The Insider Story of Twilio

Written by Pete Flint
Pete is a General Partner at NFX, a seed-stage venture firm based in San Francisco.

The Insider Story of Twilio

“The dirty secret of every startup ever is that when you look at companies with these big, world-changing missions…those are usually retroactively put in place.”

Similar Essay

The Insider Story of Houseparty

Jeff Lawson took Twilio from an idea that no one had a name for, to an IPO, and now a $63 Billion market cap company. His words echo my experience at Trulia — the story you hear about iconic companies is rarely what actually happened.

This is the insider story of Twilio.

It’s the blueprint of Jeff’s road to success – how he validated the idea, the counterintuitive strategies that made Twilio outstanding, and why so many Founders “actually miss the business opportunity right under their noses.”

(Jeff also just published “Ask Your Developer”.)

The Original Idea For Twilio

  • I’m a developer. I’ve been a software developer and I learned to code in the ’90s. I’d started three companies before Twilio, and I was one of the first product managers of Amazon Web Services. When I left Amazon, I knew I wanted to build my next company around something that I was passionate about, something that I get really excited about.
  • I thought back to my time as a developer and as a company builder. For every company I had started prior to Twilio, there were two things in common, despite the fact that they were very different businesses.
    1. Number one, at every one of those companies, we were using the power of software to really build a great customer experience, a differentiated product, and iteratively understand our customers and build better and better solutions using software. To me, that’s the superpower of software: your ability to listen to a customer and quickly iterate your way towards a better and better customer experience or product or solution for that customer.
    2. The second common thread was in the course of building those companies, experiences, and products, we needed communication because we had to reach out to customers and let them also reach out to us for a wide variety of things. Sometimes it was in our marketing, or in our sales process, or while they were using our product.
  • There were all these places where we’d say, “Oh, wouldn’t it be neat if a customer could reach out to us and we could get them this answer? Wouldn’t it be neat if we could practically notify them of this or that?”
  • Every time we’d have these ideas, we said, “Yeah, that’d be really neat, but I’m a software developer. I don’t know the first thing about communications.” That’s like copper wires, satellites, and space.
  • This is where the real problem showed up. You’d call the companies who seemed like they should know this realm — the hardware companies or the carriers — and you’d say, “Hey, we have this idea. We’re trying to build it,” and you’d explain it to them.
  • The salesperson would say: Yeah, we’re happy to help you with that… here’s how:
    1. The first step is you’re going to run copper wire from the carrier to your data center.
    2. And then step two, you’re going to buy a bunch of hardware and rack it up.
    3. Then step three, you’re going to buy a software stack to pop it on top of that telco hardware.
    4. Step four, you’re going to bring it up while a professional services army comes to bang the whole solution into shape. We think we can do that for you, but it’ll take two to three years and two to three million dollars. Sign here, we’ll get started.
  • Every time I had this experience, I said, “Wait, hold on a second. We’re a startup. We can’t really do that.”
  • Maybe there are some companies, some big enterprises, maybe they could sign that check pretty easily. But the years it would take was still a big problem. It would take years to build this V1 of this idea we have, and customers would never get to play with it until we had built the whole thing and spent millions of dollars and years? And then once customers told us all the things that were wrong with it, then we have to embark on the next version, which again would be millions of dollars and years spent?
  • This is the complete opposite of the software ethos. Everything we do in software, we can measure it in weeks. That’s what sprints and agile is all about.
  • It felt like everything in the world of communications was like the old waterfall model, which makes sense. It’s an industry where they’ve been accustomed to launching satellites, putting up towers, buying spectrum for billions of dollars, and laying down millions of miles of copper wire all around the planet.
  • Yeah, those are hard. Those are slow. Those are high stakes so I understand that. But how we get value out of communications isn’t about all that anymore.
  • It’s really about the software now.

 

Founder-Market Fit

 

When you are not alone in seeing the use cases, you’re on to something

  • I started Twilio to solve a relatively simple problem: How do we bring communications into the realm of software and enable every software developer in the world to build out their ideas quickly and easily? That’s where we started.
  • If I was the only developer in the world who had that problem, then we probably wouldn’t have built a meaningful business. So, I did a lot of research before we started Twilio, talking to other developers, basically describing the solution we had in mind and asking, “Would you have a use for it?”

Quote

  • Every time I talked to a developer, they’d scratch their head for a minute. They’d say, “Ah.” Then eventually they’d say, “Well, wait a minute. I have a question. That idea that you talked about, the telephone API, could I…”
  • And they’d explain some use case they had recently… Could I notify my customers when a package ships for my e-commerce website so that they don’t keep calling customer support to ask for the packages? And I would say, “Yes, yes. That’d be really easy.” And they’d say, “Oh yeah, great. Well, let me try it when you build it.”
  • After having that conversation enough times, I realized that I was not alone in seeing these use cases. That’s what gave us the conviction to start the company.
  • A lot of people didn’t originally realize how big of an opportunity it was. And the timing was hugely impactful, with the rise of smartphone use — when telephony met software.

 

“The Dirty Secret Of Every Startup Ever”

  • I think that when you look at companies with a big world-changing vision or mission, those are usually retroactively put in place. To be honest, that’s the dirty secret of every startup ever.
  • The startups that have this giant world-changing vision on Day One probably get blinded by this: “We have to change the world and we have a vision,” and blah, blah, blah, that they actually miss the business opportunity right under their noses.
  • The best startups are probably those that aren’t founded with this idea of this giant mission. They’re founded with a relatively simple thing: “I know a customer segment that has a problem and I’m going to go solve it.”

Quote

  • And if you do that really well in the early days of a startup, you earn the ability to say, “Okay, we did that. We’re making money and we’re growing. What’s next? How do we decide how to take our early success and turn it into future success?”
  • That’s when you start thinking: Okay, so what is the real north star of our company? When we have to pick the next thing we’re going to do. Should it be over to the left or should be over to the right? Well, we need some sort of guiding vision. Now we’re going to install a framework to help us make those decisions. That becomes your mission. That’s how it was at Twilio.

 

Treat Developers Like Customers

  • I pitched a VC on the idea for Twilio. He was my safe pitch because I knew him really well. His feedback was, “Wow, you’re going to need a lot of salespeople for this thing.” And I said, “Oh no, no, no, not at all. Developers, they’re going to buy it. We’re not going to need sales. It’s going to be amazing.”
  • He literally laughed me out of his office. He said, “Yeah, yeah, right.” But I did start the company with very much a bottom-up developer focus mindset.
  • Now, of course, we have since come to add a lot of salespeople. So, the venture capitalist was right. But initially, we didn’t start with them.
  • How do we get Twilio into the tool belt of every developer in the world?
  • We just started by treating developers like customers. It sounds really simple, but there’s a lot to it. Most companies who claim to serve developers actually don’t see developers as customers. They see them as a strategy. Developers aren’t customers for them. They’re like an audience that you try to win over in order to actually add more value to the company. And if it works, great. If it doesn’t, then you change strategies.
  • That’s why a lot of the platforms so frequently say, “Hey, you know what? I know we put out that API last year, but it’s not working. We’re going to pull it back.” Developers mistrust those things because they were not the customer, they were part of a strategy.
  • We always said: Developers are the customer. Treat them like a customer. Treat them as the source of your revenue and the source of your success.
  • We sponsored a lot of hackathons. We ran hackathons. We gave out a lot of t-shirts to developers.
  • At one point, I made this prediction, “In five years, Twilio will ship more t-shirts than Blackberry ships phones.” That may have been true.

 

Network Effects = Add More Value To Your Customers

  • I think network effects are one tool in the toolkit of trying to make it. Hopefully, the more people you serve, the better off all of your customers are. But that’s certainly not the only tool in the toolkit.
  • Network effects are often mistakenly thought of as: How do I create a stronger company? What’s my moat?
  • But actually, the question is: How do I add more value to my customers? As I grow, is there a way that the rest of my customer base or the rest of whatever I’m building makes my solution better for all of my customers.
  • There are a lot of ways to do that. One way is to build a comprehensive product that moves quickly. As I think about Twilio, we very quickly went from a one-product company to a multi-product company. That bucks the conventional wisdom in a lot of ways.
  • A lot of the conventional wisdom says to do one thing and do it well. Find a niche, get rich. There are a lot of fancy sayings for it, but I’m a believer that in the world of software, you have to try a lot of things because it’s relatively inexpensive to try things.
  • So, we very quickly added products. Twilio Voice was our first product. We pretty quickly, 18 months into the life of the company, announced our second product, which was Twilio SMS.
  • It turns out that SMS is a bigger product than voice. And today it certainly is, because the number of use cases for it were really exploding and were really unexplored because SMS had been a pretty esoteric and difficult-to-use technology up until Twilio.
  • We unlocked a lot of innovation around what is possible with messaging.

 

NFX Case Studies

 

Don’t Share Solutions With Your Developers; Share Problems

  • It was 2014. We had bought a billboard and we needed to decide what to go on it. We’d hired a communications firm. They did a lot of work. They talked to a lot of our employees. They talked to customers. They basically pitched us, “Here’s the best idea. Great companies use Twilio,” and put a logo. And I’m like, “Really? We just spent six months to figure that one out!?”
  • So we’re stuck with, “We’ve got a billboard. It’s going up on Monday and we need the creative. What are we going to put it on it?”
  • Something that had been in the back of my head for a long time, one of the things I would think about in the shower, was the whole idea behind those commercials for drugs: “Ask your doctor if (blank) is right for you.”
  • For some reason, my brain just always went to, “Ask your developers if Twilio is right for you.”
  • So we’re in this meeting and we literally could not end the meeting without deciding what went on the billboard, because it was going up on Monday. I just blurted it out, “How about, Ask your developer?” And everyone asked, “What do you mean?”
  • “Well, developers know about Twilio and the executives should be listening to their developers.
  • That’s one of the megatrends that’s really going on: Developers are able to adopt services and tools very quickly and inexpensively. For example, Stripe, Amazon Web Services, or anything else that is allowing them to innovate faster and drive the businesses forward.
  • But also this bigger message around developers is that they should be thought of as leaders inside of companies. They actually know a lot about what companies need to do to innovate and to win in this world and businesses should consult them.
  • So we did the billboard and it’s interesting because you go back and forth. Some people are like, “What an idiotic billboard. It doesn’t tell me what you do.” Obviously, we have our tagline on it that says Twilio communications platform.
  • But in some ways, it is so simple that it’s easy to consume, but it has profound implications.

Billboard

  • Over the years, I’ve thought a lot about this notion of asking your developer. What does it really mean? It’s a fun tagline and it’s a fun billboard because it’s a wink and a nod, but also I’ve thought a lot about the implications of it.
  • Twilio now has 10 million developers in our ecosystem and 200,000 customers.
  • I’ve had this conversation with so many business executives over the years, asking me, “Jeff, I have a question. We’re struggling to figure out how to get really good at building software? How do we hire great developers? How do we organize the team? How do we make sure we retain those developers? Because, hey, we’re not Google or Facebook or someone who’s known for being a great engineering culture.”
  • I’ve shared my tips over the years and I’ve thought about it some more.
  • I’m in a somewhat unique position being that I’m a software developer myself, but now I’m also the CEO of a public company. I see the division between that developer mindset and the business mindset because I live with one foot in both of those worlds.
  • So, I took my unique vantage point and wrote it down in this book, Ask Your Developer. It’s essentially about creating a shared parlance, an understanding between what business executives and developers are trying to accomplish. What do business executives want to accomplish and how will the developers go about doing their job?
  • There are so many things about how developers do what they do that I think are not really fully understood by business executives.
  • The biggest thing that I advocate is don’t share solutions with developers, share problems.
  • What you do is unlock the full creative problem-solving ability of those developers.

 

The Key To Success, Especially In B2B, Is Trust

  • We continue to invest. We now have video, chat, email, as well as data infrastructure, and a lot of facets to our platform. The idea is, once you get to know Twilio, there are so many ways you can adopt us and use us. We just solve a bigger and bigger set of the challenges that a developer has.
  • But for a company, what they’re looking for is more comprehensive solutions. That’s where having one platform that shares all of these different attributes instead of having to cobble together lots of different things really helps. Companies can pick a vendor that they trust, that they want to work with, and allow that company to go solve more and more challenges for them.
  • Ultimately, the key to success, especially in B2B, is trust. Trust is the number one thing that you sell.

Quote

  • If you think about what the cloud is, the cloud is saying to your customer, “Hey, you know this part of your business, whether it’s your infrastructure or whether it’s some app, whatever it is, trust that we are going to execute on this idea better than you can do it internally. Trust that we are going to keep building, that we’re going to keep it reliable and secure, and we’re going to add features and functionality, and we’re going to do it better than you can do it yourself.”
  • That is essentially asking for your customer’s trust. And so, fulfilling on that trust every day, that’s ultimately how you build your business, how you retain your customers.
  • I like to think that we earn our customer’s business every day.
  • At Twilio, we don’t think about lock-in and we don’t think about any of those things. All we do is think about, how do we earn our customer’s business every day? With a combination of trust and execution. That’s how we do it. That’s how we stay ahead of everybody else. That is scalable.

 

Twilio’s 3-Part Framework for Customer Value

3 Stages

If you think about what Twilio does, we’ve really always offered three things to companies, and it turns out they’ve been particularly relevant for the era of a pandemic.

  1. Twilio offers, first of all, digital engagement, so the ability to use all these digital channels like voice, messaging, chat, video, email, to engage with customers and really any stakeholder, and to do so with a lot of flexibility.
  2. The second thing that we offer is digital agility, the idea that with software, you can build anything relatively quickly. APIs are key enablers of that kind of agility.
  3. The third thing is cloud scale, the idea that when you build something, you’re not thinking about racking up servers or doing capacity planning. You just build something, you push it out to the cloud and it works everywhere.

It turns out the world has needed those things really more than ever in the era of a pandemic, because we had to really rewire the world in so many ways, in such a short period of time.

 

Acceleration Born Of Necessity

You think about some of these industries that were really reinvented on the fly.

  • I think about healthcare, and as a fortuitous coincidence, Twilio announced HIPAA support for healthcare workloads in February of last year. That’s something we had been working on for like 18 months and we happened to announce it just in time for the healthcare world to embrace telemedicine like never before.
  • Early in COVID, a huge percentage of doctor visits turned into telemedicine visits. I think we saw a massive acceleration. Telemedicine is not new. There had been companies building telemedicine. There had been medical systems experimenting with telemedicine, but a relatively small percent of doctor visits were done over video.
  • Suddenly it was like half or more visits became video visits and that has accelerated in one direction the adoption of telemedicine now in the world.
  • You think about other categories, like e-commerce, they saw a massive acceleration of adoption. Not just Amazon, but every company that offers e-commerce saw a huge acceleration.
  • I remember talking to the CIO of one of the major big-box retailers mid-year. He said that they saw a five-year acceleration of their e-commerce traction, of their e-commerce adoption in one quarter.
  • That executive was talking about how contact centers for e-commerce were completely overwhelmed with customers asking about orders and returns.
  • All the things that you typically would play out over the course of multiple years of slowly building that infrastructure and staffing those teams played out over the course of a quarter. Companies had to catch up and build. That’s really the story of 2020.
  • Most of these workflows are not special one-off things that we did for COVID. These are the natural course of the digital transformation of nearly every industry that just got accelerated out of necessity, as we had to remove all face-to-face interactions in society and make these industries work as completely digital businesses.
  • When I talk to a wide variety of leaders, they basically say, “Look, this gave more prominence to these projects. It accelerated budgets. It accelerated executive attention on these projects. What would have potentially taken years got done in quarters, or sometimes even weeks.” And that’s really amazing.

 

“Human beings are wired to build”

  • I think there’s a creative problem solver mindset in a whole lot of people.
  • If you can actually figure out how to apply it to your work and your personal life, I think that leads to a fulfilling life because human beings are wired to build. I think that’s one of the defining attributes of humanity.
  • As we go into 2021, develop a mindset to use creativity, to build something remarkable that is truly good for the world.
  • The world has bigger problems than we’ve seen in a long time.

You can listen to the podcast conversation here.

Do you have questions about the insider story of Trulia for Pete Flint (Co-Founder & Former CEO at Trulia)? Ask Pete on Yoda.

13 Network Effects

 

Connect with Pete Flint