CEO Jeff Lawson reflects on the peaks and valleys of Twilio's growth story

[00:00:00] Our chief product officer, she shoe has a saying, he says every day, our goal is to suck a little bit less. That was like that. It's very self-deprecating obviously, but it kind of expresses this idea that it's okay, everything's not perfect. We suck at certain things, but if we just suck a little bit less every day and we're building a stronger company as a result,

[00:00:31] a new show that surfaces tactical advice, founders and startup leaders need to grow their teams, their companies, and themselves. I'm Brett Berson, a partner at first round, and we're a venture capital firm that helps startups like notion, roadblocks, Uber, and square tackle company building firsts through over 400 interviews on the review.

We've shared standout company, building advice. The kind that comes from those willing to skip the talking points and go deeper into not just what to do, but how to do it with our new podcast in depth, you can listen 

[00:01:05] deeper conversations every single week. Learn more and subscribe today@firstround.com

for today's episode of in-depth, I'm really excited to be joined by Jeff Lawson, Jeff, the co-founder and CEO of Twilio, which creates products that power business communication. Jeff co founded Twilio back in 2008 and led the company through a successful IPO in 2016. He's also a new author, his book, ask your developer how to harness the power of software developers and win in the 21st century was published earlier this year in today's conversation.

We traverse a ton of ground in Twilio's company journey and Jeff's 13 year evolution as its CEO. He dives into some of the initial wins, like going against conventional wisdom to launch a second product in the early days of Twilio. But he's equally game to unpack some of the mistakes along Twilio's path.

Like when one of their biggest customers, Uber significantly scaled back their investment in Twilio's products. Jeff also opens up the pages from the playbook. He pulled from his time at Amazon chiefly. Twilio's write it down company value, and he makes the case for why PowerPoint is a terrible decision-making tool.

He takes us inside Twilio C-suite including why they do postmortems. When things go right, not just when they go wrong. He also sketches out his aha moment that his executive team needed to argue more. Finally, he outlines how he tries to strike the right balance between two CEOs. He looks up to Jeff Bezos and mark Benioff.

And grapples with one of the thorniest challenges for leaders, which is maintaining pieces of that startup DNA as a company scales up today's conversation is a really unique peek behind the curtain at one of the most quietly fascinating companies. And CEO's around, Jeff's got a refreshing, humble streak that shines through whether he's talking about Twilio's peaks or the valleys.

I hope you enjoy this episode. And now my conversation with Jeff. Well, thanks so 

[00:03:21] much for joining us. Yeah. Thank you for having me here, Brett. Appreciate it. 

[00:03:25] Wanted to start super high level and then use the time to go down in varying degrees of detail, but maybe want to just start with when you reflect on the Twilio journey thus far, why do you think it worked?

If you were teaching someone, the lessons or the reasons it worked maybe outside of. Some of the more obvious things like tech tailwinds or hiring exceptional people. What are sort of the primary reasons you think you were able to take this thing from idea through longstanding large durable 

Yeah. Thanks Brett. I think we'll never totally know the answer to that question. I mean like any business, I think you think, you know, what made you successful, but the reality is I just have to start by acknowledging that there's so much luck in what we do. And there are a lot of smart people working just as hard, if not harder and just aren't getting the break for whatever reason.

And so I just do have to acknowledge that there is so much lock in all of this stuff, as far as the things that we consciously did. I would just say there's probably two things that I would point to. And I think one was just. Knowing who we were and what we wanted to be and what we wanted to do. And in the very early days of Twilio, we got a lot of advice from people saying this whole developer thing.

Like, no, one's done it before. And developers, aren't an audience and it's the go to market. Nobody knows how to do that. And so we got a lot of advice telling us to go build an app. And the conventional wisdom was like, you can always add an API to an app if that's what you really want to do, but really APIs can't be a business.

And I think first of all, we had conviction that the developer was going to be an influential buyer inside of companies. And that developers were being trusted with innovating inside of every kind of company. And therefore it made sense that if they were empowered to be able to pick up new tools that were low risk and low cost, and you know, it wasn't like signing a $10 million contract.

It was just signing up for, you know, spending a dollar to go build a prototype. That developers would really lead the charge and that conviction wasn't just like our idea. It was being proven out by the early customers that we had in Twilio. We worked with a lot of developers early on, and we saw them putting in their credit cards.

We saw them bringing us into all kinds of customers. I remember some of our first customers were Intuit and Sony and the developers had brought us into those relationships very early on. And so we had early proof that what we thought was right was correct. And we stood by that conviction. And even though there were a lot of very smart well-intentioned people who said this probably isn't the way to build the company.

I think we kind of knew who we were. We knew what we wanted to be, and we had enough evidence that that was correct. Yeah, we stuck to our guns. And I think the result of kind of sticking to our plan, even though a lot of people told us we should do otherwise and knowing who our customer was and knowing who we're serving.

I think that really made the difference than if we had waffled on that or tried to serve multiple different customers or kind of had in our heart. We wanted to do this, but we let investors tell us to go to that. I think we would have had a very different outcome that 

[00:06:45] conviction come from. Was it just the voice of the customer and focusing on them and seeing that, did you find conviction in some other place?

[00:06:54] Well, as often as the case, it started with our own lived experiences. So I'm a developer, my two co-founders were developers. And in the beginning, we are just basically trying to say we are building something that we had needed. In our prior lives. In previous apps, we have built and previous companies, we have built, you know, I started three companies before Twilio and I was sorta thinking, I can imagine cases where I would have needed this at every single company I built before.

You never want to let your own personal experiences take you too far. Cause there's always a chance that you're an aberration that somehow your experiences are just different than the vast majority of people out there. And so the next step is to validate it with other developers with potential customers.

And before we wrote a single line of code to start Twilio, we just talked, we talked to developers, I had developed this very informal methodology. Whenever I had an idea that I thought, oh, maybe I want to do this idea. Ella, go talk to people who were likely customers of that idea. And usually friends, family, you know, people that I knew somehow somewhere.

And I would just sort of say, Hey, you know, I'm working on this idea. I'm curious, I'd explain the idea. And I always thought it was really interesting. So you explain an idea to people. And one of two things happen either you really tickling a niche that they have, you are talking about something that solves a problem that they have and may not have even known they had, but once you start talking about it, they kind of get intrigued like, oh yeah, well, that's interesting.

And they start to ask you questions about it and they start to ask you a clarifying questions. Like, oh, what would it do this? Would it do that? And what they're doing is they're pattern matching. What you're saying to a problem that they may want someone to solve for them. The other thing that happens, if you have not tickle the age that they have is it's just tremendously awkward.

They will listen to you. They'll be polite. And then they'll just change the subject because they don't really even know what to say. They'll be like, oh, Hey. Yeah, the job that's really, uh, that's super interesting. Hey, you know, Hey, how about those? Uh, how about those giants? Did you see the game yesterday?

And you're like, oh, well I guess, uh, you know, I didn't connect with them. And when we started Twilio, I did, I did that. I went and talked to a lot of developers that I knew, and I would explain what we were building. I'd say, oh, you know what? We're, you know, I'm working on this idea with an API, you write a few lines of code and you can make a phone ring and you can do all sorts of cool stuff on a phone call, or you can send a text message or receive a text message.

So like a few lines of code, you know, what do you think about that? And a funny thing happened at first, they would say, oh, Well, that's really interesting. Jeff, how about them giants? You see the game? I was like, okay, well maybe this is a bad idea, but about 30 seconds later, it's happened every time. About 30 seconds later, they would say, say, Hey, remember that, that thing you were telling me about with the phone, could I, and they'd name use case?

Could I notify a customer when the package ships from the commerce site that I recently built and I'd say, yeah, yeah, you could be super easy and they'd be like, oh, I get it. Yeah. Okay. Can I try it out? And I had enough of those conversations where you could see the gears start turning and they're, and they're matching what I'm telling them with a problem.

They had recently experienced as a developer where they had wanted to build a thing and couldn't, and just assume that they could, that's the way the world works. I want to do the thing, but I can't do it well to now realizing, oh wait, maybe I could've built that thing. And when you saw that pattern matching occur, they would suddenly like to perk up and they say, oh, I'd love to try it out.

Once we have that conversation enough times. That's when we got the conviction to say, let's start building. And so we built the prototype of Twilio. We did it pretty quickly. We did about three months was the first prototype muse, you know, not great by any stretch of the imagination, but it was enough to start getting feedback.

And we circle back with all those developers we talked to and said, Hey, remember that idea I told you about here. It is. Just try it out, give us feedback. That's all we want. And sure enough, those developers started building some really interesting things with the API and they started saying, and this was even the best part they started saying, oh, I know, like you asked me to keep it a secret, but you mind if I share it with this other person, because I really think they would have a great use case.

And we heard developers actually wanting to spread it to other developers. And so what we validated in that period of time was this idea that there were all these latent use cases out there that developers had wanted to build and just assume they couldn't because communications just, wasn't something a developer knew how to do it could do.

And that gave us a lot of that really conviction. If you think about 

[00:11:22] the last 13 year journey, it sounds like this conviction in the problem and the solution and a unique go to market. This is long before the API economy and bottoms up and everything was a thing was sort of one key bet that worked. Are there other bets along the way that you attribute to the outside success that you've had in building 

You know, I'd say the other thing that I look at is we've always had a willingness to try new things, new products in particular that has served us really well. For example, a lot of people will give you startup advice and things that like, they basically say focus, focus, focus, or find a niche, get rich.

And like there's all these phrases that tell you to just do one thing and do one thing. Well, and that's. Not bad advice, but I will say that we owe a lot of our success to the fact that we were always very willing to branch out and try new things. So we launched Twilio voice was our first product back in 2008.

And that let you make and receive phone calls with API requests. And very quickly our customers started saying, Hey, I got these phone numbers from Twilio and you know, the phone number on my cell phone lets me not just make them receive phone calls, but also send and receive text messages. Is that something I could do with these Twilio numbers?

We said, oh, that's a really interesting question. And so we started researching this and at the time you really couldn't do that with phone numbers. You could text with your phone, but there was no way for like a business or an app to text with a phone number and the advantage of a phone number over what was the system of the day, which was a short codes, was five or six digit numbers you could text with.

With speed, because with a phone number or with a short code, they cost tens of thousands. You have to do long commitments. It took six months to get provisioned by a carrier. It was really reserved for big enterprises aligned towards that sort of style of building things, not towards the agile iterative nature of let's try something that's cheap and fast.

And if it works great, scale it up, if it doesn't work. Oh, well, cause that's our software works. And so we did is we brought the cost, the barriers of entry for them building an app with text messaging from thousands of dollars, months of approvals to 30 seconds and less than a dollar, it took to buy a phone number and tenure first text message.

And because of that, we were able to encourage so much more experimentation of new ideas and therefore so much new innovation. But that wouldn't happen if we had said no, no, no, no, no. We just launched our voice product. I think at the time it was probably doing. $300,000 of ARR. And so we could have very easily said, look, we have this brand new product.

It is just getting off the ground. Clearly the voice market is almost like a hundred billion dollars. We've got a lot of work to do before we think about product number two, but instead we followed our customers and we said, great, let's work on that. And so while we kept building our voice API, we started working in the very early days.

I mean, their company was probably less than 10 people at the time we started working on product number two, and I'm very glad that we did. Cause it turns out that messaging has become such a big driver of new use cases, new experiences that we all have interacting with a variety of products and has become a huge driver of Twilio's growth.

I mean, it's our largest product today. And so I'm very happy that 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. So when you think about those 

[00:14:53] first few years, How did you resource allocation across at that point?

It went from one to two and I'm sure other products and sort of the classic do we launch a new product versus invest 

[00:15:02] in the core? You know, it's interesting. I would say that in the early days of a startup, I mean, I don't know if other startups like this, but at least in the early days of Twilio, the notion of resource allocation would have been such an academic concept for us.

Right. You really are following your gut in the early days. I would say maybe other people ran their startups differently at the beginning. Like, yeah. I remember at one point, oh, you know, we should have an annual planning process where we do budgets. And I was like, really? That's the thing, you know, like, so in the early days of the company, it was very much just like, we're going to try to follow our customers.

We're going to follow our gut and we're going to try things. And we made a lot of mistakes in that, by the way, too. I'll give you an example. There was a period of time where we launched our SMS product. It was growing really nicely. And the company, I don't know, it was 10, 20 people is still very small.

And we had all of our engineers working on a new product after that. And none of our engineers were working on the SMS product, even though it was growing like a weed. And that was a mistake, right. We should have said, okay, we got, we got to hit here. We got to double down, we've got to invest in it. We have to re we have to resource allocate ourselves.

Well, but we didn't do that. And so like that kind of following our gut is both good in terms of like, we listen to customers, we had an instinct that said, Hey, there's something here. We should go follow it. But the flip side of that is we made the mistakes of actually not intentionally, really investing in the core product that was winning.

It was taken off because we got distracted by the pejorative term is the next shiny thing. And, you know, I got definitely accused of that in the early days of Twilio, by some of our employees like, Hey, we keep chasing the shiny things. Which was true. And you do need to balance both of those things. We've gone through a bunch of frameworks through the years.

There's the horizons framework of horizon. One horizon, two 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 an hour, five years from now, we've gone through that framework.

We've gone through a number of those things, but ultimately I think that some framework that is helping you ensure that you're investing in your core, keeping your core business healthy and growing. But clearly that can suck all the resources of the company. The current thing, there's no shortage of things.

Customers need. There's no shortage of wisdom that will say, Hey, you've got this core business. That's the cash cow of the company that makes all the money. And so therefore you need to keep investing growing it. And so if you don't ring fence off, some amount of resources know conventional wisdom is like 5%, 10%, whatever.

Into investing in the thing that you think might make you money five years from now, the next big bet, then you're probably running the company for too short term of an outcome. And I ascribed to that. The one thing I would say we don't really do at Twilio is think about things as the next big bet, because I think that you need to be having, you need to have five or 10 or 20 bets.

And that depends on the size of the company and the scale of the company, of course, but you need to have more than one potential bet that you're working on. And in the early days of those ideas, it's really easy to get married, to like, oh, we got this great new idea. I'm like, we did this to like, say like SMS and it is Twilio or the next thing that was after SMS that we were all excited about and all ran towards.

And instead you need to think like, well, there's many things that could potentially be the next great thing, but we need to run experiments to figure out if indeed customers want those things. If it is the opportunity that we think it is. And I think if you put all your chips into one next big bat and it doesn't pan out, then you've probably got a problem.

And so at Twilio, as we got more scale, what we started to think about is how do we run a number of those experiments at any one time? And there's a certain wisdom and discipline in being able to run multiple of those experiments and to be patient and to not expect those things to become giant businesses overnight.

So that's the first part of how do you run an experiment and treat it as a learning exercise? Not yet as a business exercise, like it's not measured in dollars and cents. It's measured in learning. If the market wants this potential thing you could build, but then the second wisdom that you need in those areas.

And we've screwed this one up too many times is when you learn that the market does want and need that thing, you're onto something is then pour resources into fueling it. And I think one of the common mistakes that we in, I'm sure other companies have made. Is like you fully allocate your budget at the beginning of the year.

And so you've got, okay, I'm going to five people go work on that idea. And five people could work on that idea and whatever you allocate. And one of those things is just taking off. We need more people. Well, you know, it's March and you know, your budget gets done in December. So, you know, we'll talk to you in December.

What a great way to starve an idea because of an arbitrary budget cycle on your calendar. And so one of the key things you need to do is to hold back and to be prepared, to invest when you see the signs of success and the idea merits that investment. And so there's both a matter of venturing out, you know, sending people out in the boats to explore these new ideas, but then when you see those signs of success, make sure you've got the ability to double down in real time when those things are needed and can use the resources that are taken off.

So I think that's where we've landed in our framework 

[00:20:15] before we move on. Is there anything else in this category of how you launch new businesses or new products that you've come to rely on, or you've kind of figured out in the way that you operationalize that now at Twilio, 

[00:20:29] that's still a pretty hard thing.

I would say for us to do, I will say one of the mistakes that we made early on, right? If you listen to folks giving startup advice, especially in go to market, what do they tell you? They say the classic mistake that especially engineers make when they are starting companies or creating new products, is they just assume that the thing they've built is so amazing that if you build it, they will come the classic term for the mistake.

If you build it, they will come. And everyone says you don't have that assumption. You've got to actually build a go to market plan. And I would say a Twilio with our first product voice. We didn't have a very strong go-to-market plan and we built it and they came and then we built our second product, Twilio SMS.

And again, we didn't have a very strong go to market plan and we built it and they came. And so we got away with what essentially wasn't anomaly twice in a row and the company was doing very well. And then we started introducing more products and guess what? People didn't necessarily come. We didn't know what to do because we never had to build that muscle.

We didn't really have the muscle of actually doing an integrated go to market and product plan. You figuring out the market and trying to figure out who you're bringing the product to and how are you going to get it to them. And so it was sort of interesting. We had this anomalous experience, I would say twice in a row that really got the company off the ground.

And then later in life had to actually figure out our go to market muscle. And in fact, when we went public in 2016, we only had about a dozen sales reps in the company supporting what in the 2016 of my memory serves me correctly. It was about $200 million of revenue and for a B2B business, even on the supported by developers as we are, but to only have about a dozen sales reps supporting, you know, a couple of hundred million dollars of revenue.

Is very strange. I don't think we knew it at the time. It wasn't necessarily that the developer led go to market was so good. It was that we were under invested in distribution. And so that was, uh, a challenge we had to quickly fix. And we did over the subsequent years and have successfully figured out a much better integration between a product and developer led motion.

That is the beginning of how we get into the accounts that we get into. But then a sales led motion that really cements those accounts and enables us to cross sell and upsell over time. And so what I think we've come to realize is that with a platform and a developer first product and a developer first go to market, really the key is saying, how do we build certain of our products that we know are going to be developer lead developer, adopted developer bought?

And maybe that's it. Maybe that's the whole go-to market of that product is just the developers taking it. But you have to measure the right metrics. Separately. We're going to have other products that are developer led, but then clearly a sold product. And what's the difference? Well, chances are, if the price tag gets high, eventually with usage, you're going to want to have a mature business relationship with the decision makers, the purse string holders of the company.

I'll give you an example. Any developer can adopt a Twilio and send their first text message for, you know, a dollar text messages, the customer, you buy a phone number for a dollar, and the second message costs a penny. Um, so penny one, you can send your first text message, but when they launch a product that's built on top of that and it starts scaling and it's scaling globally.

The total bill to Twilio can grow. And once the bill reaches tens of thousands or hundreds of thousands of dollars in some large scale B to C company, We want the relationship to not end at that developer. We want the relationship with the C suite member or the CFO's paying the bills or the head of product.

Who's responsible for that thing because you better believe that when a company is spending that much on a vendor, they want to know the vendor and guess what we want to know them too. And so knowing essentially the full life cycle, how your product gets adopted, how it gets used, and then who the various stakeholders are as you become more and more strategically important to the company is really important.

And when we add a dozen quota-carrying reps, we just didn't have enough capacity to go talk to all of our customers. So the implicit assumption in that model was that. You know, they just would keep buying and they didn't need to talk to us. In fact, a lot of customers told us that they said, no, we're really happy.

We don't need to talk to you. We're good. And that, that was coming from the developers, right? Developers notoriously would probably prefer not to talk to somebody, but when the numbers started getting bigger, well, that's when actually you do want to have a relationship. You do want to talk to somebody.

Maybe it's not the developer, the half to actually build a relationship throughout the company. And so that's the first thing. If you're going to get to meaningful revenue with a customer, that's when you need to flip the relationship and actually build a mature B2B relationship with the company. But there's other products where they may not merit sales.

They may not need sales, but you also just want them to be kind of, self-service easy to use, easy to adopt and more secondary potentially to the customer's use case. So there's a lot of products that we've built that are infrastructure, API APIs that honestly our sales team. Does not understand. They're like, what is that thing?

And we're like, you know what? You don't have to worry about it. It's for the developer to use and we're helping developers get more jobs done and we're helping them make these four products easier, but we're not expecting you to go in and sell this thing. We're just expecting developers to buy it. And so knowing the difference between the products, if you've got a large product set, which we do, we've got, I think, 60, 70 products in our portfolio, knowing the difference, not treating them all the same has been another part of our playbook and making sure that we know what every product wants to be, and we know how it is going to be running.

[00:26:10] what was the process for you to figure out that your worldview, right small go to market team, 10 people at IPO was wrong. 

[00:26:21] Well, it hit us in the face. When our, I think our third quarter as a public company, we had to disclose that one of our largest customers at the time was Uber. And that they were intending to use, not just one vendor, but they were intended to use multiple vendors for the services that we provide them.

So they had grown to be about $60 million annual account for us. Huge, enormous. I mean, for any software company, a $60 million account is enormous. Let alone for one that was relatively young, like we were, and they had grown like a weed, which is just a function of their growth as a company. And the thing was for the longest time they had basically said, you know, we don't really want to talk to your salespeople.

You know, the developers can say, no, we're happy. We're growing. And their mandate has been growth at all costs. You know, they were growing around the world incredibly quickly and we were supporting that growth. We're launching them in new countries all the time and helping them do that. Meanwhile, something changed inside of Uber where their mandate became less growth at all costs and became more about efficiency and suddenly their priorities became more about how do we save money as opposed to, how do we get into the new country and that never got to us.

Because again, we didn't really have a mature relationship with them. I'll put this into perspective. When we, we had only about a dozen sales reps, the rep who was assigned to Uber had also about, I think, about 50, 60 other accounts. So that rep would go visit Uber maybe once a year, is the customer paying a $60 million a year?

That was, that was wrong. You know, that wasn't, that was not the right way to approach that account. And so what I realized in that moment was that we had accepted the customer saying it's okay, we're fine. Just leave us alone and taken, uh, you know, we were trying, but like still a relatively laissez-faire attitude towards the accountant saying, no, no, no is in our interest.

And the customer's interest that we know what they're thinking and we know what they want and when their needs are, because we could have easily addressed those problems. We could have easily become more focused on cost for them, but that wasn't essentially what we have been told, or we did not allocate enough bandwidth to be able to hear it nor we'll be reaching into the right levels of the company.

For those people to say, actually, we've got a new priority. Can you help us with this? And so that was the wake-up call for us that somehow we had misallocated the resources of the company to truly support our customers and to do it at scale, we did, uh, a post-mortem actually inside the company to ask the question of like, well, what went wrong here?

Like, clearly something went wrong. If we had a customer this large and so impactful that when they had a change in their strategy, we had to inform our investors. It was a huge deal. So something went wrong here. What is it? We were a few root causes, but the main one we settled on was we just had insufficient coverage on an account that is that big.

Today's episode is with Jeff Lawson, co-founder and CEO of Twilio. Reflecting on the 13-year journey of creating Twilio, Jeff shares the peaks and valleys and some unexpected aha moments - from getting his executive team to argue more, missteps with their biggest customer, and going against conventional wisdom to launch a second product early.

CEO Jeff Lawson reflects on the peaks and valleys of Twilio's growth story

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