Today we will be diving into Twilio. Twilio was founded just over a decade ago by Jeff Lawson, with the vision of enabling developers to access the world's communication infrastructure through APIs. Twilio has over 200,000 customers and powered nearly 1 trillion interactions last year through SMS, voice, video, email, and more.
In this business breakdown, we'll cover Twilio's unique approach to distribution, how lower gross margins versus peers can actually be a moat, and why Twilio's revenue model aligns incentives with its customers. We closed with the bull and bear case for Twilio over the next five years and what investors and operators can take away from studying Twilio more closely.
To help me break down Twilio, I'm joined by Ro Nagpal, a senior investment professional at the Holocene advisors.
For the full show notes, transcript, and links to mentioned content, check out the episode page here.
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Show Notes
[00:02:53] - [First question] - What is Twilio?
[00:03:36] - How the world received text updates before Twilio
[00:04:14] - The scale of Twilio today
[00:05:02] - How expensive designing infrastructure of this magnitude can be
[00:05:34] - How to use Twilio and gain access to its functionality
[00:06:33] - The insight that led to developing the company
[00:08:37] - Other aspects of Twilio’s services beyond SMS
[00:09:50] - Unit economics of the business
[00:12:01] - Case studies of likely and unlikely customers to use Twilio
[00:15:17] - Original use cases and how they’ve evolved since
[00:16:12] - Developer insights and what innovation it’s led to
[00:19:19] - Twilio becoming a pioneer in the user software API space
[00:22:15] - How big the TAM can be and why it’s bigger than people may think it is
[00:23:38] - Why the API data and growth rate of Twilio separates it from its competitors
[00:26:02] - How having a lower gross margin actually works to their benefit
[00:27:28] - Who their competitors are and why Twilio beats them out
[00:29:11] - Strategic acquisitions they’ve made like SendGrid, Segment, and Syniverse
[00:31:18] - Unifying themes in their M&A strategy
[00:32:08] - Fees associated with using iMessage and WhatsApp
[00:32:43] - Improving margins as SMS becomes less pivotal in their operations
[00:33:21] - Things about Jeff Lawson that makes Twilio so special
[00:35:25] - What’s their bear case is
[00:36:19] - Lessons for builders and investors
