Personal blog of Yzmir Ramirez

With more than 200,000 customers, a market cap of nearly $56 billion, and the recent acquisition of Segment for $3.2 billion, Twilio is a SaaS behemoth.

It’s hard to imagine companies like Twilio as anything but a giant. But everybody starts out small, and you can usually trace success back to key decisions made in the early days.

For Twilio, a big differentiator was being one of the first technology-focused SaaS organizations that focused on empowering and building for the end user (which in their case is developers) with a self-service function. Another differentiator was, the executive team designed the organization to create tight feedback loops between sales and product with national roadshows, during which CEO Jeff Lawson frequently met with users.

Moreover, Twilio’s “secret sauce” per their S-1 is a developer-focused model and a strong belief in the future of software. They encourage developers to explore and innovate with Twilio’s flexible offering, which led to an incredible 155% net-dollar expansion rate at the time of the IPO.

Most importantly, Twilio put the product in the hands of teams before the sale happened, standing by to answer hard questions about how Twilio would fit into their infrastructure. This was pretty rare at the time — sales engineering resources aren’t cheap — and it was a strong differentiating factor. So much so that when the company went public, they were growing at 106% annually.

Twilio sells to developers at large enterprises by solving a problem that developers come up against regularly: Getting in touch with customers.

But as more successful public software companies emerge, it’s clear that Twilio’s secret sauce can and will be replicated.

Why traditional marketing doesn’t work on developers

1. Don’t hire marketing (or sales, either). If you do, hire someone super experienced from an enterprise sales background. And then fire them within three to six months.
2. Just hire someone who’s passionate about the product to “manage the community.” What is community management? Lots of swag. Cool meetups. Publish 1–2 articles as a stab at content (bonus points if they’re listicles). Oh, wait. How can we show the ROI here? Make the community manager do that until she quits. Repeat.

Twilio CEO Jeff Lawson knows a thing or two about unleashing developers. His company has garnered a market cap of almost $60 billion by creating a set of tools to make it easy for programmers to insert a whole host of communications functionality into an application with a couple of lines of code. Given that background, perhaps it shouldn’t come as a surprise that Lawson has written a book called “Ask Your Developer,” which hit the stores this week.

Lawson’s basic philosophy in the book is that if you can build it, you should. In every company, there is build versus buy calculus that goes into every software decision. Lawson believes deeply that there is incredible power in building yourself instead of purchasing something off the shelf. By using components like the ones from his company, and many others delivering specialized types functionality via API, you can build what your customers need instead of just buying what the vendors are giving you.

While Lawson recognizes this isn’t always possible, he says that by asking your developers, you can begin to learn when it makes sense to build and when it doesn’t. These discussions should stem from customer problems and companies should seek digital solutions with the input of the developer group.

Building great customer experiences

Lawson posits that you can build a better customer experience because you understand your customers so much more  acutely than a generic vendor ever could. “Basically, what you see happening across nearly every industry is that the companies that are able to listen to their customers and hear what the customers need and then build really great digital products and experiences — well, they tend to win the hearts, minds and wallets of their customers,” Lawson told me in an interview about the book this week.

Image Credits: Twilio (image has been cropped)

He says that this has caused a shift in how companies perceive IT departments. They have gone from cost centers that provision laptops and buy HR software to something more valuable, helping produce digital products that have a direct impact on the business’s bottom line.

He uses banking as an example in the book. It used to be you judged a bank by a set of criteria like how nice the lobby was, if the tellers were friendly and if they gave your kid a free lollipop. Today, that’s all changed and it’s all about the quality of the mobile app.

“Nowadays your bank is a mobile app and you like your bank if the software is fast, if it is bug free and if they regularly update it with new features and functionality that makes your life better [ … ]. And that same transformation has been happening in nearly every industry and so when you think about it, you can’t buy differentiation if every bank just bought the same mobile app from some vendor and just off the shelf deployed it,” he said.

It was barely a month ago we began hearing rumors that Twilio was interested in acquiring Segment. The $3.2 billion deal was officially announced three weeks ago, and this morning the communications API company announced that the deal had closed, astonishingly fast for an acquisition of this size.

While we can’t know for sure, the speed with which the deal closed could suggest that it was in the works longer than we had known, and when we began hearing rumors of the acquisition, it could have already been signed, sealed and delivered. In addition, the fact that Twilio CEO Jeff Lawson and Segment CEO Peter Reinhardt knew one another before coming to terms might have helped accelerate the process.

Regardless, the two companies are a nice fit. Both deal with the API economy, providing a set of tools to help developers easily add a particular set of functions to their applications. For Twilio, that’s a set of communications APIs, while Segment focuses on customer data.

When you pull the two sets of tooling together, and combine that with Twilio’s 2018 SendGrid acquisition, you can see the possibility to build more complete applications for interacting with customers at every level, including basic communications like video, SMS and audio from Twilio, as well as customer data from Segment and customized emails and ads based on those interactions from SendGrid.

As companies increasingly focus on digital engagement, especially in the midst of a pandemic, Twilio’s Lawson believes the biggest roadblock to this type of engagement has been that data has been locked in silos, precisely the kind of problem that Segment has been attacking.

“With the addition of Segment, Twilio’s Customer Engagement Platform now enables companies to both understand their customer and engage with them digitally — the combination is key to building great digital experiences,” Lawson said in a statement.

In a recent post looking at the reasoning behind the deal, Brent Leary, founder and principal analyst at CRM Essentials, saw it this way: “This move allows Twilio to impact the data-insight-interaction-experience transformation process by removing friction from developers using their platform,” Leary explained.

With the deal closed, Segment will become a division of Twilio. Reinhardt will continue to be CEO, and will report directly to Lawson.

Twilio is best known for its communications API, which allows developers to add messaging, voice or video to their apps with just a small slice of code. The company’s tools are used by customers like Lyft, Airbnb, Salesforce, Box and Duke University.

The former startup went public in 2016 at $15 a share. Yesterday Twilio’s stock closed at $113.90, giving the company a market cap of about $15.6 billion (after a horrendous week on Wall Street). It’s easy to look at its value (among other measures) and declare Twilio a successful public company. But just like every former startup out there, its ascent wasn’t always so certain.

Founded in 2008, Twilio was once a tentative early-stage company feeling its way forward in the market with an unproven product and more future potential than actual results. Recently, the company’s CEO Jeff Lawson shared a Twilio board deck from March 2010.

Naturally, we read through it — how could we not? — but we also decided to analyze it for you, pulling out what we learned and using the snapshot of Twilio’s history to illustrate how far the company has come in the last decade.

The presentation’s original time stamp lands after Twilio’s Series A and just before its Series B, allowing us to see a company molting from a hatchling to something more sturdy that could stand on its own two feet. The company raised $12 million six months after the deck was presented.

To get everyone on the same page, we’ll start with a little history, and then get into the deck itself. Let’s go!

Where Twilio came from

Twilio, the ubiquitous communications platform, today announced its plan to acquire the API-centric email platform SendGrid for about $2 billion in an all-stock transaction. That’s Twilio’s largest acquisition to date, but also one that makes a lot of sense given that both companies aim to make building communications platforms easier for developers.

“The two companies share the same vision, the same model, and the same values,” said Twilio co-founder and CEO Jeff Lawson in today’s announcement. “We believe this is a once-in-a-lifetime opportunity to bring together the two leading developer-focused communications platforms to create the unquestioned platform of choice for all companies looking to transform their customer engagement.”

SendGrid will become a wholly owned subsidiary of Twilio and its common stock will be converted into Twilio stock. The companies expect the acquisition to close in the first half of 2019, after it has been cleared by the authorities.

Twilio’s current focus is on omnichannel communication, and email is obviously a major part of that. And while it offers plenty of services around voice, video and chat, email hasn’t been on its radar in the same way. This acquisition now allows it to quickly build up expertise in this area and expand its services there.

SendGrid went public in 2017. At the time, it priced its stock at $16. Today, before the announcement, the company was trading at just under $31, though that price obviously spiked after the announcement went public. That’s still down from a high of more than $36.5 last month, but that’s in line with the overall movement of the market in recent weeks.

Today’s announcement comes shortly before Twilio’s annual developer conference, so I expect we’ll hear a lot more about its plans for SendGrid later this week.

We asked Twilio for more details about its plans for SendGrid after the acquisition closes. We’ll update this post once we hear more.