Story of Twilio

The Wizard Of Apps: How Jeff Lawson

Built Twilio Into The Mightiest Unicorn
forbes.com

Miguel Helft
19-24 minutes

Key takeaways:

 Spotted an opportunity most organizations need. Helps applications to incorporate a

variety of communications – Voice, SMS, Email
 Adopted a developer-centric strategy to make their job easier by providing extremely
simple APIs
 Demonstrated the product by actually showing how easy it is to code Twilio

User-Buyer, Marketing, Product-market fit

This story appears in the October 4, 2016 issue of Forbes.

Back in October of 2011, when Uber was still a tiny company beginning to expand beyond
the San Francisco area, it sent an e-mail to its customers to alert them about a problem.
Uber’s SMS provider, Air2Web, was going to have a scheduled outage, which meant some
Uber features, like notifications and SMS ride requests, would be temporarily unusable. “If
you text in and don’t receive a prompt response from us, it’s not because we don’t want to,
it’s because we can’t!” said the snarky Uber note, its irritation at Air2Web poorly concealed.

The e-mail landed in the in- box of Jeff Lawson , the CEO of a crosstown startup named
Twilio, which specializes in cloud-based text and voice communications. Short, stocky and
balding, with a round face framed by rectangular glasses, Lawson could double for George
Costanza, only without the bumbling, neurotic personality. Lawson is low-key and
personable, and what he lacks in the swagger and bombast associated with startup founders
he offsets in engineering intensity and entrepreneurial discipline.

Lawson knew just what to do with the Uber e-mail, forwarding it to his friend Rob Hayes, an
Uber board member at the time, along with a brief sentence: “For the love of God, they
should be using Twilio.” Hayes then introduced Lawson to Uber CEO Travis Kalanick, and
within a month Twilio was powering Uber’s SMS. “It was mutual love,” Hayes says. Little
by little the relationship expanded, and Twilio now runs texts, alerts and voice calls on the
Uber app in most parts of the world. When a driver and passenger call each other, they do so
through a Twilio number that keeps their own phone numbers private. “We didn’t know Uber
was going to be what it is,” says Patrick Malatack, Twilio’s head of product. “But it was great
to see Jeff’s hustle.”
Twilio, as a company, reflects its chief executive’s personality. “Be humble and be frugal,”
says Lawson, a 39-year-old father of two. That aw-shucks credo has translated into 30,000
customers—from small developers to large enterprises—who use Twilio to power some 75
billion annual connections that reach 1 billion devices. Match.com pairs potential lovebirds
without revealing phone numbers, Airbnb sends rental notifications and the American Red
Cross deploys volunteers, all through Twilio. ING, the European banking giant, recently
announced it was yanking out 17 hardware and software systems across its global call centers
and replacing all of it with Twilio. Its largest customer, WhatsApp, uses Twilio to verify
customer accounts and logins. Apps from Lyft, Expedia , Netflix , Coca-Cola , Salesforce and
the New York Times all have Twilio inside. “He’s built a fantastic business,” says Salesforce
CEO Marc Benioff. “This is something that every company will build into their applications,
like we have.”

The latest group that seems to have noticed Twilio’s behind-the-scenes success: Wall Street.
Defying the all-but-dead market for tech issues, Twilio, which still isn’t profitable, went
public in June, raising $150 million at a $1.2 billion valuation. Shares of Twilio, which would
have ranked high on our inaugural list of the 100 hottest cloud companies had it stayed
private, nearly doubled the first day. And within two months, fueled by 70% sales growth in
its most recent quarter, it doubled again. Its recent $4.6 billion market capitalization dwarfs
better-known tech names like Box ($1.7 billion), Fitbit ($3.1 billion) and Yelp ($3 billion).

Twilio’s coming-out party sends a multibillion-dollar signal that building communications

functions into apps is both vital and easier than ever, which in turn prom-ises to make every
smartphone in the world even smarter. Lawson is aware of the potential. As part of the IPO
celebrations, he gave each of his more than 650 employees a T-shirt with a simple message:
“Day 1.”

ABOUT A YEAR AFTER LAWSON and two friends founded Twilio in 2008, Lawson
was invited to introduce it at a popular networking mixer called the SF New Tech Meetup.
Rather than talk about an inherently difficult-to-explain technology, Lawson decided to let
the Twilio software speak for itself. In front of a thousand people Lawson began telling his
story while simultaneously coding a Twilio app—a simple conference line. In just a few
minutes he opened an account and secured a phone number, and after writing a handful of
lines of code that everyone in the room could understand, his conference line was up and
running. Lawson then asked everyone to phone in, and just like that a mob of developers was
on a giant conference call. Lawson then added some more code, and his app called everyone
back to thank them for participating. As phones throughout the room began buzzing, the
crowd went wild with enthusiasm. “He is the let-me-show-you-what-we-can-do type of
exec,” says Byron Deeter, of Bessemer Venture Partners, an early backer who has become
Twilio’s largest shareholder. “There’s no bravado and no ego, and that gives him a special
charisma and authenticity.”

Lawson’s parlor trick did more than generate industry buzz. It epitomized a developer-centric
business strategy that has fueled its growth. Twilio is exceedingly simple to use and charges
no upfront fees, so programmers often use it to test an idea or product. Pretty soon that
product scales and turns into a six- or seven-figure account that required no traditional sales
process. “We onboard developers like consumers and let them spend like enterprises,”
Lawson says. Like others that have embraced developer-driven marketing—Amazon for
computing services, Stripe for payments, New Relic for analytics—Twilio benefits as
companies increasingly turn to software for differentiation. “As that happens, and companies
hire more developers, they come in with Twilio in their tool belt,” Lawson adds.

Given this ethos, all new Twilions, as the company’s employees call themselves, endure a rite
of passage: They have to create a Twilio app and present it to the whole company. (And, no,
the assistants and marketers and lawyers aren’t exempt: Non-engineers learn the ABCs of
coding a Twilio app as part of an onboarding “boot camp.”) On a recent Wednesday evening
a few dozen staffers, hunched over catered Vietnamese pho in the company’s cafeteria-cum-
kitchen in San Francisco’s South of Market tech hub, cheer a handful of newbies as they
unveil their handiwork.

Most of the apps are goofy. One answers text queries with a Simpsons’ GIF. Another allows
users to text a math problem and promptly delivers an answer from Wolfram Alpha, a Web-
based knowledge engine that does computations. The takeaway, however, is serious: Anyone
can build a Twilio app. After each presentation, Lawson, dressed in his usual jeans, sneakers
and a dark fleece vest over a button-down shirt, officially turns them into Twilio’s version of
a varsity letterman: “Here’s your traaaaack jacket!” Lawson also hands them a Kindle, which
comes with $30 in monthly credit. “We want to encourage people to invest in themselves,” he
says.

The CEO has been investing in himself from a young age. Growing up outside Detroit, he
started a business in middle school, filming and editing event videos, mostly bar mitzvahs.
By the time he graduated high school, he’d moved up to black-tie weddings, pulling in as
much as $5,000 on some weekends. Lawson began coding in college, at the University of
Michigan, and got his first paid programming gig while still a freshman.

Soon after, Lawson launched his first Internet startup, Versity.com, which published notes
from the biggest courses on campus. As Versity gained traction and pulled in advertising
revenue, Lawson dropped out of school, raised money from venture capitalists, moved the
company to Silicon Valley and expanded the business to about 200 campuses.

In 2000, as the dot-com wave was cresting, Versity was acquired by a competitor,
CollegeClub.com, which had filed for an IPO. Unfortunately, the crash hit before the
company could go public, and it collapsed soon after. Since Versity had been acquired for
stock, Lawson ended up empty-handed. “No one looked at their burn rate or their cash
balance,” he says. “I learned a lot and became very cognizant of spending money wisely.”

Bitten by the entrepreneurial bug, Lawson teamed up with a friend, Jeff Fluhr, who had
recently cofounded StubHub. As the company’s first CTO, Lawson developed the original
version of the ticket-reselling site in just six weeks. “He architected the whole thing and
recruited a couple of people to help build it,” says Fluhr. But sports wasn’t his thing, and
Lawson left the company after a few months, dabbling in a brick-and-mortar retail venture
and finishing his college degree.

Hungry for some big-company experience to round out his skills, Lawson interviewed at
Amazon in 2004. He got an offer from a tiny team that couldn’t tell him what it was up to
until after he accepted. It was the beginning of what would become Amazon Web Services,
and Lawson helped build the technology that Amazon launched publicly in 2006. “This
whole idea that you can offer infrastructure as a service was kind of mind-blowing,” he says.
His 15 months at Amazon proved to be formative. Selling the building blocks of computing
as a service was a brand-new idea, and Lawson was at its epicenter. The model gained
traction with the advent of mobile apps, which over time prompted scores of businesses to
turn to software as a way to interact with customers. As he began to think about where he
could apply the Amazon Web Services model, Lawson homed in on communications, which
had proved essential to every business he had started. Along with two friends, Evan Cooke,
who now works in technology at the White House, and John Wolthuis, who remains at
Twilio, they developed a prototype and put it up—where else?—on AWS. Initial reaction
from developers was enthusiastic, and Twilio got its first customer, a service called
PhoneMyPhone.com, which allowed people to type their number into a website to ring their
own cellphone (handy when it’s stuck between the couch pillows).

Twilio’s reception on Sand Hill Road was more muted. Many VCs told Lawson that targeting
developers, who don’t control budgets of any significance, was a bad strategy. And his timing
was lousy: One meeting with a prominent early-stage firm was interrupted by news of
Lehman Bros.’ collapse. Eventually, Lawson received some encouragement and capital from
angels Mitch Kapor, who had developed the first popular spreadsheet and founded Lotus, and
Dave McClure, who had run a developer program at PayPal . Chris Sacca, a former Googler
who made his fortune backing Twitter and Uber, and Bessemer’s Deeter also invested.

Deeter later secured Bessemer’s position as lead financier of the company’s Series B round
with a Twilian stunt: He used Twilio to program a conference line and asked Lawson to call
in at a set time. Instead of a conference, Lawson was greeted by a message: “Thank you for
calling the term-sheet hotline for Bessemer Venture Partners. We value your business.” The
robotic voice told Lawson to Press “1” for a $15 million term sheet, “2” for $20 million and
so on in $5 million increments to $30 million. There were also options for hearing Katy
Perry’s “Last Friday Night” and for connecting with a psychic. Lawson ended up choosing to
raise just $12 million. (Click below to hear Bessemer's greeting for Lawson, or dial  650-451-
1423 for the full experience -- including a link to a "term sheet" texted to your phone.)

Twilio began by offering a simple set of basic programmable communications functions—

things like “dial,” “play,” and “record”—which developers could bolt onto their apps.
Underneath those, Twilio handled the messy task of plugging into the telecommunications
infrastructure across a multitude of carriers in various countries. The service allowed any
developer to easily add voice and text messaging to Web and mobile applications. As
Twilio’s capabilities expanded—it now offers more than 50 building blocks, or APIs, up
from the initial 5—customers began programming increasingly complex functions and
gaining access to analytics, routing data, pricing and other features, across not only voice and
text but also video communications.

Today customers can build a call center entirely out of software building blocks rather than
having to purchase expensive equipment or prepackaged communications solutions. What
once required pulling copper wires into a data center and costly investments in carrier
contracts and infrastructure can now be done by a small team of programmers with no
upfront cost. Twilio charges only for usage.

“The things they made possible were crazy,” says Sacca, who worked on various
telecommunications projects at Google . “The idea that someone with no telecom engineering
experience could build a call-center flow by dragging and dropping was amazing.” Today
Twilio connects to the global telecommunications network through 22 data centers in 7
regions and has agreements with most of the major carriers that allow it to deliver a message
to pretty much any phone on the planet. Lawson calls this Twilio’s “super-network.” “As our
business grows, the super-network becomes more difficult to replicate over time,” he recently
told investors. Many analysts agree. “Twilio is a company that is light-years ahead of their
competitive field,” says Mark Murphy, an analyst at JPMorgan.

AT A RECENT ALL-HANDS MEETING at Twilio’s headquarters, Lawson plays MC in

front of a hundred or so Twilions, most of whom sit on the cement floor. He’s framed by
large monitors that show colleagues from offices in Mountain View, New York, London,
Dublin and Tallinn. Lawson introduces a handful of new employees and, to make sure
everyone remembers their names, leads the group in a boisterous camp counselor call-and-
response routine. (He’s dressed exactly like the night before, when he watched new
employees present their Twilio apps.) He then sits down for one of the mainstays of the
weekly meetings: a customer Q&A. Gene Schriver, the CEO of Globo, a translation-services
company, joins him at the front of the room, and the two embrace. “I’m hugging him because
I bought Twilio at $26,” Schriver quips. No one in the audience needs a reminder that shares
are above $50.

With the two of them on barstools, Lawson, his leg shaking restlessly, listens intently as
Schriver explains how he essentially built Globo on top of Twilio. Globo connects customers
with translators around the world over the telephone. The calls could be coming from a call
center serving a customer who doesn’t speak English or a hospital in Bangkok where a doctor
needs to talk to a French-speaking tourist.

Globo, which also offers e-mail, text and document translations, connects the calls through
Twilio and routes them to the appropriate translator, not only by language but also by
expertise, be it medical, legal, technological or other. “Twilio was a blank canvas upon which
we could make anything happen,” Schriver says. The capabilities and reliability of Twilio’s
platform, he adds, are what allowed Globo, which has just 40 employees, to beat far larger
rivals for a federal government contract to offer translation for Medicare recipients and
people signing up for ObamaCare at government exchanges. Schriver calls his choice of
Twilio critical. “It’s the most important bet that we made,” he says.

Amid the lovefest, Lawson wants to know what’s not working and what his team could do
better. Schriver lists a few: Some services could work faster; analytics on voice quality could
be improved; it would be nice to know what new features Twilio is planning. This kind of
feedback is an integral part of how Twilio develops its products. Not long ago, Malatack, the
VP of product, found out that two large Twilio customers were parking callers they couldn’t
handle immediately on a conference line and muting them. He instructed his team to build a
capability to queue calls. “We look at what customers are doing and try to make it easier,”
says Malatack, a developer himself, who used Twilio to connect the buzzer of his Seattle
apartment to his cellphone before joining the company.

Twilio’s approach is resonating with all types of customers. When Yelp built a restaurant-
reservation system to compete with OpenTable , it used Twilio to automate the confirmation
process. Rather than have a host call customers the day before to make sure they’re still
planning to come, the interchange happens automatically via SMS, and restaurants see a
confirmation on their dashboard. Similarly, Zendesk, a cloud-based provider of customer-
service software, has used Twilio to offer call centers to small and medium-size businesses—
say, a mom-and-pop limousine dispatcher.
Twilio has also brought its simple programmable communications capabilities to countless
nonprofit organizations through its Twilio.org arm. Modeled after Salesforce’s 1-1-1
commitment to donate 1% of employees’ time, technology and resources to charitable causes,
Twilio.org has been seeded with nearly 800,000 company shares and has a goal of delivering
a billion messages “for good.” It’s currently at 10% of that goal because of organizations like
Trek Medics, which gives people access to emergency services in countries where 911
doesn’t exist, like Haiti, the Dominican Republic and Tanzania.

In the United States the Crisis Text Line used Twilio to build a service that connects some
1,600 volunteers with people who are contemplating suicide or face a threat of domestic
violence. As Twilio integrates with services like Facebook Messenger, the Crisis Text Line is
taking advantage of those connections. “We want to reach people where they are,” says Chris
Johnson, Crisis Text Line’s CTO.

Sizing the opportunity in front of Twilio, which did $167 million in sales last year, is not
easy. At its current growth Twilio would hit a $1 billion annual run rate in the second half of
2018. Lawson calls telecommunications services a trillion-dollar market, with big portions of
it poised to migrate from hardware to software. But legacy competitors like Avaya , Genesys
and others are determined to defend their turf. And a crew of smaller startups, with the next
generation of Lawsons, are also courting software developers.

For now, none of the new players have the scale, features or reliability of Twilio. The bigger
risk for the company is its overreliance on a handful of big customers, such as Facebook’s
WhatsApp, which account for about 13% of its revenue. But with most of the growth still
coming from smaller accounts, Wall Street appears unconcerned. “It is very possible that
Twilio will compound its growth nicely for many years to come,” says JPMorgan’s Murphy.

For Lawson, who learned his lessons during the dot-com boom, success is about not only
growth but also financial discipline. Profitability is within reach in no small part because, by
tech startup standards, Twilio is downright frugal.

Its headquarters south of Market Street are in a modest, revamped industrial building. What
passes for a reception area is a cramped room with a security guard behind a small desk who
directs visitors through a meandering series of hallways to a cavernous service elevator.
Twilio occupies the third floor and parts of the second floor. The company has no fancy
furniture and no corporate chef. Free lunches, that tech company staple, are catered only a
couple of times a week. The combination of thriftiness and rapid growth paved the way for
Twilio to conduct its IPO on its own terms. Lawson says the company had more than $100
million left in the bank and didn’t need to go public. “I wanted to make sure our customers
knew we were not some fly-by-night unicorn,” he says.

Lawson, whose stake in Twilio gives him a fortune that approaches $500 million, is halfway
to personal unicorn status. If Twilio’s stock doubles yet again, Lawson will be a billionaire.
As the world gets increasingly mobile and cloud-based, that seems entirely possible—not in
two months but perhaps in two years. Says Lawson: “We are absolutely just getting started.”