There’s money to be had in the online communications marketplace.
San Francisco-based Twilio, a cloud-based communication service provider, said on Thursday that it’s landed $130 million in a Series E investment round, bringing the company’s total funding to roughly $240 million. With the new funding, Twilio is now worth just over $1 billion, making it a unicorn startup.
With more businesses wanting to make the type of sophisticated applications seen at startups like home-rental service Airbnb, companies are craving ways to make their software programs more dynamic. One way to do so is to allow users to communicate within the application and even send text messages or make video calls.
Twilio has made a name for itself in the business world selling customized application programming interfaces (APIs) that developers can use to embed communication features—like text messaging, phone calls, and video calling—into their software programs. An API basically functions as the glue that enables applications to talk to each other and exchange data. Ride-hailing startup Uber is one of the many companies using Twilio's tools to equip its apps with communication features for the users.
When someone opens the Uber application and requests a ride, it's not a traditional call center that's responsible for sending out the text message notifying them that their car has arrived, explained Twilio CEO Jeff Lawson in an interview with Fortune. Instead, it's Twilio's APIs the company has built into that app that enable the text messages as well as the ability for the rider and driver to call each other.
Essentially, the APIs send the request for communication over to Twilio’s cloud data centers, which are hosted by Amazon (amzn) Web Services. It’s in the cloud where Twilio—which works with over 1,000 worldwide carrier networks like Verizon (vz) and Sprint (s)—is able to process and deliver the text message or phone call back to the application via the API.
Lawson claims that one of the main reasons Twilio has gained so much attention is because of its APIs' popularity with developers. According to Lawson, 700,000 developers now use Twilio’s services.
When Lawson first co-founded the company in 2008, “The prevailing wisdom was that developers were not a market,” he said.
Over the years, however, the advent of the cloud provided developers with easier ways to build their applications. With simpler ways to build applications, developers started to get more mindshare within their companies, who were turning to them to craft the software necessary to give them a competitive edge.
“The tools a developer knows, they then bring those into the place where they work and influence the tech buying decisions of a company,” Lawson said.
Once a developer spreads the love of Twilio’s service throughout the company, Twilio hopes to capitalize and establish a business relationship, he explained.
It’s this land-and-expand strategy that many startups with large developer fanbases, like Docker and Cloudera, hope will pay off by getting them a foot in the door of a company they can then do business with.
Lawson said that Twilio has “no specific time frame” for a possible IPO, but at some point, the company will likely make the transition to the public markets.
The company, which has 450 employees, counts a number of big businesses as customers, including Nordstrom, Coca-Cola, and Home Depot.
Fidelity and T. Rowe Price drove the latest funding round, along with new investors Altimeter Capital Management and Arrowpoint Partners. Strategic investors Amazon.com and Salesforce Ventures also participated in the round.
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