Why Twilio’s CEO Had the Guts to Go Public
When communications software company Twilio filed its IPO papers in late May, some skeptics questioned the timing. Based on the initial market response to its offering on Thursday, it looks like those fears were unfounded.
Twilio is the first tech “unicorn”—a startup valued at more than $1 billion—to go public this year, although there are plenty biding their time. It was rewarded for that courage. Its price of $15 per share was higher than anticipated. That gave the company an initial market capitalization of $1.2 billion, slightly higher than its last private valuation.
That didn’t last for long after the stock started trading Thursday morning. Twilio’s per-share price quickly rose above $25, with more than 10 million shares trading hands before noon.
Twilio sells software code that lets companies add communications services to their mobile and web applications. Its view is that the technology behind this should be invisible. For example, Uber uses Twilio’s technology to route messages and calls from passengers to drivers (and vice versa). One of the software company’s biggest customers is WhatsApp, which accounted for 17.5% of Twilio’s roughly $170 million in revenue for 2015. Coca-Cola, Home Depot, and Nordstrom also use Twilio’s software.
Like most other cloud software companies, Twilio is losing money to acquire customers. Its net loss for the first quarter was $6.5 million on revenue of $59 million. (For perspective, its net loss for the same period last year was $8.7 million on revenue of $33 million.) Fortune spoke briefly with Twilio CEO Jeff Lawson, after his company’s stock began trading Thursday morning.
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What made the timing right for this IPO? What made you take the chance, when so many other startups have held back?
Our view is that companies with solid fundamentals and good growth, that are responsibly growing the business, any time is good for a company like that. So, we felt good about our opportunity. We’re excited to get out.
I have to ask, why did you choose the ‘Brexit’ vote day to start trading?
There’s always something going on, somewhere in the world, that changes the markets. There’s always something. We decided to go with the belief that whatever did happen, our business would be fine in the long time.
Your customer list is full of great names from the high-tech and Internet worlds: Uber, WhatsApp, etc. What’s your strategy for adding more Fortune 500 companies to that list?
We’re really focused on a developer-first strategy. There’s 20 million developers in the world, half of them actually work at big corporations. As we unroll more developers on our platform—we have more than 1 million developer accounts on our platform today—those developers work at those companies. We’re already seeing them bringing Twilio in to solve communications problems in those businesses. Companies like ING, which recently announced they’re replacing their global call centers with a solution built on Twilio. It’s the developers that are leading that charge.
There’s a lot of attention right now on cloud customer service and contact centers right now. How will Twilio play there?
We have a great set of partners that service the call center market: Zendesk (ZEN) Voice is a call center product built on Twilio. They just announced support for SMS messages, you can message companies. Other companies like Talkdesk and LiveOps are built on top of Twilio as well.
How do bots factor in Twilio’s future?
Bots are fascinating. The whole idea that we can use artificial intelligence, machine learning algorithms to improve our communications, I think there is some hype cycle happening. However, there’s reality to it. Machine learning techniques are getting more and more powerful every day. We think there’s opportunity. We’ve got great customers that are building machine learning type bots on top of Twilio and bringing these products to market so you can text with companies and do messaging with companies. Twilio is excited to power a lot of these solutions.