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No. of Recommendations: 205
Before we start, I know that Saul and others soured on the company because Lawson once made it appear earnings were more organic than they were. But after watching many hours of his interviews and reading his articles, I find him to be a man of the highest character and and ask you all not to give this investment the death penalty for a speeding ticket.

This is not really a post. It’s more of a very long draft of a full-blown research report. Apologies for any lack of readability as the limited formatting here is less than ideal. I hope the headers make it easy to skim and scroll to what interests you. In the end, this post may ultimately serve as an encyclopedia of info on the company. But after weeks of long hours of hard research I'm making the tough decision to err on side of including it all.

My plan is to do a follow-up post where I strip this sucker down to 10 key, powerful reasons I think Twilio is the best run company in the world.

QUICK TAKE

Twilio has a clear, simple, authentic story, world class CEO, is top dog in a mission-critical space (CPaaS or Communication Platform as a Service), fueled by smart, coherent acquisitions, has a humongous TAM, powerful moat, strong culture, deep bench, killer messaging, an actual heart and a marketing plan backed by a ten million-strong army of developers. For these reasons I consider Twilio to be the best run company of any we follow and if I could only keep one it would be them. This is not to say I think it will grow the fastest or perform best, simply that it's the best run. And least likely to suffer a catastrophic and permanent loss. Eventually my goal as a Narrative Investor is to work with tech/financial analysts to include everything in a coherent narrative but for now we'll stay focused on the intangibles, those things that can't be easily quantified on a spreadsheet.

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NARRATIVE ANALYSIS

This is a deep dive into the Narrative. The goal here is to more accurately predict the future by studying the x-factors - who these people are, how they think, what they do, what they value, how they work, how they market themselves, run their culture, and to shape it all into a story whose ending (the stock will rise, fall, stay flat) we can can guess.

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NARRATIVE AS LEGAL ARGUMENT

Great stories work on two levels – emotional and logical. Emotion is important to investment theses as companies are simply groups of people and human beings are fueled by emotion, inspired by purpose. But to get the structure of this Narrative-driven post/report, you have to understand how story works.

By this I mean when you get to the end of a story you literally become a prosecutor. Your mind races back through the story questioning, analyzing every event, character, bit of dialogue, clue, etc. to see if you buy the ending. If you do, you find meaning in the story and feel it was valuable. If not, you call “BS” and your brain tells you to dismiss it as irrelevant.

So, for example, when Rocky pulls a miracle and goes the distance with Apollo Creed in the first film, your mind races back through the movie and it sees how hard he worked, how desperately he needed to win, how he find true love in Adrian and that gave him someone to fight for, how Apollo was distracted, how Rocky could have been a good fighter but became a “leg breaker” for a local mobster and when you stack up all these things (there’s much more), you believe he could be standing at the final bell and that a man can find redemption.

With investing, we’re modeling outcomes, and the outcome of any story can really only be positive, negative or mediocre – not too bad not too good. So, our goal is here to start with a desire outcome in mind – the stock price rising to an acceptable degree in a given time frame and guess if the “heroes” of our Story, Lawson et al, can do enough to justify our desire stock price. I’ll add specificity to this later. This is what we call in Narrative, the Central Dramatic Question, Can Rocky go the distance? Can Frodo destroy the ring? Can Marlin find Nemo? Here it’s, Can Jeff Lawson lead Twilio to X stock price by Y date?

I hate to spoil the ending, but I am as certain that he will as one can be, though I humbly respect that of course anything can happen. Below I’m going to lay out as many elements as I can to add concrete to the foundation of this argument.

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COMMUNICATION IS ESSENTIAL TO BEING HUMAN

As we whittle down our lists into concentrated portfolios, one key factor I use is the essentiality of the company’s service is. Communication is as essential as it gets. Every company in the modern world must have a digital front and connect with people. This means effectively using texts, calls, video and email on apps and sites. In this 2019 interview with Om Malik,

A Conversation with Twilio CEO Jeff Lawson on the Evolution of Communication
https://omshow.libsyn.com/a-conversation-with-twilio-ceo-jef...

Lawson discusses two things that make human beings unique: our ability to use tools and communicate. He differentiates between communication and media. The difference is that communication fosters actual human connection, while media provokes emotion, even chemical dependence as our brain chemistry changes when we’re in heightened states – when big media pushes our buttons.

So, for Lawson, a purpose-driven CEO if ever there was one, his life’s work is devoted to creating tools that make it simple for human beings to connect. Because he’s working on something so essential, we know he’s in it for the long haul.

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Let’s make this personal.

To better appreciate Twilio, on a gut level, think of someone you love and someone you can’t stand. Really do this. Now note that this is almost certainly because of how they make you feel. The person you love makes you feel special, appreciated, heard. And the person you dislike is self-involved and checks out the minute you start talking.

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Now let’s move this feeling into business.

A Tale of Two Businesses – Morty and Schmuely’s

You’re Jonesing for good deli – some matzo ball soup, a triple decker club sandwich or fat knish smothered in mustard. Mm. There are two delis near your house people say have great food, Morty’s and Schmuely’s.

You go into Morty’s, and the hostess greets you with a smile, remembers your name, what you ate last time, asks how your job is going (she remembers what you do), how your kids are doing (she knows their names), and lets you know cook just made your favorite kugel. She finds a table in the spot you love. After you’re done the manager asks if you enjoyed your meal, and hands you a coupon for 10% off your next one, then wishes you a great night.

You go into Schmuely’s. No one greets you at the door. You wait. And wait. And wait. Finally, a host comes over and coldly shows you to a seat you don’t love. Your waiter takes forever to take your order, and later, no one asks about your meal or says goodbye. The food was good, maybe even a little better than Morty’s, yet you leave feeling bad.

Odds are you’ll never go back to Schmuely’s but become a regular at Morty’s. If these delis were mobile apps or websites, Morty’s communication would be powered by Twilio. That said, the analogy doesn’t go far enough as Twilio can help you avoid lines, learn about the food, know exactly when you’ll eat, protect kids from allergies and more.

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THE SIMPLE INVESTMENT THESIS

Communication taps into a primal aspect of being human and is essential to modern business. Since it must be secure, and all businesses are under siege from bad actors, the TAM and tailwinds are tremendous. In fact, Lawson feels the addressable market is so big they can skip China all together, which will save them a great deal of time, energy and God knows what other meshugas.

So, what you have here is a focused, elite company dominating a space that’s a pillar of the modern digital economy. Common sense dictates they should expand their lead – or at the very least cement their position as one of the leaders - as they leverage their experience, relationships, data, proof-of-concept and offering to innovate and grow at scale for years to come.

Though competition is big, fierce and comes from every angle, Twilio’s management is, to their credit, hyper-focused on their customers – building what they need and making sure it works. This is actually a very Saulinian attitude. Lawson and acquired CEO, Peter Reinhardt of Segment talk often about focusing on what IS, not what could be. They let the market, their customers, tell them what they want and relentlessly experiment, iterate, monitor features, and do all they can to write “the code that counts” – software customers love and more importantly pay for.

Okay, onto business. Forgive some repetition as we make the case in full.

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TWILIO: THE NARRATIVE THESIS

To get the full picture we’ll look at:

The Mission
The TAM
The Leader
The Management and Culture
The Acquisitions
The Products
The Marketing
The Moat
The Track Record
The Challenges
The Ending

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THE MISSION

From Twilio.Com
https://www.twilio.com

Twilio’s mission is to help companies, “Engage customers on any channel, any time.” And to do this, “From first interaction to lasting connection.”

By “Engage customers on any channel, any time” they mean, “Connect with customers everywhere they want to interact with you-from text messages to emails, phone calls to video, intelligent chatbots and back-within a single powerful platform.

By, “From first interaction to lasting connection” they mean, “Strengthen your customer relationships by uniting communications across your entire business, from marketing to sales to customer service and operations. Personalize every step of the customer journey with solutions like intelligent chatbots, custom account notifications, a completely programmable cloud-based call center and more.”

This is pretty much all the text on the home page. That’s excellent articulation of exactly what they do and why it matters.

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THE TAM

On the podcast,

Business Breakdowns – Twilio: Messaging, Margins, and Markets
https://www.joincolossus.com/episodes/50437644/nagpal-twilio...

Ro Nagpal, a Senior Investment Advisor at Holocene Advisors, says, “The TAM is kind of like the cost of goods sold of every business on the planet everywhere, that wants to have a digital front end.”

He discusses how, in SaaS models TAM is limited by the number of “seats” or workers using the software. But Twilio is usage based. So, every company could use the product and there are no limits to how often. If a company finds that sending texts, initiating chats and even hooking sales reps up with customers drives more sales their communication center could, in theory, grow exponentially, without limits.

An enormous TAM with no limits to usage is exceptional, but of course attracts the most savage competition. This helps explain why trillion-dollar behemoths are coming hard.

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THE LEADER

I rank Lawson as the best CEO in the world. And I don’t say that lightly. I say this because I think he’s that rare genius who understands psychology and human beings. As a leader he checks every box: track record, authenticity, passion, vision, grit, warmth, ambition, and ability to think in terms of process, systematically and for the long haul. A few of the many things worth noting about him:

Early in his career, he was personally recruited by current Amazon CEO, Andy Jassy to work on AWS, the fastest growing enterprise software program ever made. At Amazon he studied Bezos and the culture he built and brought these lessons to Twilio. In fact, Twilio’s business model was inspired by AWS.

Lawson’s passion for the magic, art, practical value and scalability of software is authentic and radiates from his every pore. His book “Ask Your Developer” and a famous billboard he once put up have built him a cult-like following among developers. No one has done more to dignify and improve the working lives, productivity and appreciation of developers than Lawson.

He is a visionary who created APIs that simplify software code at the dawn of the mobile, app driven economy. And focused on winning hearts and minds of developers which many VC’s, early in Twilio’s life, insisted the strategy would fail.

Despite all his achievements (working on AWS, CTO of StubHub, launching extreme sports company) he is only 44 years-old, in his prime. He has an impressive constitution and is a tireless evangelist for software, developers, communication and technology in general. He seems to cherish the role of CEO in that it allows him to facilitate the creativity and brilliance of an elite army of technologists and engineers working at Twilio. He’s studied processes under Bezos, has discussed studying Jobs’ legendary presentations, gives his workers structured freedom like Netflix’s Reed Hastings gives to filmmakers, admires Salesforces’ Mark Benioff’s building goodwill by being a good corporate citizen and we’ll discuss his successful handling of acquisitions below.

Of note he studied film and video production at The University of Michigan as well as computer engineering and made money in high school videotaping events. Point being he has a real flare for marketing and passion for all the tools of communication. He’s also clearly found his tribe in Silicon Valley and has a real passion or the city of San Francisco. His deep entrenchment in the community and relationships must play a key role in locating coming disruptors, recruiting talent and getting deals done. For example, consider the fact that he worked at AWS, was recruited by the current CEO. Surely that must help keep that wolf at bay. At least as much as possible.

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THE MANAGEMENT AND CULTURE

The executive leadership team is powered by elite people with exceptional resumes and vast experience at relevant companies like Salesforce, Verizon, GE, Apple and former titan Palm, at major nonprofits, for Presidential administrations and were educated at top schools like MIT, Harvard, Stanford and the US Naval Academy. These are ultra-elite people running the show with long prestigious track records working in both the old school communications industry with deep expertise on hardware and in the c-suites of the giants of software.

In an interview with Patrick O’Shaughnessy, on the Founder’s Field Guide podcast entitled,

Peter Reinhardt – Learning How to Sell
https://joincolossus.com/episodes/54216780/reinhardt-learnin...

Said something impressive about Twilio’s management,

“It is next level of getting inspected by George or getting inspected by Khozema the CFO at Twilio. Both are just wicked sharp in terms of isolating what the actual business problem is and driving accountability … How do you hold accountable and operate at the right level of altitude is something that I'm really excited to be learning from George and Khozema.

This man – this kid - is the young co-founder, and CEO of Segment, now Twilio Segment, who was a straight A student at MIT where he studied aerospace engineering and, with his equally impressive roommates built a multibillion-dollar company. He was backed by Y-Combinator, a top Silicon Valley venture capital firm. So, when he calls George and Khozema “next level” that carries additional weight. He’s declaring them the very best of the best. This the Twilio COO, George Hu and CFO, Khozema Shipchandler. And I love the term, “Get inspected by” – it sounds harsh. He also talks about a concept called “hierarchical unpacking” in which you breakdown, in minute detail every single thing that is required to achieve an objective. And makes clear that one had best have their A-game when going before the big dogs, or you will get your arse lit up.

Lawson invests a great deal of time and energy discussing culture, how essential it is to infuse Twilio with actual values – not just vapid cliches – that drive decision making across the organization. He knows humans are tribal – we love our colors, logos, slogans, rituals. We rely on these things to feel part of a community, to feel our lives have a greater purpose. Lawson insists they do a company photo every year and have bagel night every Wednesday.

There’s no doubt this is a real competitive advantage that reduces turnover, which is a real killer. Look at our little board, the better we know each other, the more value we get from each other’s posts and decisions. For example, you gotta know how Bear and Saul differ to analyze the way each man responds to a big run up or huge drop in our stocks. When Bear sells a position, he may just feel it’s temporarily overvalued. When Saul sells one, he’s likely not coming back any time soon. The better you understand each man’s temperament, thought process and style, the more effectively you can leverage their wisdom. By reducing turnover, especially in the C-Suite, the benefits accrue, exponentially, over time, throughout an organization as it grows to monstrous heights.

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Look at this

About page
https://www.twilio.com/company

It has a simple, unaffected enthusiasm. Lines like “Millions of developers around the world have used Twilio to unlock the magic of communications to improve any human experience” radiate authenticity. Lawson’s love for the power of software is legit and understandable. In countless interviews, for years, he has marveled about the impact a well written piece of software has at global scale.

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Here’s the page discussing their Values
https://www.twilio.com/company/values

It reads, “There’s a unique spirit to Twilio, manifested in who we are and how we work together.” And, “These are the principles we use to build an impactful, high-growth business while staying true to ourselves.” Note that there is humanity here but no lack of clarity about the fact that Twilio is a business with shareholders who demand “high growth.”

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Here’s their Brand page
https://www.twilio.com/company/brand

It reads, “Our logo is often the first and most memorable interaction someone will have with our brand. It has been precisely drawn for optimal visual balance. It is critical that the correct logo file be used … “ and adds, “Color is a strong identifier; it provides contrast and helps define hierarchy. We believe that color should be used boldly, but not wantonly.”

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Here’s Lawson doing a presentation entitled,

Articulating Company Values & Living them Authentically
https://www.youtube.com/watch?v=0CKI8Jah-Po

The pride and joy the man exudes is one thing, but it’s backed by enough actionable common sense to make Charlie Munger do a backflip.

And lastly on managing individuals and teams Lawson does an excellent job of focusing on a few, key core ideas. For example, he believes there are three things individual workers want: Autonomy, Mastery and Purpose. We hate being micromanaged and need freedom to solve problems in our own way. We want to develop expertise in our craft. And to serve a higher purpose to fight for something bigger than ourselves that gives our work meaning.

When it comes to teams, he’s a devotee of the Jeff Bezos “Two Pizza Rule” that says if you can’t feed a team with two pizzas it’s too big. This means there must be no more than 10 people and one must be responsible for performance. So, no one gets to coast, as they can in bigger groups and the buck must stop with someone so that decisions get made and someone is held accountable. He is adamant that management focus on serving customers, building what they ask for, what experiments show they’ll pay for, and developing clear metrics to judge how well they’re doing.

And Lawson brings this same mentality of serving customers’ needs to his management style. For example, in this interview with McKinsey he talks about how important it is to let people work how they want to work – some remote, some in-office, some coming in to “hotel” near the company. And he works hard to make sure each team is built to support the styles of their members.

In another interview, he talks about how a coworker he knew from Amazon talked about working at the company when there was less than a hundred people and then returning years later when it had grown past 75,000 workers. He marveled at the fact that by keeping teams small, they managed to keep their spirit of innovation. That made a deep impact on Lawson who has tried to do likewise with Twilio as they move past 5,000 employees.

Lastly, on culture, Lawson doesn’t like the abundance of perks – craft beer, arcade games, fancy cafeterias – that are popular in Silicon Valley as he doesn’t want people who care about that stuff. Though he often can’t match salaries at the mega-giants, he’s able to attract top talent by assuring developers they’ll make an impact. At Twilio. And for their customers. The best human beings are driven by a desire to do great work, not scarf down lobster bisque after a game of Frogger at the company arcade.

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I love all this. Stanley Kubrick was once asked why he works so hard and puts so much detail into his films. He replied, “Either you care, or you don’t.” Twilio does. And the closer you study the company the more authentic and omnipresent this care seems.

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THE ACQUISITIONS

I’m going to get into the weeds a bit here as acquisitions are very important to the Story. Stay with me ‘til the end of this section. It’s really important and there’s a surprise guest star. Actually, a superstar.

In the past six years, Twilio has spent roughly eight billion dollars (not all amounts were disclosed) buying 11 companies. These include Authy, Tikal Technologies, Beepsend, Ytica, SendGrid, Core Dynamics GmbH, Electric Imp, Segment, Value First, Zipwhip and a large minority stake in Syniverse.

I’ll post links on all in the Appendix, but they are part of a coherent strategy to build the ultimate communications platform. They strengthen security, underlying technology, software, some hardware and add talent. And all relate to key facets – support for the Internet of Things (Core Network Dynamics, Eletric Imp) texting (Beepsend, Zipwhip), email (SendGrid), video and streaming (Tikal/Kurento), along with tools to analyze and leverage all the data they generate (Segment).

There’s a Berkshire Hathaway vibe here. Lawson consistently makes clear that he doesn’t buy companies to “absorb them into the Borg” and stifle what made them worth buying. His goal is to support their work, help them innovate, grow at scale and contribute to a grander vision. Their companies often keep their branding, leaders keep their titles but hyphenate with Twilio. For example, Peter Reinhardt is now CEO of Twilio-Segment, Value First’s, Vishwadeep Bajaj remains CEO of Value First, A Twilio Company.

Lawson is more secretive about some acquisitions than others, but usually raves about the teams, the people he’s joined forces with and makes a point to warmly welcome them, note things about their culture and rave about their past success. In all these acquisitions you see consistent themes:

Lawson pursued the company hard. It’s a mistake to think that founders take big money easily. They’re already wealthy and have control. And Twilio’s never their only suitor.

Lawson and the acquired CEO have a legit passion for solving complex problems and building cultures that foster experimentation and iterating to excellence. The importance of this can’t be overstated. Software developers are creators. They have artistic temperaments. The build things that never existed, that have a massive, positive impact on the world. When you think about the hours these guys put in, you realize that they are hunting bigger game than money. Of course, they’re human and want fine things. But I believe the guys I’m studying would rather invent amazing things than add Ferraris and summer homes.

The acquired companies have notably warm vibes and enthusiastic workers. For example, you look at Zipwhip’s all-hands photo and the workers look damn near ecstatic. In one article, there is a photo of the CEO before some silly invention he made to serve beer. The home page for India’s Value First reads, “Conversations, made joyful!“ And the CEO looks like he really walks the joy talk – just looks like one joyful SOB. They claim to be “400 free-spirited souls across the globe who are obsessed with technology.”

And more importantly, you feel a real passion for doing two things: delighting customers and a commitment to simplifying complex hardware, software, processes for developers.

Acquisitions are always a risky proposition. Lawson puts deep thought into targeting companies whose work is essential to his vision and culture aligns with Twilio’s culture. How you know this is not horse chips is many of his CEO’s stay. And according to Ro Nagpal in the podcast linked above, Business Breakdowns, he says that most of them wanted stock in Twilio and keep. Let that butter melt into your muffin. As an investor you’re riding sidecar with the people who know the story best.

Again, just listen to how excited Segment’s CEO seems about joining forces with Lawson.

Peter Reinhardt – Learning How to Sell
https://joincolossus.com/episodes/54216780/reinhardt-learnin...

This is not like when Teladoc acquired Livongo. Remember when the two CEOs crowed about their shared vision for revolutionizing health care only to have Livongo’s CEO grab the cash and race out the door like a gigolo hearing his client’s hubby put a key in the lock? Do you want to invest in the Justice League with Batman and Superman both having oars in the water or going their separate ways?

Of note, Reinhardt comes off as an exceptionally decent, honest, humble and intelligent person. He talks openly about nearly suffering a nervous breakdown in the early days of building Segment, and getting into nasty fights with his partners, who were roommates and best friends. They decide that ultimately what mattered most was their friendship and working together. Again, friendship is a competitive advantage. It was friendship that led them to weather a brutal storm of setbacks. And he notes that many other companies crack under the pressure, and the top dogs turn on each other though they may actually be close to breakthrough moments. Just consider the human story there, how easily they could have broken up and never become world-changing entrepreneurs wealthy beyond their wildest dreams. When it comes to culture, make no mistake, like attracts like. That Lawson pulls in, and inspires, this caliber of human being is important. But it gets better.

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Now, here’s the hidden guest star. Get a load of this guy, Hugo Fiennes.

Computer History Profile – Hugo Fiennes
https://computerhistory.org/profile/hugo-fiennes/

“… he worked on many generations of MP3 players at Rio before joining Apple to lead the AP hardware team through the first four generations of the iPhone. Fiennes later went on to design and architect the hardware for the Nest Thermostat before co-founding Electric Imp which makes secure IoT look a lot easier than it actually is.

Orville ****ing Redenbacher! The man helped design the iPhone and lead it through four generations.. He worked with Apple’s legendary, Sir Jony Ives, the greatest industrial designer of our age. And Fiennes built Google’s Nest. Now take a breath. Relax your sphincter. And read this next line: A man of this caliber sold his company to Lawson and holds the title, Senior IoT Architect at Twilio. Here’s Fienne’s blog post on the acquisition,

Twilio and Electric Imp Come Together to Solve Tough IoT Challenges
https://www.twilio.com/blog/electric-imp-is-now-part-of-twil...

There’s so much to like here, notably how Fiennes gets to the heart of what Twilio does: simplify complexity. This is in Twilio’s DNA. And note that Fiennes says of the decision to join forces, “in our regular conversations we acknowledged how complementary our offerings were, and also how alike our approaches were”. Again, this not just lip service. If you watch videos of both Lawson and Fiennes, from years ago, they say the same things about how technology should work.

I think what happened with Fiennes is this: he was a superstar at Oracle, then at Apple. He was recruited to Google, and there he built the Nest thermostat, but the company failed to properly facilitate his vision to go beyond thermostats into revolutionizing the fundamental, underlying architecture of the Internet of Things. So, he left to form his own company, Electric Imp. Then, as a visionary with a real passion for building world-changing things, he tired of the limitless stuff you have to deal with in running and taking a company public. In what few video presentations you can find, it’s clear his gift is not for public speaking. Just the fact that there are so few videos of in this day and age make that clear. Lawson, like The Trade Desk’s Jeff Green has a great passion to be in front of an audience and to spread the gospel. So, it seems clear he convinced Fiennes to join Twilio where he could focus exclusively on realizing his dream of building the ultimate development platform for IoT developers.

This is a good article from TechCrunch on the acquisition,

Twilio acquires Electric Imp to bolster its growing IoT business
https://techcrunch.com/2020/07/09/twilio-acquires-electric-i...

Again, note here the passion Lawson exudes for confronting a difficult challenge, his love of the process and confidence they’ll solve the problem. He says,

“…The IoT industry doesn’t seem to attract innovation at the same rate as software. One possible reason is that experimentation — real experimentation — that is, testing real business models in the wild — remains difficult. By democratizing access to cellular IoT connectivity, we’ve been able to help move things along, but many of the hardest infrastructure problems remain unsolved. With the Electric Imp acquisition, we gain the team and technology needed to make a bigger dent in the problems facing future IoT developers.”

He is an elder statesman, someone who has the expertise to understand technology but the management skills to lead the very best of his tribe. Not only is Lawson the star QB of Twilio he’s also like Gene Upshaw. Upshaw was a superstar offensive lineman for the Oakland Raiders who later led the NFL Players Association. Quarterbacks get all the glory. But it’s the linemen who fight in the muck that make miracle throws possible. Lawson is both QB and star lineman, the ultimate facilitator, willing to take on the necessary challenges of leadership in order to help other elite minds excel.

Here’s the key point: If Twilio at a mere $65B market cap is going to win the CPaaS war, and defeat the likes of trillion-dollar, marauding, monopolistic savages like Amazon and Microsoft this is the only way they can do it – by attracting, keeping and inspiring the best people. Lawson has the intelligence, psychological sophistication, temperament and evangelical skills to get this done. That’s a big deal.

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THE PRODUCTS AND SOLUTIONS

The point here is to give a simple overview of what the company sells and help us appreciate why the offering is so impressive. But if you want some real red meat on this stuff, Peter Offringa, the brilliant tech writer, and my brother in extreme post girth, did a write up on Twilio’s most recent earnings here,

Twilio (TWLO) QQ 2021 Update (June 9, 2021)
https://softwarestackinvesting.com/twilio-twlo-q1-2021-updat...

Before we look at these, note that Lawson is fiercely devoted to some core ideas. And he articulates them well here, in this interview with McKinsey,

Unleashing developer’s full talents: An interview with Twilio’s CEO
https://www.mckinsey.com/industries/technology-media-and-tel...

Lawson finds the idea of building anything without close consultation with customers “offensive.” You never build software unless you are certain there is not just a need for it, but that they will pay for it. The term they use for this is, “the code that counts.” And that code must be high quality, reliable and secure. He often expresses his ideas in threes and insists that teams think of 1) the customer 2) the mission/purpose 3) metrics. So how does the product help the customer, why are you doing it? Is it line with your team and company’s goals and exactly how do you measure success? This lines up well with what Twilio-Segment CEO, Peter Reinhardt said in his interview with Patrick O’Shaughnessy about being “inspected” by Twilio’s “next level” CFO and COO as they take him through “Hierarchical unpacking” – breaking stated goals into extremely detailed, actionable steps so you’re certain you can weed out fantastical thinking, spot problems before they lead to costly mistakes and instill confidence you’ll win.

Again, this elite execution is not a given or even common. I was just talking to an exec at a Silicon Valley-based high-tech company who was an emotional wreck because she knew her CEO was literally just making up numbers. And pitching nonsense to investors as they try to raise more money. This company struggles with high turnover of key roles. They’re losing a major person as we speak.

And this gets to the very heart of Narrative Investing. The CEO designed great tech but has no clue how to run a company. When top people keep leaving there’s no way to generate momentum. Anxiety ripples through the entire organization. And distrust spreads because exiting execs must hide their intentions as they plot escape. You can easily guess how the story will play out – they will be acquired, for the tech, for many millions less than they could have been with superior leadership, the kind Lawson articulates day in and day out.

***

Now let’s look at Twilio’s Products and Solutions to help us get a simple overview of what they actually sell. Of note, before we start, they provide the code, can help support developers and have deals in place to set up customers with consultants at big companies like IBM.

There are two categories, Products and Solutions.

The Products link is divided into three categories with lean, simple descriptions of each sub-category. There are:

1) Channels (Messaging, Programmable Voice, Video, Twilio Live and Email)
2) Applications (Twilio Flex, Marketing Campaigns, Twilio Frontline, Account Security and Twilio Segment)
3) Connectivity (Internet of Things, Elastic SIP Trunking, Phone Numbers and Short Codes)

The Solutions link is laid out the same way. There are three categories:

1) By Department (Marketing, Operations, Customer Service),
2) By Industry (Financial Services, Retail, Hospitality, Real Estate, Healthcare)
3) By Business (Enterprise, Startup, Nonprofit)

It’s a lot of information but beautifully organized. It gives a clear picture of what they offer and for whom. “Speed of thought” is a term soccer coaches use to analyze how fast players know what to do with the ball and it’s relevant to business. Read “Blink” by Malcom Gladwell. When a prospect or person thinking of upgrading their system registers this, they instantly form a positive opinion as they sense that these folks have their **** together and excel at what they do – simplify complexity.

This reminds me of the time I first read Nutanix’s website. I just remember pictures of motorcycles and a story so complex it made you long for the simplicity of Proust. Sadly, I didn’t sell immediately, upon recognizing the mess, and wound up taking a 50% haircut, though the evidence of a muddled story was right there on the site.

Now, again, they have 10,000,000 developers building things underpinned by their software. So, consider Twilio Live, currently in Beta. Here’s the link,

Twilio Live
https://www.twilio.com/live

It encourages visitors to create custom streaming experiences, engage with a massive audience (at “Internet Scale”), using Twilio’s trusted cloud-based infrastructure. This means creating live audio/video streaming for new social applications, marketing events, showcasing products, doing fitness, education and training and straight up entertainment.

So,Twilio helps can help companies disrupt Peloton, Facebook, TikTok, Master Class, etc.

And how massive might the Internet of Things get? What if Fiennes, Lawson and their gang solve the security, privacy and functionality challenges and power the platform that facilitates conversations between a large percentage of the world’s talking things. Here’s a video on Twilio-Signal’s product, “Microvisor”…

Introducing Twilio Microvisor
https://vimeo.com/460695517

And again, note how passionate, unaffected, knowledgeable the presenter, Twilio IoT GM, Evan Cummack is as he articulates the vision for the platform and puts it in historical context and the context of Twilio’s greater, overall mission.

Here I’ve only touched on Twilio Live and Microvisor, just two platforms Twilio’s developing. But consider the scope, the possibilities. If ever a company is positioned for upside surprises as their 10,000,000 developers invent things, it’s them.

*** ***

THE MARKETING

Marketing is like photography. Every yukkel thinks they can do it. And to untrained eyes it seems like they can. But just like snapping a decent photo of a sunset doesn’t make you Ansel Adams, scribbling a few pithy words doesn’t make you a marketer.

Great marketing is fueled by authenticity, originality, intelligence, relentlessness and the ability to not just get attention, but mindshare. As in literally owning a piece of real estate in consumers’ minds when they think of your industry. Any imbecile can get attention – parachute naked off a skyscraper and get arrested. Gaining mindshare takes brilliance and epic endurance.

So, the fact that Twilio is the undisputed heavyweight champ in the pure-blooded Communication Platform as a Service (CPaaS) space and has a stellar reputation for quality puts them in a powerful position. We’ll go into this more below in the moat/competitive advantage section.

To achieve this Lawson, since forming Twilio in 2008, has done countless presentations, keynotes, interviews, established an annual Twilio conference, put up a famous billboard in Silicon Valley, written letters to shareholders, wrote a book, designed his websites, and infused a few core ideas into every single piece of communication. There are five core ideas:

1) Software is a magic power that can radically, and instantly impact the world.

2) Developers are problem solvers who must be properly integrated into companies, in order to write, “the code that counts” as in the one that customers love and pay for.

3) Developers are creative people not the dorks portrayed in media. Kingpin VC, Marc Andreesen famously said, “software will eat the world.” So, it’s common sense that the people who write code are among the most important people in the world.

4) Build or die. By this Lawson means that Twilio provides the infrastructure, but companies must customize the software to create unique experiences. The companies that do this will win and the ones that don’t will die. Even giants will be disrupted and put to death if they fail to create great customer experiences on their apps/sites.

5) Twilio has an authentic passion to see what their customers build.

Great marketing is a combination of logic and emotion. It’s one thing to explain to people why your product works. It’s a whole other thing to do that and make people feel strong emotion as you do it. The need for human beings to feel respected is incalculably large. To feel ridiculed, stereotyped, depersonalized, as “computer geeks” have is distasteful to them in the extreme. That Lawson has been instrumental in raising their profile is a critical reason there is a 10,000,000-strong army of them using – and promoting - Twilio.

***

Again, what Twilio does is simplify code. This is the essence of the value they provide – simplifying the complex. They make it easy for other developers to embed communication into their software. Lawson knows this same quality is essential to his marketing. He is that rare genius – like Steve Jobs – who gets how essential marketing is. According to Beth Kindig his first hire was a marketer.

One of his first great moves is detailed here,

The 3-Word Billboard That Launched One Of America’s Fastest Growing Tech Companies
https://www.forbes.com/sites/carminegallo/2021/02/04/the-3-w...

Early in Twilio’s history they bought a billboard and hired an ad agency to figure out what to put on it. The ad agency hacks puked out cliches then Lawson pitched, “If you want to know what Twilio is, ask your developer.” He then cut that down to the simple, intriguing, thought-and-question provoking, “Ask your developer.”

It’s hard to describe how brilliant this billboard is. It works on every conceivable level. It strips down a very complex task – explaining what Twilio is into an actionable item that spurred legit conversation to explain to all what it is.

Almost a decade later, when Lawson wrote a book to further express his ideas on the importance of developers, he named it, Ask Your Developer, How to harness the power of software developers and win in the 21st century.

Writing a book is hard, hard work. You can’t fake this kind of dedication and consistency. And again, this man was a product manager who helped build Amazon Web Services, who was the first CTO of StubHub so he walks the talk.

***

Some links worth noting...

Here’s Lawson enthusiastically championing and giving a spotlight to developers back in 2012. He repeatedly cries out, “We are software people”

Twiliocon 2012: Jeff Lawson’s Keynote – The Future of Communications
https://vimeo.com/54799765

Uber’s CEO says they could not have built the company without Twilio. Though Uber would eventually leave Twilio, they did pick up Lyft.

***

Here’s a review of his book on ZDNet…

“Ask Your Developer, book review: How to prosper in a 'build or die' business landscape”
https://www.zdnet.com/article/ask-your-developer-book-review...

It includes these lines,

Here he extends the idea: 'building' is about more than building software – it's about building everything from products to processes, to make them fit you and your customers better. The people who understand this are 'software people', whether they're designing backend-processing systems or the minimal Square credit card reader. Seen this way, software is critical to making your business successful; it's not so much 'build or buy', as 'build or die'.

Note how easy it is for the reviewer to tell the story. This is what marketing expert Seth Godin calls “spreading the idea virus.” Lawson’s mission is so clear and expressed with such concision it’s easy to for marketers, salesmen, developers, partners, investors to spread the word.

***

Two links to Twilio Segment worth noting…

The State of Personalization 2021
From nice-to-have to necessity for intelligent customer engagement
https://gopages.segment.com/rs/667-MPQ-382/images/State-of-p...

This one uses the term one-to-one marketing. That’s a wild idea that I think we’ll hear a lot more of going forward and it will be powered by Twilio-Segment.

It’s a survey of 3,000 businesses and consumers that makes clear how important it is to tailor user’s experience, based on information you have permission to use. We like that Amazon and Netflix give us recommendations based on our history.

Why first-party data is the key to data privacy
https://segment.com/resources/data-privacy/why-first-party-d...

Twilio-Segment helps companies generate first, as opposed to third, party data. This means data taken from us visiting sites, not bought behind our backs, without permission. There may very well be regulation that will affect others but not Twilio, strengthening their hand.

***

Here’s Jeff Lawson introducing the CEO of Nike in 2020, when the world is still fully immersed in the pandemic, at their annual convention, now called Signal.

Nike CEO shares how Twilio helped with their digital acceleration
https://www.youtube.com/watch?v=IqXyiBSbKyo

It’s fascinating to watch back-to-back videos of a business leader’s evolution over nearly a decade. Lawson here has a shaved head, is in better shape, has traded huge glasses for contacts and is noticeably more mature, more comfortable in his own skin, less forced. Surely some of this is due to the tone of the times but having watched many other videos, the change is notable.

Nike is one of the all-time great brands known for its tech marketing savvy. For the Nike CEO to credit Twilio with helping them not only survive but accelerate necessary digital transformation is marketing that you can’t put a price on.

If you’re a salesperson working with Twilio, how much easier does it make your job? How does your competitor top a rave directly from Nike’s CEO? And consider the bond that Nike and the other 200+ thousand companies that work with Twilio have. Twilio saw them through the plague.

***

We’ll wrap up this section with a quote from Andy Cunningham. She’s a consultant, and communications expert as well as the author of the 2017 book, “Getting to Aha! Discover Your Positioning DNA and Dominate Your Competition”.

She worked closely with Steve Jobs to promote Apple, so closely in fact she was, incredibly, fired five different times by the erratic and brutal Jobs. She is a brilliant and tough woman who said this in on the Brainfluence podcast,

Get to Aha! With Andy Cunningham
https://www.rogerdooley.com/aha-andy-cunningham/

She’s very passionate about the necessity of being authentic and adds,

… that's one of the great things about Steve Jobs; once there was a narrative, he was relentless about pushing it not only through his organization, but also the influencers of his organization, and then the market in general. Just relentless, and it's that relentlessness that enables you to take a pure thing, a pure position, and make it real in the world, because once is starts dissipating in the market, which they will do if you're not relentless about it, then you lose that focus and then you lose that position.

No CEO, not even The Trade Desk’s Jeff Green, is as relentless as Lawson in spreading his gospel with such legit emotion and laser focus.

Lastly, FWIW, Lawson constantly mentions three companies – Amazon Web Services, Twilio and Stripe as being the great builders of infrastructure for others to then customize, to “build or die” off.

*** ***

THE MOAT (COMPETITIVE ADVANTAGES)

Hamilton Helmer is the author of the influential book,

7 Powers, The Foundations of Business Strategy
https://www.amazon.com/7-Powers-Foundations-Business-Strateg...

Stay with me, this is important. Helmer’s bio includes running a consulting firm that’s done over 200 projects with the likes of Adobe, Netflix and Spotify. He teaches business strategy at Stanford, was Chairman of the Board of a public company, American Science & Engineering and holds a PhD in Economics from Yale. The introduction to his book was written by Netflix CEO, Reed Hastings who is arguably the greatest CEO of all-time.

The book was sent to Lawson by a Twilio board member and impacted Lawson so heavily that he asked his c-suite to read it. The book articulates 7 Powers, which are durable competitive advantages. They overlap heavily with the concept of a moat, made popular by former Morningstar analyst, Pat Dorsey. Put simply, they are:

Scale Economies - Cost savings that come from sheer size, so for example Netflix buying a film spreads the cost over a more subscribers than smaller rivals.

Network Effects - Adding customers makes the offering stronger, when Crowdstrike gains insight from one customer, they use it to defend all others. As the company gains data, insight, they make the offering stronger, which helps raise prices.

Counter Positioning – When the disruptor’s business model can’t be easily copied because the legacy company would need to blow up their own to compete. (Apple taking on Nokia)

Switching Costs – The cost for customers to quit is so high, it’s not worth it.

Branding - Having intangible assets that cause consumers to pay more because your brand makes them feel greater trust in the product or it just makes them feel good to ow, even though it’s not better than rivals.
Cornered Resource – A patent, a landfill, or Buffett’s famous only toll booth into town.

Process Power – Superior processes developed over a long time that can’t be replicated. (Toyota’s method for building cars.)

If you have just one of these it may be a lasting competitive advantage.

Here’s Jeff Lawson interviewing Helmer on a podcast, called the NFX (as in Network Effects) Podcast. It’s run by a venture capital firm with the same name.

The 7 Powers with Hamilton Helmer & Jeff Lawson
https://podcast.nfx.com/episodes/hamilton-helmer-jeff-lawson...

Two things worth noting from the end of the podcast, Lawson says you can’t just decide to have these powers but have to work to achieve them with intense focus, repetition for a very long time. And Helmer responds by saying that while the concepts are simple, gaining power, in a specific company and industry is very complicated.

Off the top of my head, Twilio has at least six. I’m not sure about Counter-Positioning. This means they are extremely powerful. But don’t take my word for it. Helmer, an old school businessman not prone to hyperbole finishes by gushing,

“Congratulations on the phenomenal thing that you’ve done in building Twilio… I’m just in awe that you’ve done such an amazing accomplishment, so it’s been my pleasure to be interviewed by you.”

High praise from the premiere expert on building durable competitive advantages.

*** ***

THE TRACK RECORD

I’ll give some stats from Lawson’s 2020 Annual Report, which, of note, celebrates builders and the word “build” or “builders” appears six times in the first two paragraphs, which are passionately dedicated to Twilio’s spirit of building, and celebrating what their customers build.

- They did revenue of $1.76 billion with a DBNER of 137%.

- Added over 42,000 new active customer accounts, ending 2020 with over 221,000. They added giants like JP Morgan Chase to join other giants including Delta, Comcast, Epic and Phillips.

- Powered over 1,000,000,000,000 interactions, including two days (Black Friday and Cyber Monday) where Twilio SendGrid sent over 5,000,000,000 emails in a single day.

- Added 1,724 employees

- Got over 32,000 registrants for Zoom Conference. I recall watching early one where he was saying they’d gone from like 100 to 250 to 1,000.

- Were named a great place to work by several orgs, built up their charitable organization and completed the acquisition of Segment, among several other notable things.

I said earlier that companies don’t get stupider when they add over a decade of experience, constantly innovate, iterate and improve the product and processes, analyze data and not only survive global crises, but thrive during the chaos.

Past success is, without doubt, the best predictor of future success. When Wayne Gretzky put up an awe-inspiring 212 points in the 1981-82 season, he was just 20 years old, in his 3rd year in the NHL. This was after putting up a merely incredible 137 in his rookie season and 164 in his second one. With his team, system, organization all firmly in place, what did he do afterwards? He put an insane 196, 205, 208, 215, 183 and 149 points, led the team to four Stanley Cup victories before getting traded to the Los Angeles Kings where he helped usher hockey into the sunbelt, rebuild that organization and lead them to the championship game.

That Twilio has dominated its space, powered 1T interactions, sent 5B emails on one day twice, added almost a quarter of a million customers in its first decade, built a 5,000 strong army whose product is used by over 10,000,000 developers is downright Gretzkyesque. And he’s added SendGrid, Electric Imp, Zipwhip, Value First and Segment to his team, seemingly inspiring all their top guys to stay and keep their shares of Twilio stock

And that Lawson achieved all this and is still only 44 is just… it’s just (expletive) incredible. The brother’s just getting started.

*** ***

THE CHALLENGES

I’ll just list them out here and don’t have a ton to say about them. None keep me up at night. Either the likelihood of it happening is small or the company would recover.

- Big dogs go thermonuclear. Amazon, Microsoft or Google declare all-out war in the space, undercut on pricing, steal developers and out-innovate them.

- A smaller, equally well-run company invents a better CPaaS.

- Key Man risk. Jeff Lawson leaves or God forbid is unable to continue leading the company.

- Digital breakdown. A virus or bug plagues the Internet/cloud as a whole or the Twilio software degrades.

- Cultural degradation. Lawson loses focus, the acquisitions break into warring factions. His elite team breaks up as the company’s processes wither, they lose focus and wither.

*** ***

THE ENDING

I started this report with this aggressive statement,

Twilio has a clear, simple, authentic story, world class CEO, is top dog in a mission-critical space (CPaaS or Communication Platform as a Service), fueled by smart, coherent acquisitions, has a humongous TAM, powerful moat, strong culture, deep bench, killer messaging, an actual heart and a marketing plan backed by a ten million-strong army of developers.

Since writing that, and carefully working out my thoughts on the key areas explored above, my conviction has grown stronger. From my angle, it doesn’t get better than this.

But a great story needs specificity. We’re tracking two narratives here – the company and the stock price. I’m certain of the greatness of the company. Now let’s turn to the stock.

In a great story, we must know exactly what the hero is trying to achieve – get the girl, win the big game, foil the villain’s scheme, etc. For our purpose here let’s return to the great tech analyst, Peter Offringa, who gives us an exceptionally well-reasoned price target.

In this post,

Twilio (TWLO) Q1 2021 Update
https://softwarestackinvesting.com/twilio-twlo-q1-2021-updat...

He wraps up with,

Additionally, when I initiated coverage of Twilio in November 2019, the stock was trading at $98. I set a 5-year price target of $320, anticipating TWLO would reach that price by the end of 2024. Roughly 18 months later, it has already hit that target. Therefore, I am raising my end of 2024 price target to $660.

The stock was closer to $350 when I started this report around 1862. But now, with it hovering around 400, $660 gets us a roughly sixty percent gain in three years.

So, they exceeded Offringa’s last target with ease and my guess is they do it again. I see the story playing out like this. Fueled by laser focused leadership, legit camaraderie, battle-tested excellence and raw intelligence, the acquisitions coalesce into a whole greater than the sum of its parts. The acquired companies strengthen each other’s offering and as each platform – for texting, email, streaming audio/video, and the Internet of Things – improves, customers build better things faster. As this happens, the value of Twilio becomes clearer, allowing them to charge more for the service, driving margins higher. 2,000,000 of the 10,000,000 developers using Twilio build rock solid things and a few of them shock the world by disrupting beasts we thought could not be disrupted. I’m looking at you Zoom and Facebook. The company has a major positive earnings surprise and the stock shoots up 20% that day alone.

If the stock gets hammered with a broader crash or rotation, or because of a temporary, fixable setback I will back up the truck.

If you’re still reading, seriously, thank you. I hope you found this report valuable.
Print the post Back To Top
No. of Recommendations: 40
And here is the insane amount of links that I studied to write this sucker.

*** ***

APPENDIX WITH SOME OF MY SCRIBBLED NOTES

Please forgive the massive, unruly volume here. I realize sometimes it may not be clear if the notes are mine or from the person in the article/link. And I think this entire post is as much a symptom of how badly I need a vacation.

BROADWAY DAN’S BOOK ON STORY

27 Essential Principles of Story, Master the secrets of great storytellers, from Shakespeare to South Park
https://www.amazon.com/Essential-Principles-Story-Storytelli...

I have explored just how essential narrative is to being human, how it impacts our memories, self-worth, plans, politics, religion, economics. We could not make sense of reality without constructing narratives. So it is invaluable to construct narratives, leveraging the principles of story to make more accurate predictions. Narrative is a frame to collect our thoughts. It is as valuable to help us think as a bowl is to eating a bowl of soup.

*** ***

ANALYSIS, INSIGHTS, INDUSTRY EXPERT COMMENTARY

An inside look at Bessemer Venture Partners’ investment process for Twilio
https://techcrunch.com/2017/04/11/an-inside-look-at-bessemer...

Beth Kindig Quote
Beth Kindig, in an interview with the Fool has said, “Twilio has always been very visionary… this is a company that invented these cloud communications APIs the year the iPhone came out. Who would have thought that Lyft and Uber was going to need that kind of voice and in-app messaging? I think they’re light years ahead.

Twilio Stock Forecast: Is It Becoming Overvalued? – Bert Hochfeld, Seeking Alpha
https://seekingalpha.com/article/4413133-twilio-stock-foreca...

• The company's scope of product offerings in its space has helped it build a formidable competitive moat.

• CPaaS remains a cornerstone of digital transformation and one of the fastest-growing segments in enterprise infrastructure software with third-party analyst estimating a 5-year CAGR of 35% or higher.


Twilio Q2 2021 Update – Peter Offringa, Software Stack investing
https://softwarestackinvesting.com/twilio-twlo-q1-2021-updat...

Overall, Twilio is continuing their consistent expansion trajectory. The key to appreciating Twilio’s potential is to consider the enormous TAM that they occupy, their leadership position within it and the multiple product expansion vectors still available. Platform growth is coming both from organic product development and strategic acquisitions. Segment in particular adds a whole new dimension of insight to Twilio’s communications capabilities, allowing the combined company to close the loop on customer preferences and optimize marketing performance in a way that CPaaS competitors cannot match. Twilio is quickly evolving beyond just providing communications plumbing to enabling data-informed applications that drive enriched customer engagement for enterprises.

Opinion: ‘Moats’ will make all the difference for cloud companies when costs come under pressure – Beth Kindig

https://www.marketwatch.com/story/moats-will-make-all-the-di...

Twilio is customer-facing with the risk of costing valuable downtime should a competitor not have equal coverage. To switch from Twilio, you have to port numbers, negotiate contracts with a new carrier, determine if the carrier covers all of the countries needed for your applications, and that the call quality and sending SMS is reliable.

Twilio – Investors Need to Give it Time to Scale Up and Be Profitable
https://seekingalpha.com/article/4435794-twilio-investors-ne...

Business Breakdowns – Twilio: Messaging, Margins, and Markets
https://podcasts.apple.com/us/podcast/twilio-messaging-margi...

Danny Vena – Motley Fool Article
https://www.fool.com/investing/2020/04/22/adding-500-to-thes...

It doesn't stop there. The company hosts 25 cloud data centers in nine geographic regions that serve developers in 180 countries around the world. Twilio's growing list of customers, which numbered more than 179,000 at last count, continues to expand beyond its North American roots, with 29% of its revenue from international markets in 2019, up from 23% in 2017.

The Twilio/Amazon ‘Stack’ Will Dominate the Next Call Center
https://fonolo.com/blog/2018/02/the-twilio-amazon-stack-will...

Twilio Shakes Up the Cloud Call Center World with Flex
https://fonolo.com/blog/2018/02/twilio-shakes-up-the-cloud-c...

This article has a good overview on three things that made Twilio successful. It makes case that they could be growing into a place where they compete with own customers, a la Amazon

Twilio essentially created, then dominated, the category of “Communication Platform as a Service”. (Voxeo deserves a lot of credit as a pioneer as well, but they never achieved the global scale that Twilio has. Their “Tropo” technology and team live within Cisco.) Other competitors in the CPaaS space are running far behind the leader:

Twilio: A Buy on the Strength of the Platform
https://seekingalpha.com/article/4441253-twilio-a-buy-on-the...

*** ***

PRESENTATIONS/CONFERENCES

Twilio Arms Business for the Great Digital Acceleration at SIGNAL 2020
https://www.twilio.com/press/releases/twilio-arms-businesses...

Nike CEO shares how Twilio helped with their digital acceleration
https://www.youtube.com/watch?v=IqXyiBSbKyo

How Nike stayed open for business using Twilio – giving insights, advice, education, by leveraging the Twilio platform. “Our digital business has just exploded”

How Netflix uses Twilio to entertain the world
https://www.youtube.com/watch?v=3cwELvHpyUE

Twiliocon 2012: Jeff Lawson’s Keynote – The Future of Communications
https://vimeo.com/twilio

*** ***

INTERVIEWS

Jeff Lawson on Industry Focus with David Gardner and Tim Beyers
https://www.fool.com/investing/2021/02/14/an-interview-with-...

The 7 Powers with Hamilton Helmer & Jeff Lawson
https://www.youtube.com/watch?v=U_eQK9UR8ao

CNBC: “Our goal is to be the leading customer engagement platform”
https://www.youtube.com/watch?v=182mdjqikfM

Twilio cofounder Jeff Lawson: Business Leaders should listen to their engineers about when to scrap a project
https://www.businessinsider.com/twilio-ceo-jeff-lawsons-book...

Lawson talks about the time his company built worthless apps that his engineers knew would fail early in the process. There was no proven need for the products and the ones they were building were outside their core area of expertise. This damaged morale, cost them valuable time and added no value to their customers. Lawson writes,

From this experience I learned two things. One, this wasn't an experiment. Due to the contract, we were all in, building blindly without any customer validation. The developers building it knew this. Second, I should have listened to the frontline engineers, who thought the apps were worthless and the business judgment unsound. We wasted over a million dollars of our precious startup cash on this misadventure. We could have avoided that if I'd paid attention to my frontline developers.

(Musician Ben Folds Podcast) “Jeff Lawson, Solving Problems Instead of Selling Solutions”
https://open.spotify.com/episode/0zZiSQuT67ZgWhRAekPJfN?si=b...

Twilio’s Jeff Lawson, an evangelist for software developers
https://www.ft.com/content/5515ec3e-0040-4d90-85a9-df19d6e3e...

Lessons from Bezos, Benioff; putting money up first, being right in past about selling to developers. Bezos two pizza strategy.

Being a customer-centric company means prioritizing customers and understanding their problems and listening to them as your guidepost,” Lawson says. “If you do that, everything else falls into place.”

“It’s up to us as leaders, as managers, to not just say we want innovation but to embrace the process of how you get there,” Lawson says.

Three questions for Jeff Lawson
Who is your leadership hero?

The two leaders who come to mind are Jeff Bezos and Marc Benioff. I admire the intellectual rigor that Bezos has instilled at Amazon and the soul that Benioff has built into the culture of Salesforce.

If you were not a CEO/leader, what would you be?

A software developer.

What was the first leadership lesson you learnt?

Have conviction. If you don’t have a true visceral belief that the world needs and is bettered by the product or service you are building, it is extremely difficult to stay committed through the extreme highs and lows of building a business. (I made this mistake more than once before starting Twilio!)

How Jeff Lawson of Twilio Perfected his Pitch
After striking out with investors early on, Lawon took a page from Steve Jobs

https://www.inc.com/magazine/201310/burt-helm/how-jeff-lawso...

So I sat down and I watched a bunch of Steve Jobs keynotes. I studied how he set the stage, describing the state of the world as you know it, and why it sucks. And then, boom--he gives you the answer to a problem you didn’t know you had until five minutes ago….

I’ve raised $110 million so far, and I believe it is because of how I set the stage.

A Conversation With Twilio CEO Jeff Lawson On the Evolution of Communication. (June, 2019)
https://omshow.libsyn.com/2019/06

At about 3-5 minutes Lawson passionately articulates renaissance man vision of being a “software person” – there are two things that make us the dominant species that we are, we do two things better than any other species, communicate in more specific way and build tools. This is what makes humans human. That’s what gets me and so many of our people out of bed in the morning… all humanity who want to take humankind to next level.

Lawson sees this moment as a “Communications Renaissance” – passionate about technology bringing families closer – facetime to talk to grandparents 3,000 miles away. Communication as a modern miracle. Talks about Ad for ATT by David Fincher, about future of communication. Moved by how much better communication will get “You will” – collection of vignettes, how almost all of them came true. The one thing that’s not true – the company that brought it to you is not ATT. It’s not ATT, not Facebook, not even Twilio, it belongs to the developers. What a class act of a CEO – genius, bold, but humble.

Confusing conversation and human connection with notion of conversing with complete strangers. Not into forums. Trap we fall into wanting to bloviate on social media. Arguing pointlessly, etc. What is purpose of communication? Engage with people we care about and depend on. Motivation not to connect us, but to keep us glued to our screens. Media – Twitter Facebook – job is to keep you glued to your screen. Twilio is a COMMUNICATION company.

At 20 minutes speaks in eloquent defense of benefits of Capitalism.

23/24 minutes – How often do you get to see one of the largest and most important industries on the planet undergo a transformation … from hardware to software. To set stage for next era of the company. How do we build more people to the rest of the world, creating a bigger stage for ourselves…

(NOTE – very similar to the CTO of Cloudflare’s Tweet – how often do you get to do something this big?)

Got tons of press attention because we were bold.

Customers, product, team – focus on product, team and customers – all you need to focus on, higher stakes in public – stakes bigger as in public. Scale not changing him or Twilio – focusing on these three core things. FOCUS ON FUNDAMENTALS – customers, team and product.

Mobile came along in 2008 (iPhone, Android) – amazing innovation in 2008, when Twilio was founded. Once in a lifetime opportunity to build things that scale globally. For most of human experience, could create something for a few dozen people, but now a software developer can type magical codes, publish to web and overnight have billions of people interact with the thing you just built.

29 Minutes – “You were there at Ground Zero” for AWS – scale, business execution surprising to Lawson, how well they’ve done. Utility not surprising. Lawson was recorded by Andy Jassy, interviewed, didn’t know what AWS – gonna have to trust us, it’s cool; Lawson moved to Seattle to join the team, was blown away. Opened eyes to whole new way of building had not thought of before. If lower barriers, make it easier, that along with mobile has fueled intense innovation.

Lawson recruited by current Amazon CEO, Andy Jassy!

32 Minute talks about AWS as the software platform revolutionizing world, new era of software, creating a platform

1st great era – on prem software all about selling you licenses

2nd great era – SaaS – don’t need big expensive sales cycle – put it up in the cloud, Salesforce

3rd great era – NEW era, fastest growing enterprise software in history – AWS, selling infrastructure on a per use basis, all broken down to fundamental building blocks given back to the world, new way of delivering software value – the platform business model.

He also passionately defines the word “communication” as something that fosters actual human connection as opposed to media which fosters, literally, a chemical dependence on getting your hit of adrenaline (e.g. Twitter, Facebook.)

*** ***

TWILIO’S WEBSITE AND INFO ON THE COMPANY

Twilio’s Company Values
https://www.twilio.com/company/values

These include 10 items divided into three categories: How We Act; How We Make Decisions and How We Win.

Lawson put an immense amount of time into articulating these in a way that is practically valuable, inspiring, and authentic. These are not the usual vapid corporate talk. They’re foundational elements of the company.

Draw The Owl and Other Company Values You Didn’t Know You Should Have
https://review.firstround.com/draw-the-owl-and-other-company...

“Primarily, it is the CEO’s job to articulate the values of the company — but not alone. “In fact, if you think it’s only the CEO’s job, I suspect the company will fail. Be inclusive because these values are not just yours, Mr. Founder or Ms. CEO,” says Lawson. “They are the tribe’s values, and what you’re doing is creating a tribe. Human beings are tribal creatures, because it took congregation and community to survive. So, the group has to be bought into the values as well.”

“Leading a company means being a conscious custodian of its values. It’s a requirement, not a nice-to-have. Because, here’s the reality: every company has a culture and has values whether or not you put them into words,” says Lawson. “You might as well articulate them so that they stay in your sight and you can guide them.”

Twilio CEO Jeff Lawson on building a company during a downturn
https://www.protocol.com/twilio-ceo-q-a

The company was founded around the epic crash of 2008/2009. Of this Lawson says,

My lesson that I take away from that is, if you focus on customers, that's all that matters. Investors, anyone else, they'll fall into place if what you have is a great product that's serving your customers. And during a time of economic tumult, that is an even more important time to serve your customers.

Counterintuitive Lessons on How to Get Better as You Scale, From Twilio’s Jeff Lawson
https://review.firstround.com/counterintuitive-lessons-on-ho...

Consider back in 2008, when it seemed as though the company was swimming against strong currents of accepted startup wisdom. “We got a lot of advice from people saying that developers aren't an audience and nobody knows how to do that go-to-market, we should go build an app instead — you can always add an API to an app, but APIs can’t be a business,” says Lawson.

But 13 years — and a successful IPO — later, Lawson’s seen his bullish bet on developers being influential buyers bear out. Of course, the API economy and bottoms-up self-serve strategies have since reached critical mass, but they were still untested waters in Twilio's early days. “Some of our first customers were Intuit and Sony — and it was the developers who had brought us into those relationships very early on,” says Lawson. “If we had waffled on who our customer was or tried to serve multiple different customers, I think we would have had a very different outcome. We knew who we were, we knew what we wanted to be, we had enough evidence that that was correct, and we stuck to our guns.”

“We were willing to follow our customers where they took us, even if it meant launching a brand-new product area when the conventional wisdom would have said that was the wrong thing to do.”

“We used a number of frameworks over the years, including the horizons framework. Horizon one is the thing that makes you your dollar tomorrow, horizon two is the thing that'll make you your dollar in a year from now, and horizon three is the thing that might make you a dollar five years from now,” he says.

Unleashing developer’s full talents: An interview with Twilio’s CEO
https://www.mckinsey.com/industries/technology-media-and-tel...

Another one of his three, on products: quality, reliability, security.

***

Because you want your developers focused on building what we call “the code that counts,” the ones your customers actually pay you for.

***

The other common thread, though, between all three of those companies is that we needed to communicate with our customers at various points in the customer journey. And every time we had these ideas to do that, we’d say, “Oh, that’s a really neat idea. Yeah, that would be fantastic. Oh, but wait a minute. I’m a software developer. What do I know about communications?”

So, every time, I’d ask the people who seemed like they did know—the carriers and telecom or networking-hardware companies—if they could help us build it. And every time, I got a similar answer. It was going to be very complicated, take two to three years, and cost a few million dollars. Now we didn’t have millions of dollars to spend on this one feature. But even if we did, this idea that you would spend years building something before your customers ever gave you feedback was offensive to me. And so we started Twilio to bring communications, which is so fundamental to how almost every company engages with its customers, into the era of software.

How to Build High Performing Software Teams – Jeff Lawson
https://www.youtube.com/watch?v=QJBmXCfKOs4

Excellent interview in which Lawson is very mellow, authentic and convincing.

Talks about how critical it is to focus on customers, not read Techcrunch and obsess on investing. He’s a lot like John Wooden, focusing on the fundamentals – customers, traction, revenue – and above all relentless focus on customer and let rest take care of itself.

“Focus on true north of customers, revenue growth and everything else falls into place, honestly.

“How do you bridge the world of developers and businesspeople?”

Communication/understanding gap between both worlds, and as a software devleopers and CEO of public company he knows how to facilitate the relationships. And how to help developers take risks, innovate and build digital products and experience that millions, or even billions love and make the company money.

Start with acknowledgement that writing code is a creative endeavor, and treat developers like human beings, are creative problem solvers, not geeks and doofuses as portrayed by Hollywood. Focus on the business problem that execs are trying to solve. Customer problem trying to solve. Developers do much better work as part of the bigger problem-solving process. Get better software, written faster solves problem more quickly.Share problems, not solutions.

Developers are not just “digital factory workers”

Guiding focus on Teams: Customer, Mission, Metrics

Intrinsic motivation. No hiding in a team of 10 if you’re checked out, hiding. All 10 stay connected with the purpose. How do you keep small teams, a “mitosis” type process, keep dividing teams and divide the people, code-base, problem domain in way that makes sense.

Architectural hygiene – clean layers with each coding teams working on own challenges.

Single thread leaders responsible for one thing, accountable for the outcome and all they think about is solving this problem by leading their team. That gives a sense of ownership. If have teams lead by single thread leaders you’re training talent to gain experience, and you give them greater responsibility as they prove their worth.

Twilio sells developer-focused product, so a lot of developers understand the “problem domain” and want to work there. Lawson is against perks cause feels if you come to Twilio to get the perks you have come for wrong reason. Wants people more interested in the work they do. And get joy out of it. Selection bias in people who don’t care about perks.

You are an inspirational leader, Twiliio is a massively inspirational company.

“The story you tell is one of impact” – how to attract talent.

Dominoes transitioned into a tech company to survive. Techie was told you’re going to lead the transformation of this company.

Having a mature conversation with a developer is about three things: Features, Timelines, Quality.

Principles are about how to make decisions. Document truths learned and make them principles.

Think a lot about how we engage each other, written word, narrative format very important. When have to write down narrative and explain thinking it forces you to clarify your thinking and get it down, then you have the ability to control the conversation. Twilio does six-pages for a meeting. And six is too long. For certain things get decisions down to one page. If you can’t maybe you can’t. Distill it down to one page, if you don’t have the clarity to that you lack the clarity to make that decision.

Encourages the Made to Stick book.

Watched a lot of Steve Jobs but biggest things he did to get better at speaking, the “stand up” having to get in front of people to speak and got better at it as the company grew. And because he grew – gradually – like martial arts! Repetition of the format, audience, getting a little better every time taught him to become a much stronger speaker.

Ask Your Developer – all proceeds go to underrepresented communities to get them into tech.

*** ***

ACQUISITIONS

Twilio Acquires Sendgrid
https://www.twilio.com/press/releases/twilio-to-acquire-send...

Twilio Acquires Segment – Lawson personal letter
https://www.twilio.com/blog/twilio-acquires-segment

Press Release – Twilio Completes Acquisition of Segment
https://www.twilio.com/press/releases/twilio-completes-acqui...

Twilio Acquired Segment. Why? And was it a good idea?
https://www.simondata.com/resources/twilio-acquired-segment-...

Twilio Completes Acquisition of Zipwhip, a Leading Provider of Toll-Free Messaging in the United States
https://www.twilio.com/press/releases/twilio-completes-acqui...

Twilio Acquires Zipwhip - Geekwire
https://www.geekwire.com/2021/twilio-acquire-seattle-busines...

Twilio Zipwhip PR
https://investors.twilio.com/news/news-details/2021/Twilio-t...

Twilio Acquires Electric Imp - Tech Crunch
https://techcrunch.com/2020/07/09/twilio-acquires-electric-i...

Twilio Acquires Electric Imp – iCrowd Newswire
https://icrowdnewswire.com/2020/07/10/twilio-acquires-electr...

Twilio buys IoT startuup Electric Imp to scale up its connected device business
https://siliconangle.com/2020/07/09/twilio-buys-iot-startup-...

Twilio and Electric Imp Come Together to Solve Tough IoT Challenges
https://www.twilio.com/blog/electric-imp-is-now-part-of-twil...

VERY important post by Hugo Fiennes, founder of Electric Imp, BIG SWINGING DICK of a guy was at Apple, created Nest for Google!

Twilio Acquires Electric Imp: Merging Cloud Services with Iot
https://www.momenta.one/insights/momentas-take-twilio-electr...

Twilio and ValueFirst Come Together to Improve Customer Engagement
https://www.twilio.com/blog/twilio-acquires-valuefirst

Notably, Twilio’s CEO and Co-founder Jeff Lawson commented “..The IoT industry doesn’t seem to attract innovation at the same rate as software. One possible reason is that experimentation — real experimentation — that is, testing real business models in the wild — remains difficult. By democratizing access to cellular IoT connectivity, we’ve been able to help move things along, but many of the hardest infrastructure problems remain unsolved. With the Electric Imp acquisition, we gain the team and technology needed to make a bigger dent in the problems facing future IoT developers.”

Twilio acquires ValueFirst to work at different aspects of CPaaS industry
https://www.agencyreporter.com/twilio-acquires-valuefirst-to...

Speaking on the partnership, Vishwadeep Bajaj, CEO & Founder, ValueFirst comments, “We’re obsessed with customer centricity and helping businesses have joyful conversations. Twilio and ValueFirst share very similar values. Twilio’s a trusted brand, services, and global reach will enable us to service our customers in more meaningful ways.”

Twilio to Invest $750M in Telecom Firm Syniverse (Zacks)
https://www.nasdaq.com/articles/twilio-twlo-to-invest-%24750...

Twilio Buys Core Network Dynamics
https://the-mobile-network.com/2018/11/twilio-buys-core-netw...

Analysis of Twilio’s Zipwhip Acquisition
https://www.linkedin.com/pulse/analysis-twilios-zipwhip-acqu...

Zipwhip’s software enables businesses to have more effective conversations with people by text-enabling existing phone numbers. It uses direct network connectivity and out-of-the-box software to allow customers of any business the option to text or call and gives businesses the opportunity to handle two-way text conversations at scale. The acquisition will allow Twilio to deliver more secure, high-quality toll-free traffic at scale. It will provide Twilio with the ability to elevate the customer experience, assisting brands with better communicating through a growing channel.

Authy + Twilio
https://authy.com/blog/authy-twilio/

Ahoy Authy: Welcome Authy to the Twilio Family
https://www.twilio.com/blog/2015/02/ahoy-authy-joins-twilio....

Press Release: Twilio to Acquire Kurento Technology
https://www.twilio.com/press/releases/twilio-to-acquire-kure...

ValueFIrst CEO on how the acquisition by Twilio will fast-track growth
https://www.techcircle.in/2021/03/22/valuefirst-ceo-on-how-t...

ValueFirst and Twilio have been in a great relationship as we have been serving Twilio’s customers with consumers in India for nearly seven to eight years. We also figured out that we as companies are similar in terms of customers, people values, cultural values and so on.

The current management has been mandated to run the business as an independent subsidiary of Twilio. I will continue in the company for the foreseeable future. As CEO I will report to management of Twilio but the rest of the organisational structure remains unchanged.

In terms of branding, we do not intend to change the name of the company. We will retain the ValueFirst brand name but are calling ourselves a Twilio Company.

Segment - Why first-party data is the key to data privacy
https://segment.com/resources/data-privacy/why-first-party-d...

Segment CEO Peter Reinhardt’s blog
https://rein.pk/

Segment launches customer journey tool to build fine-grained personal experiences
https://techcrunch.com/2021/06/09/segment-launches-customer-...

Announcing The State of Personalization 2021
https://segment.com/blog/announcing-the-state-of-personaliza...

Hugo Fiennes Bio
https://computerhistory.org/profile/hugo-fiennes/

Hugo Fiennes – Deep Dive into Twilio Microvisor
https://vimeo.com/460703470

Hugo Fiennes – Creating Products people love (2014)
https://vimeo.com/104612999

Are You Ready? The Next Big Thing in Tech Is Coming from One of the Geniuses Behind the iPhone
https://www.businessinsider.com/interview-with-hugo-fiennes-...

Connect Everything with Electric Imp – Hugo Fiennes
https://www.youtube.com/watch?v=SjbGC_JR_1c

“We don’t charge developers, never going to charge developers”

How a Surprise Breakfast Burrito Helped Twilio Acquire SendGrid In A $3 Billion Deal
https://www.forbes.com/sites/alexkonrad/2019/02/01/why-twili...

The details of Twilio's acquisition — somewhat revealed in regulatory SEC filings, but never publicly discussed by either CEO until now — are part courtship, part crisis management. They reveal how much the relationships of the leaders of a tech company, even a public one, can dictate decisions that affect hundreds of employees, and thousands of customers. And they demonstrate that even plans that can be years in the making can almost fall apart when the stock market turns.

*** ***

PRODUCTS AND SOLUTIONS

Introducing Twilio Live: Build Interactive Live Streaming at Global Scale — Now in Beta
https://www.twilio.com/blog/introducing-twilio-live

Personalize or Perish: New Data From Twilio Segment Shows Customer Loyalty Hinges on Personalized Experiences
https://www.twilio.com/press/releases/personalize-or-perish-...

Twilio will soon launch Flex, a dedicated contact center solution
https://techcrunch.com/2018/02/16/twilio-will-soon-launch-fl...

Twilio Solutions
https://www.twilio.com/solutions

Communications are transforming the digital customer journey.
See what you can build with Twilio.

Twilio Build
https://www.twilio.com/partner-solutions

Note that even the buttons that read, “See what they built”

Twilio Brand
https://www.twilio.com/company/brand

Connect your IoT solutions on a future-proof foundation
https://www.twilio.com/iot

*** ***

JEFF LAWSON’S COMMUNICATIONS – BOOK, TWEETS

ZDNET Book Review of Jeff Lawson’s, Ask Your Developer

“Ask Your Developer, book review: How to prosper in a 'build or die' business landscape”

https://www.zdnet.com/article/ask-your-developer-book-review...

Which includes these lines,

For several years, Twilio CEO Jeff Lawson has been talking about the importance of building rather than buying the software that differentiates your business, because software development (and IT in general) should be a competitive advantage rather than a cost centre. Here he extends the idea: 'building' is about more than building software – it's about building everything from products to processes, to make them fit you and your customers better. The people who understand this are 'software people', whether they're designing backend-processing systems or the minimal Square credit card reader. Seen this way, software is critical to making your business successful; it's not so much 'build or buy', as 'build or die'.

Lawson vs. Snowflake’s Frank Slootman

Lawson took to Twitter to strongly disagree with Slootman. After Slootman was critical of initiatives to support Diversity, Equity and Inclusion, Lawson responded,

"It's not a "liberal" thing gone "out of control," it's about talent & ensuring every available person who can help the company fulfill its mission can contribute and belong. It doesn't happen by accident, it's hard work." And added, "The result of having a diverse workforce and an inclusive culture is more customer value, more engaged employees & increased shareholder value. That is based on ample longitudinal studies across many industries."

Can Twilio’s Jeff Lawson Humanize Software?

https://www.forbes.com/sites/laurarittenhouse/2021/02/10/can...

According to the author’s bio, L.J. Rittenhouse advises top executives to create resilient corporate cultures and sustainable shareholder value by following the principles of corporate candor. For over a decade, Rittenhouse Rankings has created market-beating investment portfolios based on analyses of CEO shareholder letters.

Rittenhouse raves about Lawson’s communication skills for being authentic, purpose driven, clear, holding himself and the company accountable and building a culture of inclusion and belonging.

3 Tips for Devs from Ask Your Developer by Jeff Lawson
https://www.youtube.com/watch?v=PGDBt5RTuUg

Code is creative
Put yourself close to customers
Understand your business

*** ***

LAWSON LETTERS TO SHAREHOLDERS, ANNUAL REPORTS

2016
https://s21.q4cdn.com/963721274/files/doc_financials/2016/ar...

2017
https://s21.q4cdn.com/963721274/files/doc_financials/2017/ar...

2018
https://s21.q4cdn.com/963721274/files/doc_financials/2018/ar...

2019
https://s21.q4cdn.com/963721274/files/doc_financials/2019/ar...

2020
https://s21.q4cdn.com/963721274/files/doc_financials/2020/ar...

*** ***

TWILIO DOT ORG – NON PROFIT INITITIATIVES

https://www.twilio.org/

Exceptional site that radiates authenticity and actual contribution not lip service to make selves look good.

Twilio CEO on company’s $10 million commitment to help vaccine awareness
https://apple.news/Ay04BYWEcTICbyChnCzx8Rw

*** ***

REVIEWS – GENERAL

Jeff Lawson on Glassdoor
96% Approval Rating, nearly 300 ratings

https://www.glassdoor.com/Reviews/Twilio-jeff-lawson-Reviews...

87 of workers recommend to a friend, 96% approve of Lawson. While there’s the inevitable disgruntled reviews, the majority are intensely positive.

Gartner Peer Insights
Twilio has 4.6 Stars off 53 Reviews

Of note the lowest ratings are a mere three people who gave it 3 stars. Interestingly the top competitors barely even racked up any reviews at all, so dominant is Twilio.

TrustRadius
8.7 out of 10 off 94 Reviews

The reviews on this site are very detailed and thorough. So I give it more credibility. You see terms like “leader”, “best in class”, “a programmers communication dream” and it’s clear Twilio not about saving money. “Twilio isn’t cheap (internationally), but you still get your money’s worth.”

*** ***

ADDITIONAL, UNCATEGORIZED

Twilio, The Future of Cloud Communications | Twilio Stock Explained | Twilio for Investors
https://www.youtube.com/watch?v=UjMc99KOCzM

Nice overview of the company as a whole by random individual investor, and software engineer, Ash Anderson

On the name Twilio

“Twilio” comes from Lawson making up words, literally mouthing sounds and stumbling on what sounded like it related to telephony. This nonsense word is a missed opportunity to instill even greater depth, connection. But obviously, their success speaks for itself and with their workers calling themselves Twilions and starting internal groups like Twilipinos (Filipino Twilions) it works for them, and their growth has been phenomenal. So, it’s a non-issue.

Stripe co-founder on complexity of software
Tweet from Patrick Collison notes how hard it is to turn capital into good software with link to WSJ article about Volkswagen’s faulty software harming their ability to compete with Tesla.

This is the article linked to,
https://www.wsj.com/articles/how-volkswagens-50-billion-plan...

This is the Tweet
https://twitter.com/patrickc/status/1351622252110876673?s=20...

This lines up well with Peter Reinhardt’s discussion of how hard they worked to create Twilio Segment’s software, how many try to emulate them and just how hard it really is as they’re still improving their own software.

Lawson Quotes on IoT
https://www.momenta.one/insights/momentas-take-twilio-electr...

This quotes offers deep insight into Lawson’s thinking and passion for innovation through experimentation, his passion for solving the toughest challenges.

*** ***

TWILIO SETBACKS

Twilio CEO blames Uber for disappointing financial results (Stock dropped 30%)
https://www.cnbc.com/2017/05/02/twilio-ceo-blames-uber-for-d...

Mea Culpa – Twilio CEO assures Jim Cramer ‘simple math error” will never happen again
https://www.cnbc.com/2019/11/05/mea-culpa-twilio-ceo-assures...

*** ***

BEHEMOTH WATCH – EYE ON THE GIANT COMPETITION

Twilio-Amazon Partnership Expands With New Voice Messaging Service
https://www.benzinga.com/news/16/12/8831350/twilio-amazon-pa...

The relationship has also manifested in Twilio's use of Amazon as its platform host and Amazon's 2015 investment in Twilio.

Microsoft Is Building A Cloud-Based Phone Company — And Taking On A Public Company It Helped Grow
https://www.forbes.com/sites/davidjeans/2020/09/24/microsoft...

Microsoft declares war on Twilio
https://www.fool.com/investing/2020/09/25/microsoft-declares...

Twilio and Zoom Integration
https://automate.io/integration/twilio/zoom
Create meetings in Zoom and onboard attendees by syncing with other apps. Send automated SMS to your customers via Twilio. Do much more by connecting Twilio and Zoom.

So, these are competitors? Can work together?

A Change is Gonna Come: Reflections on Slack, Twilio, Zoom
https://www.nojitter.com/unified-communications/change-gonna...

This site is called NoJitter and they claim to be the “leading source of objective analysis for the enterprise communications professional.” Jon Arnold seems to be a good follow for information on the communications space.

Twilio talked about over 180,000 “production deployments” this year. I have no idea what that actually means, and while it’s way less than a trillion, it means a lot of incremental improvements to make the platform richer and constant innovation

Twilio could ride Amazon’s coattails to success
J.P. Morgan upgrades Twilio stock, points to ties with Amazon Web Services

https://www.marketwatch.com/story/twilio-could-ride-amazons-...

(J.P. Morgan analyst, Mark Murphy, upgrade, April 2017)

Relevant quotes:

“We believe investors lack awareness of the volume of customers that come to Twilio because they have suffered downtime using competitors’ platforms,” Murphy said.

The biggest stock driver may be Twilio’s recent canoodling with Amazon AMZN, +0.34% , he said. In July 2016, the two teamed up in a deal that gave Twilio the power to market its messaging services to software developers through Amazon Web Services.

Last month, that partnership expanded to also include mobile phone and voice messages on Amazon Connect. Its software is now powering a number of new AWS products, including SNS, its virtual meeting feature; Chime, its notification tool; and Amazon Connect, its cloud-based customer contact center. As AWS, the leader in the burgeoning public cloud market, grows, Twilio is expected to ride its coattails.

“We believe Amazon, which invested in Twilio, has now used Twilio to power a succession of new AWS products; we do not think the same can be said of any Twilio competitor,” Murphy said.

Jeff Lawson Talks About How AWS Powers Twilio
https://www.youtube.com/watch?v=r0ejZ_rFoGg

This is a video of Lawson talking at an Amazon event.

“I consider myself to be a software person. It’s not that I write code. It’s that I like using software to build competitive advantage in the businesses that I’m involved in. Because I believe that software is a mindset. It is not a skill set.”

“Shipping an iteratively better product is the superpower of software.”

“Agility is the most important thing.”

“More than thirty times a day, Twilio gets better.”

“You don’t get points for using servers. You only get points for serving your users.”

*** ***

LAWSON’S BRILLIANT ABILITY TO CRYSTALLIZE IDEAS IN THREES

What individuals value: Autonomy. Mastery. Purpose.

How to have “mature” talk with developers: Focus on Features, Timelines, Quality.

Guiding principles on products: Quality. Reliability. Security.

What Twilio offers customers: Digital engagement. Software Agility. Cloud Scale.

Motivate teams by having them focus on: Customer. Mission. Metrics. How does it help the customer? Why are you doing it – how it fits in with mission. Having metrics to judge if you’re succeeding.

Organizing company values: Motivating Workers. Setting up teams. Helping Customers.

*** ***

LAWSON’S AMAZONIAN MANAGEMENT

He’s also a huge fan of distilling thoughts down in writing, to six pages (Amazon) or ideally even one. And takes pride in being able to do it for Twilio as a whole, so doesn’t put up with the “BS” of someone saying it can’t be done for their little project.

He believes management should never have a team with more than 10 members, that can be fed with two pizzas. Or chumps can hide. And there must be a leader who is responsible for their decisions, who breaks ties and takes the heat when stuff is not working.

*** ***

A WORD OF CAUTION ON COMPLEX SPACE

I’m hesitant to bump my position over 10 percent because I don’t understand the competitive landscape. I find it endlessly frustrating to invest in tech, where I lack the skills to fully know why X features are better than Y features. And whenever you have such a large market you inevitably attract fierce competition. Microsoft, Amazon, Salesforce, Zoom and a long list of smaller competitors – Bandwith, Avaya, Vonage to name a few - operate in communications. There is CPaaS, UCaaS (Unified Communication as a Service) and CCaaS (Contact Center as a Service) and it’s not entirely clear to me how, or even if, these overlap.

It’s hard to tell who is a friend, frenemy or enemy. For example, you have Amazon Web Services, which Twilio is built on – and presumably pays a fortune for, yet AWS competes with its own offering, Amazon Connect. Likewise, Twilio has many vendors built on top of it. Twilio Flex has some worried that it will compete with them. Twilio has had a partnership with Microsoft, but they have Azure Connect. So, one can only imagine the machinations and contortions Lawson and his sales and marketing teams must go through to keep bigger fish off their tail and smaller ones, customers, from fleeing in terror.

Some links…

CCaaS vs. CPaaS
https://www.callcenterhosting.com/blog/ccaas-vs-cpaas-the-di...

Article details the differences between the two which seems to be focused on idea that CCaaS is fixed but CPaaS gives much more flexibility.

Gartner Magic Quadrant for CCaaS 2020
https://www.cxtoday.com/contact-centre/gartner-magic-quadran...

The Gartner Market Guide for CPaaS (2019 article)
https://www.uctoday.com/unified-communications/cpaas/the-gar...
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No. of Recommendations: 38
I rank Lawson as the best CEO in the world.

Dan, you actually said that! This is the guy that in the Q3 2019 press release wrote

“We delivered another quarter of incredible growth at scale with revenue growth of 75% year-over-year,” said Jeff Lawson, Twilio’s Co-Founder

And in the Conference Call he said: "Our third quarter results were strong with total revenue growing 75%, tremendous growth at this scale that reinforces our view that we are still in the early days of this market opportunity."


Now he was comparing the revenue of two companies in 2019 (Twilio and Sendgrid), to the revenue of just one company in 2018 (Twilio), and bragging about 75% growth at scale. I see that as outright lying to stockholders! Either that or ignorance of what was going on.

He'd be near the bottom of my rating of CEO's because if you can't believe a CEO he doesn't rank. Who knows what else he's exaggerating or misrepresenting?

But aside from that, a great write-up.

Saul
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No. of Recommendations: 8
I think you are taking too much of a Western mindset to this. The two became one. No need to make such illusive distinctions. Ommmmmmmm.
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No. of Recommendations: 47
Great lesson for writers in here kids - avoid hyperbole like the plague.

There was no reason for me to declare Lawson "The best" - it's a ranking that means nothing, does no good, and invites your reader to dismiss your thoughts.

We are all looking for shortcuts to filter information. And when you, as a writer, use hyperbole you're just inviting reader to dismiss the rest of the work. Not saying Saul did this with me - because we have previous relationship. But again, when you are hyperbolic, you cause trouble. It's a real flaw I'm working to fix and one that comes from being hyper-opinionated New Yorker (Brooklyn). We're prone to declaring everything the best! Or the worst! And that does way more harm than good.
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No. of Recommendations: 43
I think you are taking too much of a Western mindset to this. The two became one. No need to make such illusive distinctions. Ommmmmmmm.

Dan, I think that you are avoiding looking at willful fraud, because you like the guy.

If you had taken both companies' 3rd quarter revenue in 2018 and compared it to the combined revenue in 3rd quarter 2019, the combined company was growing at 42%, not 75%. This was the company to be in the future, the combined company. When the CEO used the words "incredible growth" and "tremendous growth" and attached them to 75% "at scale", my God! That was dishonest! And it's not me worrying about organic vs non-organic growth. The CEO set out the dimensions, not me.

Saul
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No. of Recommendations: 17
I can't believe it, but I disagree with Saul's here.

Twilio 'bought' the Sendgrid asset, in capitalists terms, Twilio owns everything related to the entity including past revenues. I don't think this is a matter of semantics, I think property rights in the US market are very clearly defined. The legal structure around ownership is the core to our free market's success. Twilio owns the company. It's theirs to do whatever they want with.

I also don't think Jeff was in any way trying to hide anything. Selecting what assets to buy is an important skill and becomes more relevant as the company scales. Twilio should get full credit for buying great assets that expand their business.

I sold Twilio a while back. I have no position in the stock. But think it's a great company.
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No. of Recommendations: 22
BD, awesome post and I appreciate that you pulled in the references etc. I too got out when lawson pulled the sendgrid+twlo growth shenanigans. I still maintain he was mistaken to do so but he and the company have redeemed themselves in my eyes.

I think a company's "story" or "mission" matters sooo much and can be the difference a good company or a great company. I really appreciate the research you did here. I totally agree that TWLO has the potential to be one of our biggest companies eventually. They have an incredible market, incredible vision and incredible execution. I've been so impressed as lawson has put each building block together of a vision he started talking about years ago.

I can't believe that a company of TWLO's size has accelerated its organic growth above the 50% range.

Anyways, your post is a tour de force. Nice job. I'd love to see you take on some of our other companies too.

-e
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No. of Recommendations: 18
It really doesn’t matter who is right or wrong here. Dan, an incredible write up which must have taken hours to do. I still have a few hundred shares left since 2018. Quite a ride.
Regardless, I for one thank you for the time you spent on this.
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No. of Recommendations: 6
Twilio owns everything related to the entity including past revenues.

But then one would have to compare the current combined revenue with the prior combined revenue. My understanding of Saul's issue is that he was comparing current combined revenue to prior Twilio revenue alone.
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No. of Recommendations: 3
Twilio 'bought' the Sendgrid asset, in capitalists terms, Twilio owns everything related to the entity including past revenues. I don't think this is a matter of semantics, I think property rights in the US market are very clearly defined. The legal structure around ownership is the core to our free market's success. Twilio owns the company. It's theirs to do whatever they want with.

The assets are the balance sheet, the revenue are on past earning statements. You don’t buy past earnings, you buy the current balance sheet and future growth. Put it this way, when you buy a company, you don’t go back and change your past earnings statements. How you report growth then has to be carefully considered.
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No. of Recommendations: 15
Dan,
Wow it took me two days to plow through this post, you put so much time in I felt I owed it to you to consider your argument throughly. You have pulled together a lot of information to support your narrative.

As to the revenue numbers - it was a mistake. Hopefully one not to be repeated. The disagreement is - was it intentional deception. I am going to lean in the direction of no, maybe it was just over enthusiasm. I have made plenty of mistakes in my life so I will give him this one because it does not appear to be a pattern.

I am most intrigued by the evidence around the size of the TAM. You make good points that is may be larger than we could imagine. Hyper Growth going on for longer than we have seen before would be life changing.

The lower margins have always been a negative, and your argument that margins will get better as they scale makes sense. But they will likely NEVER get to the pure software margins.

It makes a lot of sense that they allow other businesses to experiment with both software and hardware (IoT) and remove complexity and expense for that experimentation.

Thank you for all your hard work. I am reconsidering.

Flygal
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No. of Recommendations: 30
Hey Flygal et al,

I think this is really not a "Saul" stock as my thesis carries some speculation that things will improve - with innovation, with margins.

So it's really my first pure play Narrative-driven thesis. I see such greatness, with caliber of people, with size of market, with past execution, with vision of products, that an upside surprise eventually seems inevitable. It's weird but this pick for me is more because I see the downside risk as so low than stock price will shoot up. But I do think it eventually will. Anyway, it's very kind of you to show the post such respect. I put a good three weeks of full-time effort into it. And it was an ask of other people's time that I took very seriously.

As for character, I think I left out important quote - it was from Segment's Peter Reinhardt who told Patrick O'Shaughnessy how hard it was to build Segment. He said,

... I think most teams actually would have split in that first chapter. It was a year and a half of misery. I ended that year and a half with going to the hospital multiple times for panic attacks. I lost 10 pounds in two weeks. By any health measure, we were not doing well. And we were fighting. It was bad but ultimately what kept us together was that we'd been roommates for a long time. We were great friends for years beforehand. We were not particularly interested in working anywhere else, at the end of the day we knew that we wanted to work with each other. The idea mattered less than the people around the table. And I suspect that many other companies die without that, going through the same struggles but they just die and split up before they maybe get to their breakthrough, if you will. So, that was the first big challenge.

That bolded line really moved me. Scary to think how many great ideas were never realized, how many fortunes never made. That Reinhardt learned the hard way to value people is an essential element of Narrative Investing. To me that is some elite character there. And I believe that like attracts like. A young man like this leading a multibillion-dollar company he built from nothing doesn't sell it lightly and certainly not to a hustler.

If Lawson lied once I respect that being a dealbreaker for some. For me, I equate competence as a form of human goodness. Twilio has been instrumental in facilitating so much of the app economy it's legit awe inspiring - over 230,000 businesses can more effectively communicate with people - all those security codes assuring our identities, Uber/Lyft riders connecting with drivers, retail businesses switching to digital in pandemic. And Twilio.Org feels like an authentic part of Twilio, not a throw-away thing to make them look good.

Steve Jobs was accused of lying so often they said he had a "reality distortion field". Musk makes so many outrageous claims its comical. But both built empires.

Within reason, I don't demand ethical purity from my CEOs. They're human, successful beyond comprehension, powerful, impactful and therefore prone to ego-driven blunders and ethical lapses.

As for numbers, we'll get an ER shortly and see how the Narrative is playing out. FWIW, the short term Narrative Indicator suggests they will do okay, not too bad, not too great as they continue doing the heavy lifting of integrating acquisitions, ramping up 100s of 1000s of new employees and building a truly global business. Don't see why they'd have notable beat but expect solid execution.

Best,

BD
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No. of Recommendations: 5
Dan, the reason it took me two days is I listened to each of the podcasts you referenced. I get it. That particular podcast was really searingly honest in a way you don’t normally get from ANYONE. It made me listen and think.

It is just a day from earnings. I don’t want to front-run the numbers. But if one of my companies disappoints. I will consider Twlo.

I have given you a hard time offline so I thought you would like to know I really listened to your reasoning.

With respect,
Flygal
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No. of Recommendations: 24
Does this dress make me look fat?

Many a lesser man than Achilles have been felled by telling the truth in circumstances such as this. The truth, let's remember, is always context-dependent and intentionality matters. Are you bending the facts to deceive others so that you might personally benefit at the cost of the others' well-being? If so, the word "lying" might be an appropriate descriptor. But if you're offering your perspective with a modicum of wisdom--to either be encouraging, or to avoid unnecessary insult, or to avoid making the greater appear as a lesser, we can consider speaking in ways that distort the facts but remain true in spirit. The world of literature and fiction are structured on this premise and it's why the great stories of our Civilization still over more value than pretty much anything else humans have built: yeah, go re-read Moby Dick.

There are many liars in this world in the most literal sense and if they are running public companies, things will not end well.

Lawson appears not to be one of them: his character and Twilio's accomplishments thus far would not have been possible if that was the case.

Hugs,

Monkey (long TWLO)
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No. of Recommendations: 22
Hi Dan!

What a great post, thanks for sharing this!

I am also still holding shares of Twilio, my last addition was during the COVID meltdown in March 2020. Since then Twilio has become one of my biggest portfolio positions. I feel very confident with that, for the many reasons you stated in your write-up. Having said that one of the grudges I have with the company is the lack of profitability. Also, Twilio is already quite large ($68 bil market cap) not among the highest (organic ;) ) growth companies out there. But then again we just witnessed Google, Apple, Microsoft, et al post incredible growth at a much larger scale. And regarding the organic growth rate "lie" from Q3 2019. I agree with most that that wasn't ideal and that Jeff could have mentioned it in the earnings release or at least in the prepared remarks. However, I think it is a bit far-fetched to call this fraud or lying. After all, Jeff made that acquisition happen, and the 75% growth rate was their actual growth rate, defined by accounting rules, in that quarter. Plus, the CFO did disclose everything in the prepared remarks of the call:

Now diving into the numbers, base revenue, which includes Twilio SendGrid, grew 79% year-over-year to $276 million in the third quarter. Organic base revenue for Twilio was $227 million growing 47% year-over-year. Twilio SendGrid grew 31% year-over-year to approximately $49 million.

As Jeff mentioned, while the growth was very strong, base revenue came in a bit lower than we expected. We've experienced rapid growth and with that come some growing pains. Consequently, a few of our older systems sometimes fall short of where we'd like them to be. We have faced some of these growing pains in the third quarter as we discovered some errors in our billing processes that resulted in a few onetime credits being issued to customers totaling approximately $5 million, which will also impact our ongoing run rate. Importantly, our internal controls identified these errors and we understand the root issues and are working to improve our billing related processes and other systems. We will continue to invest in systems to support our strong growth trajectory into the future.


Most importantly, looking back now we know that Twilio didn't try to hide anything. Their core business is not declining, it is accelerating. And, these acquisitions were really smart.

Niki
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