Twilio: Jeff Lawson

27:16They need to accept payments. They need to, you know, do marketing. They need the security. They need, like all this sort of, they need to get their store online. All these lists of things that they, that they might need to do. Yeah. And then at the end of this process, like we spent a few months, maybe like a month. And we had a list of like a thousand ideas of like problems that needed solving. Okay. Then we moved to the second phase of this. Wow. which was, okay, let's brainstorm new technologies that are emerging that might allow us to go solve some problems. So you'd brainstorm, you know, the web, or, you know, at the time it was like Bluetooth or GPS or all these different technologies.

27:57So do a long brainstorm of that, and then we narrow it down to the most promising ones. And then the really interesting part was you did a matrix. So you get on a big whiteboard and on the horizontal axis, you would write all of the new technologies. And then on the vertical, you would write a bunch of those problems. And then you would draw a line and connect them or something? Well, like you brainstorm. You'd say like, well, if a business needs to acquire new customers, can Bluetooth solve that problem? Well, I remember my favorite one was called the Thing Locator. and the observation was that you had pagers.

28:35You remember pagers like doctors would have? There's always doctors and drug dealers, right? Of course, yeah. Yeah. Sure. Well, pagers were going out of style. People didn't need them anymore, but yet every city was blanketed with infrastructure to do two-way paging. And we said, well, if you're always losing your keys or your car or your whatever, couldn't we put a GPS chip and a, like a pager radio into a small package and let you just keep track of where things are? And this was in 2000. Yeah. Called the thing, the thing locator. And so we did a bunch of research and what we found was that the power requirements of both of these things, GPS and the pager network would be the form factor of this thing would be pretty large.

29:22Yeah.

29:52alert here, but the business that you decide to pursue is a brick and mortar retailer for extreme sports called Nine Star. And you would sell skateboards, BMX bikes, and snowboards. That is surprising that that was the idea that you all landed on. In what probably was a condemnation of this brainstorming process. Yeah. I mean, totally. My co-founder, Matt, had had this idea like five years earlier for a like what was called the category killer retailer for extreme sporting goods. Because what he observed, he grew up in Santa Barbara and he observed that these sports, you know, skateboarding, snowboarding, surfing, they were exploding in popularity.

30:38You think about the X Games and like this is like the clothing brands everybody was wearing and, you know, Tony Hawk and all these things. But if you're going to carry 300 surfboards and 1 ,000 skate decks and BMX bicycles and all that, you need a big footprint store. And we looked at it, and we were looking at retail in this time and saying, well, everything seems to either be going online or is becoming really experiential. Think REI. Think like there's a climbing wall in the store. They've got great selection. The salespeople are knowledgeable. The salespeople do the sports. You wanted to do an REI for extreme sports, essentially.

31:23Yeah. We said REI. If REI is the granola eating sports, we're the Pop-Tart eating sports. And by the way, were you a skateboarder or BMX or a snowboarder or anything like that? I did none of these sports. Okay. I got you. All right. So what would your role be in this company? Like you would do the – like if this was a brick-and-mortar retailer, what was the technology aspect of it? Well, you know, I was asking myself that same question. I immediately said, okay, well, like why am I doing this? Like I'm not doing these sports. You don't know retail. I don't know retail. I don't know skateboarding.

31:58I don't know anything. But the one thing I thought was interesting, I said, you know what? starting a bricks and mortar retail business from scratch in the year 2000. And, you know, basically this was 2001 at this point, I could build whatever technology I want to make this a great customer experience. What would I do? What can we build? And I kind of latched onto that problem being a really interesting one. Again, going back to like, what's a great way to learn new things or discover new technology is just commit yourself to the domain. and go figure it out. When we come back in just a moment, how Jeff discovers that selling skateboards is not his true passion in life, and how that discovery eventually leads him to Twilio.

32:47Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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36:54Hey, welcome back to How I Built This. So it's around 2001. And after much brainstorming, Jeff and his partner Matt have decided that what the world really needs in that moment is a brick-and-mortar store that sells skateboards and snowboards. And to start out, they're able to get some backing from Kevin O 'Connor, the guy who helped them with their first business. Well, luckily for us, Kevin was just getting into surfing himself. So he sort of understood the market and was really interested in this idea. And so he said, yeah, like, I'll be your first funder. Let's go. We're going to move out from New York to Southern California, which is the home of all these sports.

37:34Let's open our first store out there and I'll be your first funding. And we'll go find more money, of course, but I'll be your first backer. Where was the first store? The west side of Los Angeles. And it took us a couple of years to get the store open, but we finally opened it in basically Westwood and the corner of Olympic and Sepulveda. And so I spent the next like several years actually building a point of sale system from scratch to run the business on. And by the way, at its height, how many stores did Nine Star eventually open? Well, this is where we ran into the fact that retail is a brutal business.

38:14Our first store did very well actually. So we put a skate park in the store. like there was a kids could skate in the store. We had a video game lounge in the store. We had amazing selection, great employees knew the sports inside and out. And the store was like the place to be. In fact, we put a half pipe in the parking lot and it drew people in the door. It was amazing. So we said, Oh, this is great. And so we raised some more money and we opened store number two inside a mall in Orange County, and it was a dud. And so we had one store that was doing really well, one store that was not doing well.

38:53And so the average of both was the company was just basically staying afloat. I think why you were still trying to get that first store off the ground, you actually decided to go back to school, back to University of Michigan to finish your degree. and like what was your plan after you finish? We're just going to head back to LA and kind of pick up where you left off? Yep, yep. And first of all, going back to school when you are in your mid-20s is a blast. It is like literally the movie Old School. And I kept in contact with my co-founder who did actually in that summer started building out the store.

39:30And I said, great. So when I finished college, I moved back to the west side of Los Angeles and we got hustling to get that store open. So did this thing, got the company off the ground. We opened the store and we're running this store, this retail store. I'm sitting in the back of the store, writing code for this point of sale system. I've got, you know, skate kids who are skating in every part of the store, making all this noise with their skateboards. Cause we made the whole store basically a skate park. You could skate everywhere inside the store. And so kids are skating everywhere. You kept hearing these like bang, bang, bang of like the skateboards landing everywhere.

40:06The employees are like these young skater guys and they're like running in like, hey bro, do you know where the size nine shoes are? And I'm like, no, I don't know where the shoes are. I'm trying to write code here. And after a while I realized I actually hate this business. I hate the customers. I hate the employees. I hate the stuff we're selling. And for a software developer sitting in the back of a skate shop, trying to focus on writing code, getting constantly disrupted by everything going on. I again had this realization that I'd made the same mistake I made at StubHub, which is for some reason I'm building this business without a love for the customer.

40:48In fact, I had sort of grown to hate the customer. And I was like, this is a problem. Now, also, I had at this point gone multiple years without a salary. My bank account is drained. I've racked up credit card debt. and I'm actually not even meeting my minimum payments at this point and I'm like something's got to give and so I kind of float my resume out there to a few friends and I'm like maybe I should just go work at a big company like I literally had no experience in a big company like I knew they had these big buildings they had a logo on the top of the building and people walked in at 9 and left at 5 but I had no idea what people at big companies did all day because as a startup You're just moving.

41:31You're just doing all day, every day. Yeah. And I'm like, I feel like if I want to be an entrepreneur and like succeed in building a great company, knowing what happens in one would be really useful knowledge. And by the way, recharging my bank account is another added bonus. Yeah. So naturally, you go to work for Amazon. Yeah. And I think this is around 2004. and presumably you moved to Seattle and you go, I think you went to work for what at the time was a new division, which was AWS, Amazon Web Services, which obviously now is their biggest engine of revenue. And you were there like a little over a year.

42:13But at some point, obviously you had this idea to start a new company, which would become Twilio. But what was the insight that you had at Amazon to make you think, Like – because we should just say this at the start. Like the vast majority of people who listen to our show, right, they're listening for consumer-facing brands. So, I mean, Twilio, I think you'd admit it's a little bit hard to explain to people who don't know what it is. We'll get there. But what was the insight that you had at Amazon where you thought, oh, you know, I can turn this into a business? You know, I've always wanted the – like the things that the big companies have I had always wanted.

42:52and I remember like I called an Apple store one day and I got this amazing like hello thank you for calling the Apple store for hours press one for you know you get the typical thing I was like that's so cool and how did they do that like when you call my store like someone has to answer the phone and be like hello and I was like how do they do that and I researched it a bit and it was like very expensive very sophisticated like you have to go buy hardware you have to go work with carriers You have to roll out copper wire to a carrier to your closet. You got to go buy software. There's people involved who are the experts in telephony.

43:26Just to have that automated phone line? Yeah, right? It was incredibly complex. And in the skate shop business, I remember I would work in the store. I'd work in the front of the house, and I'd be at the register, and the phone rang all day every day. And you pick it up, and every time it was someone saying, hey, I got a question for you. Is my surfboard repair, is it done yet? And I'd be like, well, okay, tell me your email address. And I'd like, you know, have the phone hunched in my ear with like my shoulder holding it up while I'm typing in a keyboard. And looking up in the system that I wrote, whether the skateboard was or the surfboard repair was going to be done.

44:02I'm like, nope, it's still gonna be ready Thursday. And I was like, why did I have to do this? Yeah. And what I saw at AWS was this idea that like, oh, now every business can have the most sophisticated technology. The same infrastructure that the giants, that the Amazons and Googles of the world are using to build their business now is available to everybody. And I kind of saw what Amazon was doing because I'd been there and they're doing it for compute, for servers, for storage, for databases. But I thought about my set of experiences and I was like, you know what I would really want it for?

44:36It's like, how do I talk to my customer? I bet a lot of entrepreneurs, a lot of software developers are having this problem too. So essentially, the idea was to make it easy for companies, technology companies, to communicate with their customers or to enable some kind of communication with their customers using a phone. And to do that at that point was very expensive. It required lots of hardware. There was essentially no cloud version of this. It was basically like having servers in the old days. Now you'd worked at AWS. people were working with cloud-based servers, you're essentially saying, why can't we do this with telecommunications?

45:21Well, you know, like I remember I would call, I would say, okay, we want that fancy like phone thing. Yeah. So it's like, I don't know anything about that. I'm a software developer. I don't know the first thing about how to make a phone ring. So I call the people who it seemed like they did. Like I call like Cisco and say like, hey, you know, it seems like you people know how to make the phone ring. Like, tell me how to go about doing this. And they'd say, well, you know, it's going to take us two years and cost us about$4 million, but sign here, we'll get started. And every time I remember having this same reaction, I was like, well, first of all, that's funny, like$4 million, like, yeah, I'm a startup, I don't have that kind of money.

45:54But even if I did, let's say I was some big company, I would kind of look at it and say, well, actually, you know what is even more problematic? It's like this two years idea. Because what I was observing was that everything in the world of software has gotten faster, where it's like, hey, we no longer design a product and spend years building it. We look ahead the next two weeks and design the next sprints worth of work, build that and then reevaluate. And that's like the nature of agility has really entered, not just the software development world, but like the business parlance, which is you're no longer embarking on multi-year projects because those always tended to fail.

46:32Instead you kind of work more iteratively and that's how you unlock value. That's think about all the apps on your phone. They're getting updated like all the time. But then you looked at the world of like, but if I needed a phone to ring, now we're back into the years and millions of dollars world. I said, why can't we fix that? Why can't that just be a line of code? And that was where Twilio started. All right. So you decide that you're going to pursue this and you're going to do it with two friends, Evan Cook and John – is it Walthias? Walthice. Walthice. And so did you leave Seattle? Did you move back to California?

47:07So we first had this idea. We talked to a bunch of developers that were just friends or acquaintances of ours. And we said, like, hey, you know, if you had, you know, have this idea where there's this like service that's running in the cloud that with like, you know, line of code, you could hit it and you could make the phone ring and you could do all these neat things. You know, would you have have use cases for it? And a funny thing happened. The developers would first say, uh, that's a, you know. Yeah. How about how about the Mets? You know, and I was like, well. okay, well, maybe this is a bad idea.

47:37And then every single time, about a minute later, they would say, hey, wait, can you go back to that phone thing you were just talking about? You know, could I notify my customers when a package ships from an e-commerce site I was recently building? And I'd say, yeah, yeah, you could. And they'd say, oh, interesting. You know, like one of our early customers was Uber. And they came to us and said, well, actually, we want to let you know when your ride's arriving, Can we do that with Twilio? We said, of course you could. And they, like a day later, rolled out the first version of getting a text message when your car is arriving.

48:14Okay, just a question here, right? This is 2008. Obviously, everything we're talking about today is just normal. Like I think everyone listening takes this for granted. But when a developer would say, oh, wow, I can notify my customers when a package arrived. I mean they could do that with email at that point already. So what was the – when somebody would say that to you, say, well, I can't really do that through email. Like what would you say about your product or your idea that would make it better? Well, people did do it via email, but there was sort of like a – it was actually they were coming to me with the idea as opposed to the other way around because they were saying like if customers are calling me all day saying, did my package ship, did my package ship.

48:53Like we almost forget about the early days of the internet when you would always be wondering when the thing was going to arrive. and it might be like weeks, like, you know, and when people would hunt for like the customer service phone number to call and very quickly, what customers started asking us was like, you know, the phone is, the phone calls are great, but what about text messages? You know, could I send a text message? Because that would be even more convenient. And we kind of looked at it and said, yeah, like, and, you know, wearing my consumer shoes, I'm like, I would prefer a text message in a lot of these cases.

49:25And then wearing my developer hat, I was like, oh, yeah, a lot of those situations that I described before would actually even be better as a text message. I want to ask you a bit more about that in a moment. But I want to ask you about how you – when you started to explain this idea to people because to build this, you were going to need money. You were going to need a lot of money because you had to fire software developers and engineers and all kinds of people. How – what was the reception from – well, before we talk about investors, just from people that you met. I mean, yes, developers, they got it.

50:03They seem to get it. But when you would just explain this idea to people, did they understand it? Did they understand it? Were their puzzled looks? Was it like, oh my god, you've got a hit? What did people say to you? Well, you know, in the early days of a company, the two people you really need to explain yourself to are customers and investors, if you're raising investor money. Yeah, yeah. And so we talked to customers, you know, the developers, and they were like, you know, the gears were going. They were like chomping at the bit. Yeah, look, when can I get access to it? So we started building the early prototype of the service and started giving access to those developers.

50:40And they immediately started building some really interesting stuff. and they come to us with great feature requests and they were saying, oh, can I launch this? And we'd be like, well, maybe not yet. This is like super prototype-y. So you could build the prototype with Twilio and initially the way you would make money or how you pitch it to investors was we get a cut, a penny or two pennies for every automated outgoing call and then every incoming call, we get a penny or something like that. Yep, yep. And so every phone call would be like, a penny a minute. And when developers embed these capabilities into their apps and interact with their end users, we're just going to make a little bit of money every time they're used, but those are going to add up over time.

51:23So the summer of 2008, we feel like we're rocking and rolling. We're going to go raise our first round of financing. And then later in the year, we're going to launch and this is going to be amazing. So I start, I'm still in Seattle. My co-founders live in the Bay Area, but I'm still in Seattle. I start flying down to meet with Silicon Valley investors, venture capitalists. And two things happen. First of all, it's the summer of 2008. Not a good time to be raising money. The financial crisis is in full swing. I mean, they are like, many of them were just like, our checkbooks are closed. I'm sorry.

52:00We're just not writing checks right now. So horrible time to be fundraising. But the second thing that happened, kind of universally. Like I go into these investors, I say, you know, we have this idea. It's this, you know, platform approach, software developers are going to build these services that use, you know, phone calls to go achieve all these business goals. And we're going to charge a pay as you go rate to make it super easy to sign up. We'd explain the whole thing and they'd say, well, yeah, I just, you know, it sounds interesting, but like software developers, you know, that's not, that's not a market.

52:29Like they don't have the checkbook. They don't have buying authority in their companies. Nobody knows how to reach them. Like no one's ever built a business for software developers before. So why don't you go build an app, you know, build a call center, build something in the cloud and, you know, come back to us when you've built that. And, you know, we'll, we'll think about it again. And I remember like meeting so many investors and they all had basically the same feedback that at the end of that summer, we, we had one investor that was really close. They got it. They were like, Oh, the developer thing, the plan, I think They were paying attention to AWS and they said, this is going to be amazing.

53:05Lehman Brothers collapses and they're like, sorry, we're not. Yeah. And so we spent that whole summer and did not have a dollar to show for it from investors. We raised no money. So we're like back where we started. We have no money. We have no investor interest. We didn't even have a bank account because you need like money to open a bank account. And we had no money.

53:30when we come back in just a moment how twilio begins to get customers and how jeff uses a proven guerrilla marketing technique to generate buzz free tacos stay with us i'm guy roz and you're listening to how i built this

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55:36Framer is where ideas go live start to finish. Ready to design, iterate, and publish all in one tool? Start creating for free at framer.com slash design and use code built for a free month of Framer Pro. That's framer.com slash design and use promo code built framer.com slash design promo code built rules and restrictions may apply hey welcome back to how i built this i'm guy roz so it's 2008 and jeff and his co-founders have gotten some pretty good early feedback on twilio other software developers they love it the problem is investors think it's a bad idea. And we had this very fateful meeting, I remember, where we said, look, you know, investors have told us we're wrong, that this is stupid.

56:36These are smart people. These aren't dummies. They're smart. Like, maybe they're right. Maybe we're on the wrong track. And so we said, maybe we should either just give up. Maybe it's a bad idea. All right, let's just go get jobs somewhere. Or maybe we should just pivot and like build one of those apps they told us to go build, even though we're not that passionate about it. And I remember we said, yeah, but our customers, like those developers who are early customers, they are loving it. They are building. They are using this. They're launching things and having all these ideas. I think what we've got to do is like we've got to follow through on delivering for those customers and at least get a product to launch and see what happens.

57:16It seems like your earliest customers, because you were, of course, eventually able to raise some seed money, and then you raised a lot more over the years. But it seems like your first customers were really focused on SMS, on text, and using this as a way to communicate via text or get people to sign up for things. Like you could say – you start to see these things as like text$1 to 5421 or whatever. and you would sign up for whatever that was. Like, was that a function of what you had built? Yeah. So we launched, and at first we were voice only. So we launched. We had basically nothing in our bank account.

58:01We launched - By the way, who was your first significant customer? I remember the day we launched, Sony reached out. And you'd say, Sony? What did Sony do? And you sort of think about some big enterprise use case. Well, it was actually Sony Music. And there was a music promoter who worked at the record label who was like, oh, I saw your launch post. I want to build this service. There's a band called Lamb of God. It's like a metal band. Yeah. He said, we've had this idea in our mind forever that we want to do what's called log rolling our customers, our fans, where they can sign up to get a daily phone call.

58:41and the band is going to record like an audio from the road. They're on tour. They're going to record their daily update and then customers can sign up and we'll blast out the phone call and you'll hear from the band every day. Wow. And I was like, that was the day after we launched. Like I'm on the phone with a, you know, a music promoter at Sony. And I was like, huh, there's like some real, like, you know, business needs are coming out of left and right here. And, but I remember like, first of all, it was a weird period of time because we launched and I remember like the day we launched, my co-founder, John, looking at this like internal dashboard we had saying, oh my God, like they're paying us, like seeing like, you know, credit card payments starting to come in and they're like, they actually trust us with their credit cards.

59:25They will actually, you know, willing to pay for this and that's the validation you're looking for and immediately started seeing it. And suddenly you saw this explosion where like most apps that you downloaded from the app store, you know, would text you to verify your phone number or would text you when your order ships or when you have a friend say something or whatever. And there were all these ideas that were coming out of the woodwork of things people had wanted, app developers had wanted to build into their apps but just never knew how to do before. And now they could. As you began to – just from a business perspective, right?

1:00:04As you begin to get some investors and more interest into 2010, for example, how did you go about hiring people? I mean, did you have like that massive expansion quickly or were you still relatively small? You know, one of the things that I have always taken from my entrepreneurial endeavors because most of my companies, like we did not have a lot of money. And so in the early days of Twilio, we said about, we said one of our values is be frugal. And sure enough, I remember we hired our first software developer who was not a founder joining the company, a guy named Adam Belli. And I remember Evan saying, hey, Adam is great.

1:00:47We really got to hire this guy. But he wants a salary of like 100K. And I was like, whoa, the sticker shock of paying someone that much money when, you know, the founders had made nothing. And then we gave ourselves a meager salary in the very early beginning. I'm like, wow, this is like, oh. And I remember telling Evan like, all right, like we're gonna hire him, but like better be worth it. Right. And it started growing the team at that point, but it wasn't for a couple of years because we just started to stay small and lean in those early days while we were building out with really pretty limited resources.

1:01:23Yeah. Wow. I think a big turning point for you was – or maybe not. I don't know. But Uber started to use Twilio. And I guess this is probably still early in Uber's history. So maybe it wasn't a significant amount of revenue at the time. I think the first time I used Uber, maybe it was 2012. I can't remember, 2013. But was that a turning point or not quite yet in 2011? You know, looking back at it, Uber, it was not clear that Uber was going to be such a big deal, right? Because at the time they were like town cars. It was like fancy. And Uber, when we won them as a customer, I think the whole company was about five people, right?

1:02:02So it's very early in their history. But there's a funny thing. Like I look back at that period of time, 2011, 2012, where, you know, Uber was a few blocks away in that direction. And Airbnb was a few blocks away in that direction. And the floor above us was Instagram. And like, we would throw a, like an office party on a Friday evening. And all of the people who founded these companies and were building these companies would just come over for a beer. And, you know, at some point it was the, it wasn't just Uber, I would say, but it was the sum of all of that entrepreneurial activity going on in our backyard, who were almost all of them, our customers that started to like really propel the growth of the company, especially after we added text messaging, which was the service that this new whole category of mobile apps that was getting born really needed.

1:02:51And we were the one everyone turned to. How, and essentially, it sounds like, was it just basically developers talking to other developers and that's who you're, that's how it grew? You know, in those days, the notion of like anything is possible with code was really permeating the world. And so you had these like hackathons. Yeah. And they were happening all the time, like every weekend, every college campus, every major city. Wow. And we were right there and we made sure to go to every hackathon. I remember one of the big hackathons in San Francisco was going on and it was happening over a weekend.

1:03:32And the hackathon organizers got wise to this. They started charging a lot of money to sponsor it. Like, oh, you want to sponsor our hackathon? Great, that's$50 ,000, right? And so they started getting wise to it. So I remember I showed up at one of these hackathons at 2 a.m. with about$700 worth of Taco Bell. Wow. That was probably the best marketing dollars ROI we ever got. And you just walked around handing people tacos. Tacos. wearing my Twilio shirt and just handing out tacos. And I remember I closed down that Taco Bell. There was a Taco Bell in Oakland that was still open at that hour. And I went on, I pulled into the drive-through and I said, how many tacos do you have left?

1:04:12I said, I'll take them all. And she literally turned off the open sign. That was a very guerrilla approach to how to reach the world's developers. And we really had to develop that. But I think I benefited actually from a lot of the guerrilla marketing that we did in my college campus for Versity. A lot of the similar things, like you're just getting to where your customers are and like screaming for the mountaintops in whatever the most relevant way is. And also your customers are a very specific set of people. It's not, it's developers. I mean, that's, and you, I guess going to hackathons, you know, you're going to find them there.

1:04:48And at that time, no one else was trying to reach them. We were like one of the only ones. Yeah. Yeah. I'm curious about competitors as you started to grow because, you know, you're going – you start with a few thousand developers and then tens of thousands and then hundreds of thousands. And you quoted around this time, maybe it was 2013, you said, you know, our end goal is to open the black box of telecom and move the world away from the legacy of Cisco and Microsoft's big expensive hardware that you put in your closet and watch age. I mean, that sounds like a shot across the bow. I mean, did you start to see competitors in some of the big companies like Cisco come in and say, well, we should do this too.

1:05:32We can do this. You know, it was interesting because one of the early questions we got from like investors, they said, well, won't carriers do this? Won't AT &T just do this? Right. You know, they could, I guess. But, you know, people always overestimate the ability for a big company to see an emerging market like this and actually invest in it because it is, in its early days, small peanuts compared to the scale those big companies are operating at, right? Yeah. So inevitably, like the carriers, they weren't dummies. Like they saw this trend of APIs and developers and innovation. They saw all this stuff happening.

1:06:12And inevitably, almost every carrier in the world that I can think of in that era, in those early days, like 2010, 2011, 12, built an API on top of their services and launched with great fanfare their developer platform. And every one of those carriers within 12 months had shut it down. Why? Because it didn't immediately pass their bar for like, well, is it making us a billion dollars of revenue? And if it's not, we don't care about it because it's not moving the needle for our big company. And that's the advantage that every small company has. It's like when we were, our first year, we made$200 ,000.

1:06:52Our second year, we made$2 million. For a startup, that's a huge success story. For a carrier-sized company, that's a miserable failure and like shut that thing down. We don't have time for that. And that's the natural advantage that every startup has over like incumbents in the market. And we saw that innovators dilemma just play out time and time again inside of the bigger companies while we went about building this. And now today we're approximately$4 billion of revenue. But like that's a 15-year journey and that's the nature of that creative disruption. Yeah. Uber eventually became a significant – very significant.

1:07:32I think Uber and WhatsApp became two of the most significant drivers of revenue. And I think Uber at a certain point was like 12 % of your revenue is coming from Uber. Because every time you ordered an Uber, right, Twilio was powering that in the background, right? They would tell you how long your driver was going to take. And I mean that was all basically coming through Twilio. But they essentially pull out of their relationship with you or drastically reduce it, I think, in like 2017. Was that something that, I don't know, freaked you out? You know, it actually didn't worry me. You know, our business model is usage-based, right?

1:08:18So when a customer sends a text message, it costs a very little amount of money, but those things add up over time. And what results from that business model is that a company like Uber, when you get in in the early days, as they expand, our revenue expands. But in some ways, when a customer is growing so fast, as Uber was during those days, you look at it and you're like, do I want my company to actually become just like the Uber story? Not really. I've got tens of thousands of customers at that time. So they were growing to be like a quarter of our revenue. I'm like, that's actually a problem.

1:08:52That's not something to celebrate. That's actually something to worry about. I'm curious about that as a case study because at that time, Twilio had gone public. And so you were a publicly traded company. And when that Uber decision came out, I think the stock plummeted like 30 % for some time. And you did talk about this, that actually there were mistakes that you felt you could learn from. Like, for example, you know, you didn't service them as well as you should have serviced them. Is that true? Do you feel like that was a lesson that you learned from losing that account? You know, there's a sense in certain customers, especially like very technology-driven companies, that they're like, yeah, we don't want a salesperson.

1:09:37Like, we just want – just leave us alone. Just give us a service. And, you know, we don't need to talk to you. And, like, I'm a software developer myself. So, like, I can understand that mentality. But at some point, like a customer gets big enough that you're like, first of all, someone in that business is signing the check every month. We need to know that person. Yeah. And even though the customer was saying like, we're fine, we're okay, like we don't need you. And we had assigned our sales resources elsewhere. The mistake we made was saying like, no, we needed to be walking the halls. We need to be really working that account.

1:10:10Like white glove treatment. Well, and figure out, okay, if the developer doesn't want to be talking to us, so be it. somebody else might. There's a budget owner somewhere who's spending now millions and going on tens of millions of dollars on our services. We at the very least have to know that person really well. And that was the transition that we had not really made because we were taken a little bit by surprise when Uber one day said, you know what, like we actually want to start, we want to use less of your services. So it was a bit of a tough transition for us, but I remember standing up in front of the company the day after that happened.

1:10:45And the company, we're a newly public company. I think it was our third quarter reporting as a public company. Everyone was like, well, what happened? Like, I thought being public was just like, you know, up and to the right. Yeah, right. And, you know, I remember saying like, look, you know, this company is not about one customer. We've got tens of thousands of customers and we're building this for an enormous opportunity This is far bigger than just the activities of one customer. And I think that was the right way to look at it. Let me talk about heading up a public company because it's a different beast, right?

1:11:19You've got to disclose and your books are open. And I think you debuted at$15 a share. So if you bought Twilio stock when you went public, you would still have made a lot of money today at$60. Today it's roughly$64, almost$65 a share. But like many technology companies, 2022 is not a good year for you, right? There was a 70 plus percent decline in the stock value. I mean, every time I talk to the head of a public trade company, they say, I don't pay attention to the stock price. I don't believe that. I just don't believe that they don't. I mean, do you, it must weigh on you to some extent, or do you, do you just feel like, well, you know, there's not much I can do to move this thing.

1:12:04You know, everything guy is about, about timeframes, right? If you look at the stock on a hour by hour or even day by day basis, it, you know, I kind of liken it to imagine you were playing in a basketball game, but the score did not go up when you made a basket the score randomly changed you know you're dribbling up the court and you get 10 points and then you make a shot and you lose five points and it's like a ran like the score is disconnected from the thing you're doing would that be a fun game like no right you'd be like this is a bunch of bs like why am i doing this and so if you look at a stock price on the day-by-day minute-by-minute basis you're like this is completely disconnected from what I'm doing today, right?

1:12:50Like what new information exists in the market on like a Tuesday afternoon when we're not reporting earnings about our company's future profit potential? There's no new information. So what's causing the stock price to move? I don't know, a bunch of stuff that's not in our control. And so in order for you to actually believe that you have agency over the outcome, you have to ignore the short term. But you also have to believe that in the fullness of time, The activities we undertake do affect. But that plays out over years, not over like minutes, hours, days, or even quarters. Yeah, I'm curious.

1:13:29Your take on this, there's a headline in the Washington Post today, for example, the day we're talking on this interview. And it's something like the golden era of Silicon Valley or the golden era of tech is over, right? You've seen these, and I'm sure you've seen these over many years. And right now, we're in the midst of just a period of large layoffs, every single company. Twilio obviously had to lay off about 11 % of its workforce in September of 2022. I mean, do you think – and also the explanation that we hear is that there was overhiring in the previous two years. But is that the beginning and end of why there are layoffs in your view?

1:14:19I mean, for example, with Twilio, is that why? Did you overhire? You know, overhire is a simplified way to talk about it. But I think you have to look at the root cause. But the end result is, yep, if you have to let go of people, it means you hire people that in retrospect you wish you maybe hadn't hired. But the reasons why are more interesting. when you are operating in an environment where interest rates are very low, meaning an investor can put their money into a very safe account, like a savings account, and make nothing, then they're much more likely to want to put their money into a more speculative stock, like a tech company.

1:15:06But once the savings account is making 5%, 6%, whatever, in a higher interest rate environment, you're like, well, now I'm less likely to take risk. That's why the equation of tech companies that are gonna spend a lot today to go build market share. And if you remember, like the internet is a massive market. And so for everybody who's building an online business, you're like, I've got billions of people who are my potential customers. There's a tremendous amount of entrepreneurial activity. I'd be a fool not to invest as much as I can and go building my market share today for this enormous market we're in.

1:15:43And that's what people have done. But once you change that story and say, well, actually the profits that we said will eventually give the equity value, it's the eventually part that changed because the eventually became, well, now it's like a lot closer to today. And that's what makes this period so hard. Now this happens, this is a business cycle. This business cycle happens all the time. This is not the first time we've been through one of these cycles. But the one thing that's different is the last business cycle, the boom time, the low interest rate environment went on for a pretty historically long time.

1:16:18So there's a lot of people in the workforce, for example, who have never seen a high interest rate environment in their career. And that created a whole generation of entrepreneurs and workers and investors too, who are accustomed to like revenue growth, future opportunity, all that. And suddenly you look at it and you're like, oh, actually, current day profits are highly valued. And that's the change that the whole industry, especially in tech, is going through. And that's a difficult transition because our muscle memory is so oriented towards the last 10 and 15 years. You've got, I think, roughly 7 ,000 employees all around the world.

1:16:57Is that about right? About right. Yeah. And we're now in this new kind of phase where, you know, a lot of companies are still grappling with how to, whether to bring people back, right? There are lots of companies that are demanding it. And I know you are essentially fully remote company. Some of the concern that I'm hearing from leaders and founders and CEOs is that it's really damaging to the company culture when everyone's remote. That actually, it's hard to cultivate a sense of belonging and other things involved in working in a space where you're interacting with other people. How do you feel about that?

1:17:45I mean, do you think that's a fair, because I think it's a pretty fair assessment of what's going on. What's your take? You know, I think the hard thing is when you go extended periods of time without the ability to have that face-to-face. And the challenge that a lot of companies are having in the current environment, because you see, there's a lot of startups that were born during the pandemic. Right. That were purely distributed because like, look, that's all you can do during a pandemic. And like, I think their cultures are probably doing fine. But then you've got a lot of companies that have a big investment in real estate.

1:18:22and those companies, you're saying, I can't afford to carry all this real estate that people don't want to go into and afford for people to travel everywhere to go see each other. Right. I got to pick one or the other because I only have so much budget. So just out of curiosity, you've got a lot of real estate. We do. Yeah. And it's not used. Yeah. I mean, there's a building on the side of the 101 in San Francisco that, right, headquarters here. Yeah, our headquarters is in Soma. You know, at the beginning of the pandemic, we had, I think, three buildings in San Francisco. And today, you look at those offices, they're about, you know, low single digit percent utilization.

1:19:05Wow. Yeah. So what are you guys going to do? I like face-to-face interactions like I think most human beings do, but I do not think we need to have it on as regular basis as like the nine to five office used to have us doing it. And so if I have to pick, which as a CEO, I basically do, I am picking a distributed company that as we work through the phases, we'll be able to get together on a regular basis and in teams or divisions or departments, have fun together, break bread together, and then break up. And so if I have to pick, that's what I'm picking. But the challenge is to get there. I personally believe that the future of a company like ours, I think that the company's offices are going to consist of three different types of locations.

1:19:59I think you'll have number one, like a showroom, the place where you bring customers or like recruits or like a place that looks really fancy and nice. And like, you know, people are looking, but it just looks like your company. It's a physical manifestation of your company. Yeah. The second is you need offsite space. If, you know, once a quarter employees are traveling from, you know, wherever they are to the, to meet, wouldn't it be nice if they had an experience that felt like your company? And those are like regional, like, you know, you can have one in North America. That's where teams do their offsites.

1:20:30And by the way, if everybody's doing this, it'll be cheaper than renting a hotel every time. But the third is my favorite. The third type of office space are coffee shops. like I actually think that instead of having a formal office in a city what you might want is like a thousand square foot coffee shop it's only for employees you badge in but it's like hey you know I work from home often but you know I need to get out of the house I need to concentrate more the you know I got to get away from like a distraction at home or I just want some energy around me so I can go to a coffee shop and like you know for a few thousand square feet like you You could have one in every major metropolitan area or even every neighborhood in some major areas and have enough employees in those areas to be able to justify the cost because they go in every day.

1:21:14And I think that combination of like the showroom, the destination, off-site space and the coffee shops ultimately will solve the problems of like why does the company need physical places? I think it's those three problems. You know, when you reflect on your journey and the failures you had early in your career, which were very valuable clearly because they – you were able to take all of that knowledge and those experiences and apply them to what you would eventually build in Twilio, which is a multibillion-dollar giant now. How much of where you are today do you attribute to your work, your work ethic, your skill, your intelligence?

1:21:54And how much do you think has to do with getting lucky? I think we're all a product of our environment. So much of what we know or have the opportunity to do or just problems that we end up getting visibility into or having the resources to go solve them. I mean, these are all things that are a product of like how we were raised, when we were born, where we were born. And so you can seize those opportunities or not. But the first thing you need is those opportunities to exist for you. And so I definitely feel tremendously lucky to be born where and when and all sorts of things. And I don't take that for granted.

1:22:42I take it very seriously that we have an obligation for those of us who have had opportunities to use part of our time and our money on this planet to try to create more opportunities for more people.

1:22:58That's Jeff Lawson, founder and CEO of Twilio. By the way, the name Twilio is, of course, totally made up. Jeff and his team were looking for words that kind of sounded like telephone. So tell, twee, hello, things like that. And in 2008, they got a really great deal on the domain Twilio.com. It only cost them seven bucks. Hey, thanks so much for listening to the show this week. Please be sure to follow the show however and wherever you listen to podcasts on Apple Podcasts. you just click the plus sign. And on Spotify, you click follow. If you want to contact the team, our email address is hibt at id.wondery.com.

1:23:40If you want to follow us on Twitter, our account is at howibuiltthis and mine is at guyraz. On Instagram, we're at howibuiltthis and I'm at guy.raz. This episode was produced by Kira Wakim with music composed by Ramtin Ereblui. It was edited by Neba Grant with research help from Sam Paulson and technical assistance from Hans Copeland. Our production staff also includes J.C. Howard, Casey Herman, Carrie Thompson, Alex Chung, Elaine Coates, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This.

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