Today, Portland-based JanRain (www.janrain.com) announced it has raised $3.25M in a Series A funding round from DFJ Frontier, RPM Ventures, and Anthem Venture Partners. We caught up with the firm's CEO, Brian Kissel, to hear more about the firm and the funding.
For our readers who are not familiar with OpenID and other authorization software, can you explain what it does?
Brian Kissel: Essentially, for those not familiar with OpenID, is it is a follow on to something that Microsoft started years ago, Passport, which was a single-sign on service for the open Internet. It allows you to do what companies do today inside a firewall on their Intranet, which allows you to log in at the beginning of the day with Active Directory, LDAP, or an Exchange Server and give you access to payroll, benefits, travel, and everything else you do inside a company with a single username and password. Passport was an attempt to replicate that on the open Internet. It allowed you to log in with someone, who becomes an identity provider, where you can use and reuse that login instead of creating one everywhere you go. Microsoft started that with Passport, but then found that end users and company web site operators were not particularly interested in giving Microsoft yet another monopoly on a proprietary technology.
About three or four years ago, a number of individuals in the open source community said--the concept of single sign-on is compelling, we ought to do something to get lots of companies to participate--and that was the genesis of OpenID. As you may know, it started in Portland with Brad Fitzpatrick of LiveJournal. After the idea was formed, JanRain quickly picked it up and focused on that. JanRain wrote most of the OpenID open source libraries, the first OpenID provisioning service, and founded the OpenID foundation and put all the intellectual property management policies in place. We also convinced Yahoo, Google, Microsoft, Verisign, and IBM to join OpenID as corporate sponsors for the OpenID foundation. Subsequently, Facebook and Booz Allen also joined, and it's started now to gain wide market adoption. There's about a billion OpenID accounts now, when you include Yahoo, Google, AOL, Flickr, Blogger, France Telecom, Telecom Italia, and several organizations in Japan who are issuing OpenID. There's no shortage of OpenID enabled users.
In addition, JanRain goes well beyond OpenID. That's just one third party identity solution, you may have also experienced similar functionality with Facebook, MySpace, Windows Live, Twitter, or other providers. They're not OpenID, but similar in nature. What JanRain does is abstract the complexity of those standards, so a website doesn't know or care what protocol is being used. They know that a user can show up at a website with their Google, Yahoo, Twitter , or other login and click to register and log in. They can also pass data, as requested by the web site and approved by the end user. It allows the user to create an account quickly, and they can come back with a single click login--click a button, and you have access to the web site. One area of interest to most of our clients, is not just the ability to get people onto the web site, but also to project the user experience on their web site to friends and colleagues on social networks. You can go to Universal Music Group, listen to a sample, participate in a blog, download a sample, or buy a ticket or t-shirt, and Universal wants to be able to let its users become advocates and champions for the site--talking about that experience on Yahoo, Google, Facebook, MySpace, or Twitter. We make it easy for them to do that. The second part of our value proposition beyond the login and user data management, is the ability to then publish those activities on the site on social networks, which creates a circle of connectivity between end users, their friends, and drives traffic back to your site.
What kinds of web sites typically use your services -- big sites, small sites, sites in between?
Brian Kissel: There are 70 million website on the Internet today, and they're all potential customers. We have products for every class. We have a free offering for small, homegrown family operated websites--RPX Basic. We have an entry level, commercial product, RPX Plus, for organizations that typically have more than 10,000 registered users. We also have RPX Pro, which is enterprise class for larger organizations with over 10,000 registered users.
Why not just pick something like Facebook Connect, etc. for authentication?
Brian Kissel: Some people might be tempted to go for Microsoft, Google, or Facebook and be done. Typically, what happens is we get to them before they make that decision, and tell them that's great--but why leave a bunch of your users and customers out in the dark? They might not be on Facebook, or Google, or Yahoo, or Twitter, and we can accommodate that as well. In some scenarios, a customer will have already implemented Google, or Facebook, or MySpace, and it's working out well, but they'd like to accommodate all of the different providers, and looking at what is required, with all of their protocols and keeping up with them and the social publishing piece--it's a lot of work, which takes lots of technical competence and commitment. Frankly, it's not a core competence of theirs, and they outsource it like they might pick a CRM vendor, or content management provider, or customer feedback provider. Companies are looking more and more at best of breed component technology, rather than building their own solutions. They're using plug-ins, and third party solutions for content management--why code your entire website in HTML , when there are lots of content management solutions that capture all the standard things you want to do, in an off-the shelf solution? That's what we are. If you envision accepting third party login, and want to offer the fullest solution you can, and you've done something specific with Google and Facebook, we allow you to do it all.
You've been around since 2005, why the venture round now?
Brian Kissel: As you know, OpenID, like many technologies, has a gestation period. Up until our first commercial product launched in December of last year, we were focused on professional services. OpenID was still relatively new, not well understood, and adoption rates were not what you would want them to be for commercial software offerings. At that point, we were taking the open source libraries, installing them, configuring them, and optimizing them for specific customers. As time was progressing, it became more standardized, and what clients wanted became more turn key. In 2008, we really started building out what eventually rolled out as RPX, short for Relying Party Accelerator. That's the term for a site consuming OpenID--a Relying Party. So we took everything we learned over the preceding years, and packaged it up into a service. What happened in December, is we started to see customer traction, and a scalable business model. Venture capitalists do not typically invest in service businesses--they like scalable software businesses, which can scale quickly and generate a better return. We realized the market was taking off, and we started talking to investors to help us accelerate what we were doing. It felt like we were in a pole position, running on the yellow flag, and the race was ready to start. We wanted fuel in our tanks to capture the opportunity, now that it's more mainstream.
How did you end up with the venture investors in this round?
Brian Kissel: We started talking to a number of firms, here in Seattle and down in the Bay Area. The most interest we got was actually from Draper Fisher Jurvetson in Menlo Park, on Sand Hill road. Warren Packard was very intrigued. As you might know, the philosophy at DFJ is that it has a lot of affiliate funds--feeder funds for DFJ proper. Warren introduced us to David Cremin, who had some investments in the northwest and was looking for early stage deals here. He was intrigued, and we did an initial close with him a couple of months ago. Along with him, we talked to a number of additional firms to fill out the round. Two particular firms that DFJ had done business with in the past participated as well. It was DFJ making the initial commitment, and us working with DFJ and those firms to put together a syndicate of like-minded investors.
What's next for the company, and what are you investing that new money in?
Brian Kissel: It's really more about execution now. We really want to ramp up our sales and marketing capacity, as the whole ecosystem starts to take off. As the platform has expanded, the amount of potential has expanded. OpenID started just as login, and nothing else--no data being transferred, no notion of social publishing, no notion of ecommerce applications--and what's happening now, is people are saying it's a great concept, can't you do this. We've got a year's worth of backlog on customer requests for new capabilities, and our current team is insufficiently sized to pursue all those requests. We're using a good portion of the funding to hire development resources, to accelerate our product development.
How big is the company now, in terms of people, and how much hiring do you think you'll be doing?
Brian Kissel: The company right now is 12 people, and in our projections, we'll be at between 20 to 24 by the end of 2010.