to demonstrate success with our customers, who are happy to be references, and continue to deploy to more and more end users. One of the key signs investors look for is a company’s gross retention and net retention rates. This means, over the past 12 months, what % of your customer ARR are you retaining (vs losing) and what growth resides within that customer population year-over-year, is it growing. These quantitative indicators provide an unbiased view of customer health that is often elusive to assess.
Lastly, and critically, we continue to demonstrate a path of efficiency and growth. While building an enterprise-grade end-to-end solution requires significant capital to attain trust, we have continued to demonstrate that our revenue growth is able to outpace our spending growth in recent years. This helps a new investor to plot out what the future could look like.
Lastly, and critically, we continue to demonstrate a path of efficiency and growth. While building an enterprise-grade end-to-end solution requires significant capital to attain trust, we have continued to demonstrate that our revenue growth is able to outpace our spending growth in recent years. This helps a new investor to plot out what the future could look like.
What are the milestones you plan to achieve in the next six months?
HYPR is experiencing accelerated growth, driven by our focus on scaling our Identity Assurance Platform to meet the evolving needs of a wider customer base. Strategic partnerships and integrations with major platforms like CrowdStrike, Microsoft, and Yubico are extending our reach and providing customers with even more powerful security solutions.
We’re actively listening to our customers, addressing their concerns about emerging threats, and innovating to combat modern identity fraud while ensuring robust security, compliance, and a seamless user experience. As we look to the next 6 months, we see a year of growth accelerating for the company on the back of new products and innovation and are excited to build on that momentum going into next year.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
I shared some advice above about cultivating a network and keeping a data room ready to save time. Beyond that, it’s important to express why the problem area you are in remains or is increasingly widening, and how you go up against (And win) vs. large incumbents. The other advice I can offer is be mindful that preferred stock isn’t the only game in town, and it may cost you much less in the long run than doing a Series [Letter] round. Do have that conversation early with your existing investors for their support and be mindful in this environment: just because you raise money doesn’t mean your forecast and net burn should immediately change. You need to feel comfortable with your range of plans for the fiscal year, with or without fresh capital.
Where do you see the company going now over the near term?
Over the near-term, we are heads down in execution mode. Our new products are proving success in the market and widening the strategic conversations we have about being a long-term solution provider to our customers. We’re going to keep at it, and trust me it’s not as boring as it sounds ; – ). We aren’t doubling our headcount, diving into new geographies or anything silly like that and we’ll continue to hire opportunistically in the right areas.
What’s your favorite coffee shop or location in the city to hold a meeting?
Our nearby local favorite is Culture Espresso. They have two locations, and we’ve always been fond of the one on 38th and 6th avenue. p.s. not just the coffee, their baked cookies are great.
