How Jeff Lawson Brought the Magic of in-app Communications to the Public: The Story of Twilio.
Barely into his teenage years, Jeff Lawson began filming birthday parties, bar mitzvahs, and other events for a neat sum of money.
By the time he graduated high school, he was doing full productions for weddings and raking in a few thousand dollars every weekend. A career in the film industry beckoned. Would Lawson take it up?
Not at all.
Today, Jeff Lawson is the CEO of Twilio, a billion-dollar valuation unicorn tech company. Stocky, balding, round-faced, with keen eyes shielded behind square-shaped spectacles, Lawson has nothing of the bombastic personality that is not uncommon among silicon valley CEOs.
But how did Lawson come bursting through the corporate tech industry in just 8 years?
The Making of an Entrepreneur
Lawson insists that the story of Twilio doesn’t begin in 2008 but rather, 150 years ago when Alexander Graham Bell connected some copper wires to a speaker and a microphone and created the first telephone.
Right from his youthful days, Lawson was wildly influenced by his grandfather who, in the 1930s, had set up a successful paint company. He was an industrious man, Lawson recalls, who worked through his golden years, until the very last day he folded his arms in quiet death, aged 98 years.
Lawson had gone to the University of Michigan to learn coding back in the 90s when you needed to fax your documents to some people if you wanted to register your domain name. But he still wanted to play around with this new technology
In 1996, he got together with some of his college buddies and launched a company (Versity.com) that hired students to take notes and sell them off to other students. By 1999, the company had grown to 50 employees, and Lawson had dropped out of college to run it.
The young entrepreneurs then sold off the company to a competitor (who was set to go public) in a straight equity deal.
But then both companies never survived the crushing wave of the dot-com bust of the late '90s.
Suddenly, Lawson had nothing to do.
He sought out his friend Jeff Fluhr, who'd recently co-founded StubHub, and joined as the first CTO. Among other things, Lawson architected StubHub's original ticketing system. After only a few months, Lawson left in search of some big, corporate experience.
He joined a small team at Amazon working on a project that sought to sell computing as a service. This would later become Amazon Web Service (AWS), and Lawson would play a key role in building the technology that powered the service.
"This whole idea that you can offer infrastructure as a service was kind of mind-blowing," he would later say.
The Idea For Twilio
After his one-and-a-half-year stint at Amazon, Lawson couldn’t stop thinking about how he could apply the idea behind AWS elsewhere.
The advent of mobile apps had compelled hundreds of businesses to turn to software as a way to boost communications with their customers. This boosted the AWS model, which quickly gained a lot of traction.
Lawson began to think about communications, which had been a critical aspect in all the businesses he’d ever been involved. Could he build communication tools within software and software development tools?
He would soon have the answer.
With his two friends Evan Cook and John Wolthuis, Lawson built the first Twilio prototype in 2008, which they placed on AWS. Software developers reacted positively to Twilio, an incredibly valuable compliment at the time.
As developers warmed up to the service, Twilio signed up its first customer, PhoneMyPhone.com. They provided a service through a website where users could enter a cellphone number and call up the phone, an incredibly useful service for when you couldn't remember where you’d left it.
Twilio would then receive its first major press coverage when Dave McClure, angel investor and founder of 500 Startups, used the service to rickroll (prank) Michael Arrington, founder and editor of TechCrunch.
Next came Tumblr, Earth911, Sony Music, Cheetos and other bigger clients signed up for its services by March 2009. Twilio then updated its pricing model to a pay-as-you-go model.
Overcoming Significant Hurdles
Lawson's game plan from the get-go had been to target developers. Twilio would supply simple lines of code that they could use to add basic communication functions to their apps and software.
Users could then send voice and text messaging, emails, and use other functionalities such as analytics. Twilio would handle the messy backend of communications infrastructure to make it all of it possible.
But not many VCs were enthusiastic about Twilio’s approach of targeting developers. According to them, developers didn’t control company budgets. In short, it was a bad strategy.
And the timing was all wrong.
As Twilio grew, Lawson recognized the fact that the telecommunications was still mostly a hardware business. He understood the great hurdle it would take to turn it into a software business. And the competition was stiff because legacy giants such as Genesis, Avaya, and other smaller startups who were courting developers, viciously defended their turfs.
But Lawson had picked up valuable lessons from running his previous companies and he knew that he had to ensure Twilio was downright frugal. It wasn’t just about growth, but financial discipline as well, especially since Twilio faced great risk because of its over-reliance on a few big customers.
The year 2008 was certainly not the best of times to launch a company, much less seek seed funding. The financial meltdown was at its peak and the business landscape strewn with wrecks of stranded and dying businesses.
During one of his meetings, Lawson recalls, there was a brief pause to soak in the news that Lehman Brothers, one of the oldest and most successful banks, had crumbled.
But Lawson, determined to swim against the current, went on courting potential financiers and angel investors. Luckily, while some prominent VCs were still a little apprehensive about Twilio and its go-to-market strategy that targeted developers, others believed in the vision.
In March 2009, nine months after launching, Twilio closed a $600,000 seed round, led by angel investors that included Mitch Kapur, Chris Sacca, Dave McClure, and corporates like The Founders Fund.
More Gasoline to Fuel Growth?
Eighteen months since founding, Twilio had gained quite some traction. It was serving around 4,000 developers, including a major political party (it wouldn’t name) which was using the service for advocacy.
The company needed to fund growth in sales and marketing and the development of new products.
At the end of 2009, Twilio closed a $3.7 million Series A funding led by Union Square Ventures. Albert Wenger of Union Square Ventures and Dave McClure of Founders Fund joined Twilio’s board as part of the deal.
Twilio still faced pressure to grow its sales and marketing staff and fund product development. In November 2010, the company closed a $12 million in a Series B funding, this time led by Bessemer Venture Partners, and which included other angel investors.
Having gained considerable traction in the US market, Lawson set his sights on the international market. Other than the UK where Twilio already had a footprint, Lawson planned to roll out Twilio’s services to more than 20 other European countries.
But he would need more funding.
Twilio's initial investors had shown great faith in Lawson’s vision and the board gave the green light for a Series C round. In December 2011, Twilio closed a $17 million Series C funding led by Bessemer Venture Partners and Union Square Ventures. Total funding since founding topped $33.7 million at the time (though it raised more money later on).
Twilio could now maintain its growth momentum aggressive hiring to strengthen its workforce, which stood at nearly 100 by 2011. Its user base had also grown by 400% to reach 75,000 developers.
In August 2009, Lawson announced that Twilio would launch a private beta for international service. One month later, outgoing international calling was available to all users.
Twilio launched 'Twilio SMS' in February 2009, a feature that allowed users to send and receive text messages from their Twilio phone numbers. As it grew its user base, Twilio continued to lower its prices since the increasing volume of usage meant that it could haggle for better rates with communication companies.
The services went through a series of iterations and updates as the company collected feedback from its users. However, in August 2010, Twilio made what was perhaps its most significant product updates, with more than 100 changes to its APIs based on requests from thousands of users from the developer community.
Next Step; the IPO
In its 8-year existence, Twilio had raised more than $233 million in funding from many of its angel investors. It was time for the next big step.
In June 2016, nine years after it first opened its doors for business, Twilio made an emphatic public market debut on the New York Stock Exchange. There had been a tech-IPO drought at the time but Twilio still set its share price at $15, against an expected range of between $12 and $14.
Within 24 hours, the share price spiked by 92% to reach $28.79, giving the company a $1.2 billion market valuation at the time. It had reported sales of $166 million in 2015
Twilio has become so pervasive that most people hardly even notice they are using its services. For instance, WhatsApp uses Twilio to verify its users through text, Netflix sends new user passwords via text using Twilio and Uber sends text notifications to their users through Twilio.
While Twilio is not the only service available, it now dominates the market due to its simple, user-friendly APIs that are robust enough to power the most demanding apps for companies that seek to reinvent how they interact with their customers.
The fact that the company launched and thrived amid the 2008-09 financial crisis means that Twilio is a story of resilience and daring, and to stick to your vision even in the midst of turbulence.