When Twilio was young: the early years | VatorNews
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`hen they were young
`When Twilio was young: the early years
`Contrary to expectations, the cloud telephone company
`repeatedly reduced prices as it scaled
`
`Innovation series by Ronny Kerr
`November 4, 2016
`Short URL: http://vator.tv/n/480f
`
`Editor's note: Our Post Seed VC event is coming upon Dec. 1 in San Francisco. We'll have Chamath
`Palihapitiya (Founder of Social Capital), Aydin Senkut (Felicis), Jeff Lawson (Founder & CEO,
`Twilio) and more. Check out the lineup and agenda register for tickets before they jump! Post Seed is
`brought to you by Vator, Bullpen Capital, Haystack.
`
`As our readers know, Vator has started a series called When they were young.
`
`It's a look back at the modest days of startups, what traction they had in their first few years, and how
`they evolved. In the end, we hope to provide a glimpse into what great startups looked like in their first
`three years.
`
`Stories like these are always well received because it reminds us that anyone, regardless of pedigree
`and environment, can rise above the noise and have great influence. They show us the value of being
`resilient, persistent, and committed. If we can follow their footsteps, maybe we too can have similar
`success.
`
`My last segment in this series focused on Munchery. This segment is on Twilio.
`
`— Twilio's First Year —
`
`Founded: June 2008
`
`Founders (ages at the time): Jeff Lawson (30), Evan Cooke, and John Wolthuis
`
`Initial company description: "Twilio provides an
`in-cloud API for voice communications that
`leverages existing web development skills,
`resources and infrastructure.
`
`CONNECT AND COORDINATE BY VOICE:
`Build sales automation systems, order inquiry
`lines, CRM solutions, call routing apps, phone
`trees, appointment reminders, custom voicemail
`apps, and a whole lot more.
`
`SIMPLE, POWERFUL, PAY-AS-YOU-GO: Everything you need in just 5 API building blocks.
`Reduce the cost of developing, deploying and managing voice apps by paying for capacity when you
`need it, not before."
`
`In short, Twilio let developers create apps to make and receive calls for a wide variety of purposes.
`
`Private beta launch and first press - at five months from founding: In November 2008, Twilio
`launched in private beta. The company's CEO Jeff Lawson said he was hoping to commodify other
`existing phone services by making them accessible and customizable by developers. Twilio was
`originally sold through a cloud-service model with no contract required and flat fees for calls.
`
`A couple days before the news, Dave McClure (angel investor and founder of 500 Startups) used the
`service to rickroll Michael Arrington of TechCrunch, resulting in the company's first press hit.
`
`First funding - at nine months from founding, at four months from launch: In March 2009,
`Twilio closed a $600,000 seed round led by Founders Fund and Mitch Kapor with participation from
`David Cohen, Manu Kumar, Chris Sacca, and other angel investors.
`
`http://vator.tv/news/2016-11-04-when-twilio-was-young-the-early-years
`
`6/11/2018
`
`TWILIO INC., Ex 2019, Page 1
`TELESIGN CORPORATION v. TWILIO INC.
`IPR2017-01977
`
`

`

`At that point, customers of the company included Cheetos, Earth911, Sony Music, and Tumblr. The
`company also updated its pricing to a "pay-as-you-go" model:
`
`• 3 cents per minute
`• 5 cents per minute (toll-free)
`• $5 per month per phone number
`
`Though Twilio has since updated those figures, its pricing model has largely followed this early
`structure.
`
`

`

`When Twilio was young: the early years | VatorNews
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`
`— Twilio's Third Year —
`
`New product - at two years from founding, at one year and seven months from launch: In June
`2010, Twilio launched OpenVBX, which it described as "Google Voice for businesses."
`
`The open-source, virtual phone system essentially bundled up some common features from Twilio's
`voice and SMS APIs within an easy-to-use, drag-and-drop platform. With just a few clicks, for
`example, you could set up a menu system for when somebody calls a certain phone number (see video
`tutorial above). Additionally, OpenVBX integrated with plugins from ocmpanies like Foursquare,
`Zendesk, and Highrise.
`
`Product update - at two years and two months from founding, at one year and nine months from
`launch: In August 2010, Twilio launched the first major revision to its APIs, consisting of more than
`100 improvements requested by thousands of people from its developer community.
`
`Pricing update and traction - at two years and three months from founding, at one year and 10
`months from launch: In September 2010, Twilio lowered prices yet again, this time for its per-minute
`rates:
`
`• Inbound to U.S. and Canadian numbers: $0.01/min (previously $0.03/min)
`• Outbound to U.S. and Canadian numbers: $0.02/min (previously $0.03/min)
`• Inbound to toll-free numbers: $0.03/min (previously $0.05/min)
`
`At the time, Twilio said it was serving nearly 20,000 developers—a figure that had grown fivefold
`since the beginning of the year. In a single day, it said it was connecting the same volume of calls that
`it had connected in all of January.
`
`New fund - at two years and three months from
`founding, at one year and 10 months from launch: In
`September 2010, Twilio and 500 Startups announced a
`$250,000 micro-fund designed specifically for Twilio-
`powered startups.
`
`The early-stage venture fund and startup accelerator said
`it would invest $10,000 in up to 10 companies for a one
`percent stake in each company. Additionally, it would
`select one or more companies for a $50,000 investment
`and invitation to participate in its accelerator program.
`
`Third funding and pricing update - at two years and
`five months from founding, at two years from launch:
`In November 2010, Twilio secured a $12 million Series
`B round of funding led by Bessemer Venture Partners,
`with participation from Union Square Ventures, 500
`Startups, and angel investors. The company planned to
`use the new funding to fuel product development and to
`make new hires in sales, marketing and engineering.
`
`As part of the deal, Ty Wang (former senior director of the business communications unit at Oracle)
`joined Twilio as vice president of business development and Bessemer Venture partner Byron Deeter
`joined the company's board of directors.
`
`Later in the month, Twilio would reduce its prices once more: this time for Twilio SMS, from $0.03
`per message to $0.02 per message.
`
`First micro-fund investments - at two years and six months from founding, at two years and one
`month from launch: In December 2010, Twilio and 500 Startups announced the first three
`investments made by the Twilio Fund:
`
`• Order Mapper, which allowed restaurants to build mobile applications that power food
`delivery. One of its customers was Round Table Pizza.
`• Textaurant, a tool for restaurants so they can text people in queue when their table is ready.
`• Voicendo, a tool for small and medium sized businesses to manage their incoming phone calls
`and text messages
`
`http://vator.tv/news/2016-11-04-when-twilio-was-young-the-early-years
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`6/11/2018
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`TWILIO INC., Ex 2019, Page 3
`TELESIGN CORPORATION v. TWILIO INC.
`IPR2017-01977
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`

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`When Twilio was young: the early years | VatorNews
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`4
`
`It's worth noting that the first and third companies are now defunct, and Textaurant ended up selling to
`QLess in 2013.
`
`Product update - at two years and eight months from founding, at two years and three months
`from launch: In February 2011, Twilio launched an OpenVBX app for the iPhone, letting users
`access the same features available through the web app. That could mean everything from listening to
`voicemail, assigning messages to coworkers, and return calls and texts directly through the app.
`
`Second micro-fund investments - at one year and nine months from founding, at one year and
`four months from launch: In March 2011, Twilio and 500 Startups announced the next seven Twilio-
`powered companies to be funded by the Twilio Fund: FastCall411, Callyo, Knockknock, Magnolia
`Prime, Qwipd, Volta, and WorkersNow.
`
`Traction - at three years from founding, at two years and seven months from launch: In June
`2011, Twilio made yet another price reduction: dropping the price of each outbound SMS message to
`one cent (previously it was two cents). The company said its increasing momentum (and therefore
`volume) allowed it to wrangle better deals with telephony companies, and then it passed the discounts
`along to customers.
`
`The graph below (via TechCrunch) charts Twilio's relative growth in comparison to price changes,
`demonstrating that those discounts typically spurred on additional growth for the company.
`
`At the time, Twilio said it had 10,000 developers using Twilio SMS alone.
`
`— Twilio Today —
`
`In its eight years as a private company, Twilio raised over $233 million from Union Square Ventures,
`Bessemer Venture Partners, Founders Circle Capital, T. Rowe Price, Fidelity Investments, and many
`others.
`
`On June 23, 2016—eight years after the company was founded—Twilio went public on the New York
`Stock Exchange (NYSE) surging 92% to $28.79 a share in its first day of trading. The company had
`set its IPO price at $15, above the expected range of $12 to $14.
`
`Today, Twilio's stock is up 14.9 percent (for the year) to $33.12 (as of Friday, November 4). After a
`market downturn that affected public markets as well as the startup investing climate, Twilio's
`successful IPO was seen as a hopeful sign that other unicorn companies (valued at over $1 billion in
`the tech industry) could also start going public. Uber, Airbnb, and Snapchat are some of the biggest
`names on deck.
`
`Related news
`
`Twilio raises $3.7 million for cloud comm
`
`Startup delivers powerful API for businesses looking to expand and refine communications
`
`Technology trends and news by Ronny Kerr
`
`How does Twilio make money?
`
`Twilio clients pre-pay for services like SMS messaging, phone numbers and minutes, then draw it down
`
`What's your business model? by Steven Loeb
`
`http://vator.tv/news/2016-11-04-when-twilio-was-young-the-early-years
`
`6/11/2018
`
`TWILIO INC., Ex 2019, Page 4
`TELESIGN CORPORATION v. TWILIO INC.
`IPR2017-01977
`
`