The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: The Twilio Memo: Bessemer's Byron Deeter on How a $125K Initial Check Became Bessemer's Largest Position, What The Influx of Late-Stage Capital Means For Venture Today & Why The Incumbent Advantage Is Now An Incumbent Disadvantage

May 27, 2021

Byron Deeter, a Partner at Bessemer Venture Partners, shares his journey through the venture capital landscape, focusing on the remarkable evolution of Twilio. He reveals the strategic thinking that led to a $125,000 investment, despite initial doubts about the market. Deeter discusses the challenges that early-stage companies face and highlights the importance of founders' qualities, like humility and community impact, for success. He also reflects on current trends in the cloud market and the necessity for adaptability in entrepreneurial endeavors.

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ANECDOTE

From Small Seed to Largest Investment

Byron Deeter's team at Bessemer Venture Partners initially invested $125,000 in Twilio's seed round.
This small initial check eventually became Bessemer's largest investment, highlighting Twilio's impressive growth.

INSIGHT

Market Quality over Size

Bessemer did not have market size concerns with Twilio, but rather market quality and segmentation concerns.
The challenge was determining if a platform layer for voice apps, a then-nonexistent market, was viable.

ANECDOTE

A Risky Bet on Vision

Twilio's revenue was small and declining when Bessemer invested, making it a risky bet.
Jeff Lawson's experience as a CTO and his vision for communications enablement in the mobile ecosystem convinced Bessemer.

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Byron Deeter is a Partner @ Bessemer Venture Partners and one of the world's leading investors in SaaS and cloud. To date, nineteen of Byron’s investments are valued above $1 billion, including ten IPOs and counting. Some of the incredible companies within Byron's portfolio include Twilio, ServiceTitan, Hashicorp, Canva, Intercom, DocuSign, SendGrid, the list goes on. Prior to joining the world of venture, Byron was an entrepreneur, raising a Series A from Bessemer and scaling the company to be one of the first global SaaS companies, reaching profitability and successfully selling to IBM.

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In Today’s Episode with Byron Deeter You Will Learn:

1.) How Deven made his way into the world of venture and how that led to his becoming a Managing Director @ Insight, way back in 2000?

2.) The Market: Many people passed on Twilio, what did Byron see that others did not? Did Byron have concerns around the TAM? What made Byron feel comfortable they were not too early? How did Byron assess whether customers would churn off Twilio when they scaled to a size they could build their own infrastructure? How does Byron advise founders on this challenge today?

3.) The Team: What did Byron find some compelling about Jeff so early on? Jeff has been an incredible CEO from pre-seed to post-IPO, what has enabled Jeff specifically to scale with the company so successfully? What does Byron do to build the trust and rapport with founders that he does? What works? What does not work? How does that look today with Zoom?

4.) The Incumbents & Competition: Why does Byron believe the incumbent advantage is actually an incumbent disadvantage? What specifically has Byron found underwhelming about how the incumbents have tried to respond? In what tangible and specific way are startups better placed to win than incumbents? How does Byron advise founders to assess other startup competitors?

5.) The Funding: Twilio is Bessemer's single largest position ever, how does Byron know when is the right time to double down on an investment? What signals does he look for? Has this changed with the massive price inflation we have seen over the last year? How does Byron analyse the influx of new capital? Where is it good? What are the challenges to it?

Item’s Mentioned In Today’s Episode with Byron Deeter

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