Twilio: Jeff Lawson

When Jeff Lawson co-founded Twilio in 2008, he had already been through a series of start-ups. Some succeeded, others fizzled out—but each provided insights that led him to build one of the most extensive communication platforms in business. Fueled by his frustration juggling customer calls while trying to run a surf and skate store in LA, Lawson realized he could use his coding skills and knowledge of cloud computing to help companies connect with customers. Twilio’s early communications technology quickly gained traction with developers at other start-ups like Uber, which used it to text riders that their car had arrived. Despite early skepticism from investors, Twilio eventually grew into a $4 billion business, with customers like Nike, Toyota, OpenAI, and Airbnb. This episode was produced by Kira Wakeam, with music by Ramtin Arablouei Edited by Neva Grant, with research help from Sam Paulson. You can follow HIBT on Twitter https://twitter.com/HowIBuiltThis & Instagram https://www.instagram.com/howibuiltthis, and email us at [email protected] mailto:[email protected]. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Guy Raz?

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• 0:46Guy Raz?

  build the prototype, analyze the market, maybe even come up with the idea, what separates the people who actually build something from everyone else? I don't have a clean answer yet, so I've been sitting with it with Claude. There's hope in hard questions. Ask yours at claude.ai/hibt. We get support from U.S. Bank. A question I love asking founders. What's the one decision you almost didn't make? The one that changed everything? Because it's never the obvious stuff. It's never, I decided to start a company. It's the small, boring, Tuesday afternoon decision you barely remember making until you realize it's the reason everything after it either worked or didn't.

• 1:32Guy Raz?

  Say you're 18 months in. Business is growing. You've got expenses coming from six directions. Gas for the van, office supplies, your phone bill, team lunches that are actually client meetings, and you're putting it all on whatever card you grabbed in year one. You're not thinking about it. Why would you? You've got bigger problems. But here's the thing. Path A, you keep going like that. End of the year, you're sorting through statements, trying to figure out what went where. You've left hundreds, maybe thousands, on the table in rewards you never earned, money that could have gone back into the business. Path B, you pause and get the US Bank Triple Cash Rewards Visa Business Card. Now, you're earning 3% cash back

• 2:16Guy Raz?

  on gas and EV charging, office supply stores, cellphone service, and restaurants. You pick up an extra $750 cash back as a bonus. And you've got a low APR on purchases and balance transfers for 12 months while you're scaling. Same business, same expenses, two completely different outcomes based on one small decision. Visit usbank.com/business to learn more. The creditor and issuer of this card is US Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions apply. If you travel often, you'll want to hear about this unprecedented offer. For the first time ever,

• 3:00Guy Raz?

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• 3:45Guy Raz?

  or bring a guest to the Delta Sky Club. Make every trip feel more rewarding with the car that upgrades your travel. Apply today at delta.com/cardsocial. Offer ends November 4, 2026. Minimum spending requirements and terms apply. Flights are fulfilled as flight certificates valid for Delta Comfort or Delta Maine to select domestic destinations. Book 21-plus days in advance. Up to $80 per person and taxes and fees apply. Other restrictions apply. When I pull up to a gas pump to fill my car, I'm not thinking about chemistry or engineering. I'm thinking about getting in, filling up, and getting on with my day. And it reminds me a little bit of the founders I talked to on this show, because the best

• 4:27Guy Raz?

  ones obsess over things their customers will never see. Tiny details, invisible improvements, relentless iteration. And not because anyone's watching, but because it makes the product better. That's what the mobile brand does. It engineers fuel the same way great founders engineer their products. Mobile Supreme Plus Premium Gas helps keep engines three times cleaner, which can mean better performance and improved gas mileage. It's for people who care about what's under the hood, even if they never see it. Three times cleaner compared to mobile, regular gas in port fuel-injected engines. Actual results may vary. Visit mobilefuels.com for details.

• 5:11Speaker 01

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• 5:23Guy Raz?

  How I Built This is pleased to have Upwork as our presenting sponsor. Visit upwork.com to get hiring. Upwork has a message for you. Everything you know about business, it was made up by a bunch of guys 100 years ago. Don't stay bound to their antiquated rules like the nine-to-five workday, commuting to an empty office building, or only hiring full-timers. Embrace a new way of working with Upwork. It's a portal to the future of business, and it's disguised as a website. Go to upwork.com. There you'll see the light and also find talent for projects of any size, from simple deliverables to complex projects, from short-term help to full-time hires. You can finally let those old business titans and their tired ideas rest in peace. This is how we work now.

• 6:08Guy Raz?

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• 6:14Guy Raz?

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• 6:59Guy Raz?

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• 7:23Speaker 02

  We had this very fateful meeting, I remember, where we said, "Look, investors have told us we're wrong, that this is stupid. These are smart people. These aren't dummies. They're smart. Maybe they're right. Maybe we're on the wrong track." 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, we've got to follow through on delivering for those customers and at least get a product to launch and see what happens."

• 8:05Guy Raz?

  Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built.

• 8:19Guy Raz?

  I'm Guy Raz. And on the show today, how Jeff Lawson hated the hassle of customer service and built a company to deal with it. Twilio, a multi-billion dollar communications business that you are probably using every day without even knowing it.

• 8:38Guy Raz?

  As longtime listeners to HIBT know, I don't tend to interview a lot of founders behind software as a service companies, not because they aren't interesting or worthy. They are. Many of them are multi-billion dollar businesses. But this show generally focuses on consumer facing brands, products or services we buy or use every day. But the story of Twilio, which you will hear today, is incredibly fascinating and hopefully instructive, because Twilio was started at a time not too dissimilar from this moment right now in 2023. It was 2008, the middle of the financial crisis. Startup funding was drying up. Financial institutions were being tested.

• 9:22Guy Raz?

  And not that many investors understood what Twilio did or how it would make money. So its founder, Jeff Lawson, really struggled at the beginning. Now, before I go on, let me explain what Twilio actually does. When you get a text message from a company saying your package was shipped, or your food was dropped off, or your car has arrived, the technology that makes that happen is often powered by Twilio. Its communications technology connects big brands like Airbnb, or Uber, or DoorDash, or even Nike and Toyota to consumers in ways that have become so natural, so intuitive, that we barely even think about them today.

• 10:04Guy Raz?

  Twilio does around $4 billion in annual revenue, and it's used by around 10 million software developers around the world. By the time Jeff Lawson launched Twilio in 2008, he'd already been through several different startup ventures, some of which ultimately failed. Jeff's first business posted students' notes from college classes. That company got erased when the dot com bubble burst in 2000. When he decided to launch his second company, he and his co-founder took one of the most systematic approaches to brainstorming ever. They created an elaborate matrix of problems that needed to be solved. And they set those problems against a list of technologies that might solve them.

• 10:48Guy Raz?

  And after all that brainstorming, Jeff and his co-founder decided to launch something that had almost nothing to do with that matrix. They opened an extreme sports shop that specialized in skating and snowboarding. That idea also fizzled out, but Jeff wound up drawing on that experience, as well as many others, before he launched Twilio. And we'll get to all of that. But before we do, here's some background. Jeff grew up in the Detroit suburbs in the 1980s and 90s. His dad was a doctor and his mom was a teacher. And his first business was doing video production for birthday parties and bar mitzvahs. He started his next business as a student at the University of Michigan.

• 11:30Speaker 02

  Yeah, so, you know, a funny thing happened. I get to college, it's the fall of 1995. And, you know, most people, when they go to college, the thing they're most excited about, like, when they first get there and get dropped off by their parents, is like, oh, well, you know, you're gonna go party, or you're gonna go find some alcohol, or, you know, go start dating, and go to, you know, whatever. And I'm like, there's a fast ethernet jack in my dorm room. This is amazing.

• 11:58Guy Raz?

  Right. So while you were at the University of Michigan, while you were a student there, you basically came up with a business idea called Versity. What was it?

• 12:14Speaker 02

  Well, so we looked around at a variety of things that we could do and realized that there was, you know, on every campus, there were these lecture note companies.

• 12:24Speaker 02

  You know, they were and they were often run out of a copy shop, like the local, you know, copy shop where they would hire a college student to essentially drop off a copy of their lecture notes after every lecture. And it was this little cottage industry that, you know, seemed to form up around every college campus. And we looked at it and we were like,

• 12:44Guy Raz?

  When you say we, who's we?

• 12:46Speaker 02

  Uh, you know, I started the company with two friends of mine, Brian Levine and Michael Krasman.

• 12:50Guy Raz?

  Both students at Michigan?

• 12:52Speaker 02

  Yep, both students at Michigan. We were in the same dorm.

• 12:55Guy Raz?

  So you're looking at this cottage industry and you guys are saying what?

• 12:59Speaker 02

  We're saying, well, why, why should you walk across campus in the snow? Remind you, this is Michigan.

• 13:05Guy Raz?

  Yeah.

• 13:06Speaker 02

  To go pick up like after every lecture to get a copy of these notes when the internet, you could just sit at your computer and download it. It seems like an ideal use case for this thing called the web. Why don't we just pay note takers to put their notes online? And so we started this as just a very small idea. We had no idea what we were doing. I remember we came up with the brilliant name for it originally. It was called notes number four free.com. So notes for free.

• 13:35Guy Raz?

  Dot com.

• 13:36Speaker 02

  It's mind you, this is like 1996. We could have had any domain we wanted, you know, Google was available and we picked notes.

• 13:44Guy Raz?

  Notes for free.

• 13:45Speaker 02

  The number four free.

• 13:47Guy Raz?

  But, but, but if they were going to be, if they were going to be notes for free, how is that going to be a business?

• 13:55Speaker 02

  Ah, great question. If we gave them away for free, which seemed was the prevailing business model of the internet, which is everything was free and put advertisements on it. Well, then really the sky is the limit. And if you think about what people were talking about in terms of internet businesses in that era, it was, it was eyeballs. It was, you know, page views. It was hits and.

• 14:17Guy Raz?

  Still is in some places.

• 14:19Speaker 02

  Yeah, absolutely. And so what we're basically building was a very early content management system for lecture notes.

• 14:26Guy Raz?

  How did you, yeah, how did you know how to do that? I mean, was it you or was it your, your other, one of the other friends? Like, cause building website in 1997 was hard. Like people.

• 14:37Guy Raz?

  Even big businesses would hire like, you know, anyone to build a website because it wasn't like you just go to Squarespace or something. You had to know how to code it.

• 14:48Speaker 02

  That to me was the why we were doing it, right? Like, we actually didn't care that much about like lecture notes. It wasn't about the lecture notes. It was about the challenge of figuring out how to do these things, really.

• 15:01Guy Raz?

  Yeah. So, all right, so you start at the University of Michigan and you basically are soliciting lecture notes from students and ultimately, how many, I mean, what like, can you estimate? Like what percentage of classes you cover, like 20%, 40%?

• 15:17Speaker 02

  Well, we, so the, the sweet spot were these courses, you know, that, that like every freshman and sophomore had to take.

• 15:24Guy Raz?

  Econ 101.

• 15:24Speaker 02

  Yeah, right? Because you'd pay, you paid the note taker the same amount of money, but you had, you know, either dozens of potential buyers or thousands, based on which classes you picked, right?

• 15:35Guy Raz?

  Right.

• 15:35Speaker 02

  So what we started doing is we got a little smarter and we, we put up flyers around campus and say, are you in Econ 101? We'll pay you for your notes. And it was like every week.

• 15:44Guy Raz?

  And it would say, want to make extra cash? Sell your notes. Like, by the way, I, I still think the flyer method, especially in a closed environment like a college campus, is a great marketing tool, I have to say. I don't know if people, I don't, I haven't been on a college campus in a while. I, I still think they're pretty good. I look at flyers when I'm at like some weird, like, old school, like, organic co-op. I'll go to the bulletin board and, you know, there's like someone teaching yoga and someone, you know, doing a meditation course. I just, yeah, I like looking at flyers.

• 16:13Speaker 02

  Yeah, it's like, like someone had to take the time to actually go there and tape it up.

• 16:18Guy Raz?

  Yeah.

• 16:19Speaker 02

  Like that person was probably standing right where you are. And it makes it all very human and like small scale in a way that we don't actually get often these days.

• 16:28Guy Raz?

  Yeah. I, I think, I think it was around 1997 that, that, that one of your partners on this, this venture. Was doing an internship out in California and he met this guy named Kevin O'Connor, who was the, is the co-founder of DoubleClick, which is obviously a well-known internet ad company, it's eventually bought by Google. And, and I guess he told him about Versity and, and Kevin O'Connor liked the idea. And then he even said, like, maybe want to invest or something like that?

• 16:57Speaker 02

  Exactly. And that led to a meeting, actually, the following week.

• 17:00Guy Raz?

  Wow.

• 17:01Speaker 02

  Where, where I flew out and Michael flew out and we met with Kevin in his office. And he kind of says to us, look, you know, this internet thing is like a once in a lifetime event that's occurring around us.

• 17:15Guy Raz?

  Yeah.

• 17:15Speaker 02

  And sounds like you guys are working on this interesting thing. And you have the whole internet. Why are you focused on like, you know, one square mile radius of potential customers?

• 17:25Guy Raz?

  Yeah.

• 17:25Speaker 02

  Like, why don't you go use the internet for what it's good for, which is like scale?

• 17:29Guy Raz?

  Yeah.

• 17:29Speaker 02

  And, but to do that, you need money. So you should go raise, like investors are throwing money at internet companies. Why don't you go build a real company here?

• 17:38Guy Raz?

  So you dropped out of college to do this. You, you guys moved to Silicon Valley, California to pursue this idea, versity.com, full-time?

• 17:50Speaker 02

  Yeah, well, we raised first a, like a friends and family rounds. We raised money from people we knew and Kevin participated and a few other folks like that. And that was while we were still full-time students. We raised about, if I remember, a million dollars.

• 18:05Guy Raz?

  That's insane. I, I'm just-

• 18:07Speaker 02

  Well, you know, because at that time, this is like 1990, maybe eight at this point, like every, every dentist and every, you know, everybody is being told, you got to invest in this internet thing. And so people just throw money at us.

• 18:18Guy Raz?

  Yeah.

• 18:18Speaker 02

  And so we raised a million dollars. And we expand from like the University of Michigan to I think, you know, the Big Ten. And then we raised a true like venture capital round of financing. Again, we're still basically full-time students and we raised, I think, 11 million dollars.

• 18:36Guy Raz?

  Wow. You raised 11 million. You were 21 years old.

• 18:41Speaker 02

  And that sounds super small by today's standards.

• 18:44Guy Raz?

  It's nuts.

• 18:45Speaker 02

  That was.

• 18:46Guy Raz?

  Sounds nuts to me.

• 18:47Speaker 02

  That was a lot of money back then.

• 18:49Guy Raz?

  That's a lot of money. That seems crazy. You're 21, you've got this idea and you've no experience in people through all that money. I mean.

• 18:57Speaker 02

  Yeah.

• 18:58Guy Raz?

  And, and just, just out of curiosity, I'm assuming your parents were like, yeah, you could do this. 11 million bucks. You've got this thing going. Yeah, drop out. You can always go back to school if you want.

• 19:07Speaker 02

  Not at all. Our parents were horrified by this whole thing. They're like, you know, you're, you know, why aren't you finishing school? You gotta become professionals. You know, you gotta be doctors and lawyers and, you know, that's what their generation really valued was those professions. And.

• 19:20Guy Raz?

  Yeah.

• 19:21Speaker 02

  This idea that you drop out of school because, you know, you're making something on the computer, right? It seemed kind of, you know, like foolish to them. But, you know, as we got more and more traction and as like, you know, there were stories written about us in newspapers. And, you know, we're raising money from investors. I think they, they started to come around. And I remember we opened an office, we, you know, we had, we had an office in.

• 19:44Guy Raz?

  Where was it?

• 19:44Speaker 02

  In Ypsilanti, this town right outside of Ann Arbor.

• 19:48Guy Raz?

  Yep.

• 19:48Speaker 02

  Where the rent was like negligible, like we paid nothing. And we had, you know, first a small office and then bigger. We ended up taking over a whole floor in the Key Bank Building in Ypsilanti.

• 20:00Guy Raz?

  And, and did you, so, so you had this office in Ypsilanti, but you didn't have to, they didn't, your investors didn't say, hey, you've got to build this in Silicon Valley?

• 20:08Speaker 02

  Well, they did. So then we raised our venture round.

• 20:11Guy Raz?

  The 11 million.

• 20:12Speaker 02

  11 million. And they said, you need to move this to Silicon Valley. So we picked up that whole office. On Friday, everybody was at work in Ypsilanti. And on Monday, we were all at work in Silicon Valley.

• 20:26Guy Raz?

  Wow.

• 20:27Speaker 02

  And just picked up going out here and we then expanded from, you know, I think the, the 10 campuses that we were on to, to 50 the next semester. And then after that to 200.

• 20:41Guy Raz?

  I'm still trying to wrap my head around the fact that it was, this content was free. Wasn't, was there anybody, any of your investors who were like, okay, this is great. You're going to get a million eyeballs here. And then let's turn this thing, Versity, you know, now you're doing notes, but let's think of this as like the one stop shop for college students. This is going to be like the Princeton Review meets, you know, US News and Report ratings plus like, you know, what Yelp, well, eventually like all those things. Like, did anybody say that?

• 21:11Speaker 02

  Oh, absolutely. I mean, we kept building more capabilities into the product, but never once was the conversation about, and we're doing it to make revenue. It was always about, you know, more eyeballs, more hits, more page views. And in the course of that, we made a total of about $26,000 of revenue in the lifetime of the company.

• 21:35Guy Raz?

  I mean, it's, it's totally crazy if you think about that, but the idea was let's just accumulate eyeballs and it's, and you're now living there in California. And I think within a year of moving out there, you guys got an acquisition offer.

• 21:50Speaker 02

  We did.

• 21:51Guy Raz?

  From a, from a rival company.

• 21:52Speaker 02

  Well, you know, so we were all about academic content. And I remember there were these other companies at the time who were, they were like social websites for college students, but they were not based on academics. They were based on like just social things. And one of these companies was called collegeclub.com. And I, you know, I said, I remember at the time, I'm on the record as saying, there is no purpose for a social network for college students because college is the ultimate social network. You don't need to go online for it, which, you know, then later came back to bite me when, when, you know, Facebook became one of the largest website, right? But so I, you know, I made this bold declaration.

• 22:34Speaker 02

  Well, meanwhile, the college club company, they had been acquiring their eyeballs. They were in the eyeballs game too.

• 22:41Guy Raz?

  Yep.

• 22:42Speaker 02

  And I think they were paying like when they, when they took their whole marketing spend and they divided it by the users, they were paying something like $50 to acquire a customer. And so that's a lot of money.

• 22:51Guy Raz?

  Yeah.

• 22:52Speaker 02

  And when you took the entire cost of operating our business, including paying these note takers, we were like a dollar.

• 23:00Guy Raz?

  To acquire.

• 23:00Speaker 02

  To acquire a customer. It was so much more efficient. And they, so they approached us. They said, look, you know, we've got this community. Why don't you join up with us and together we'll go public and we'll, you know, obviously like make a lot of money because of public companies are like, you know, to the moon. And you're going to help us bring down our costs and we'll keep scaling this thing together. And so we did it.

• 23:24Guy Raz?

  And I should mention the acquisition price, they acquired your company, which had only made $26,000 in revenue for $30 million, all stock, no cash, right?

• 23:35Speaker 02

  Yep.

• 23:35Guy Raz?

  It was an all stock deal, but they were giving you $30 million worth of stock. And I mean, that's a pretty great outcome. I mean, for you, for your investors in such a short period of time.

• 23:48Speaker 02

  Yeah. And I think when it was the like, expected value of their IPO, the number was even much higher because, you know, the numbers they were showing us were like, this is going to be worth, you know, a few hundred million in a few months, right? So we're all saying,

• 24:01Guy Raz?

  Yeah.

• 24:02Speaker 02

  Hey, wow, look at that.

• 24:03Guy Raz?

  You're putting down, you're putting a down payment on like a mansion.

• 24:08Speaker 02

  Well, and, and think about it. Yeah. I'm 21. I don't think you're really thinking about mansions. You're more like, that's a lot of like subway or something. So we went from nothing, being college students, to like raising this small round of friends and family investors to now having this thing that's going to be public and worth hundreds of millions of dollars in about two years of just furious, like 22 hour days, not because we had to, but because we loved it, because it was like the, the, the time of our life. And then we get to college club and they move us from Silicon Valley down to San Diego, which is where they're based. And they have filed to go public in April of 2000, but the market has basically just closed.

• 24:52Guy Raz?

  Just starts to collapse.

• 24:53Speaker 02

  Yep.

• 24:54Guy Raz?

  This is the beginning of the dot com bubbly, bubble bursting.

• 24:58Speaker 02

  It's the beginning of the bust and they are bankrupt by August.

• 25:04Guy Raz?

  So all that work, all those investors, like all that money was gone.

• 25:08Speaker 02

  Everything gone, like it was worth zero.

• 25:10Guy Raz?

  Wow.

• 25:11Speaker 02

  You know, by, within months.

• 25:15Guy Raz?

  I mean, as a 21 year old, you were going to recover. Obviously you did. And that was, I'm sure not fun. But do you remember how that felt like all those people, like family and friends and like investors who lost everything?

• 25:28Speaker 02

  Yeah. You know, I remember conversations with some of the employees because we moved down to San Diego and people were kind of moving. At various times and they like, right when we get down there, they basically start saying, look, we're, we're gonna, we have to lay off basically your whole company.

• 25:48Speaker 02

  And I was like, are you serious? So like, yeah, we've been burning, you know, $50 million a month or some ungodly number. And now that we're not going public, we don't, we're not, we don't have the money. And so we've got to reduce our burn like immediately. And so they said, you need to go talk to all your employees and lay them off. And it was just devastating. I mean, talking to folks and having this whole thing unwind so quickly.

• 26:13Guy Raz?

  Yeah. But in a sense, I mean, what happened to Versity wasn't really your fault. I mean, you were acquired, of course, that acquisition. Maybe if you could do it again, you would have taken 30 million in cash and not 30 million in worthless stock. But that's what it was.

• 26:28Speaker 02

  Yeah. But, um, you know, I just, it was sort of like, what, what just happened? Right? We had this whole internet bubble and it burst. And no one was really like, it felt like nobody was, um, like, you know, manning the door, like what, who's like, who's in charge here of this internet now, right? If everybody agreed that revenue didn't matter and now suddenly it does.

• 26:56Speaker 02

  That's a, that's a harsh transition, but one that you look back on, you're like, well, of course, like, how long can companies go without having any revenue before you start to ask questions about the business?

• 27:08Guy Raz?

  Huh. So, so I guess, spring of 2000, this thing basically unravels and you, you decide to start spending a few months working at another startup, which was called StubHub, which we know, of course, of today, because I just, I think it had just launched at the time. But I guess you, you weren't really into it because you, I guess, pretty soon after you started there, you, you began meeting with people about other things that you might want to do, right? Like, like other companies you could work at?

• 27:39Speaker 02

  Yeah, so Kevin O'Connor, who was the founder of DoubleClick, who had invested in my first company, I was in New York and I was having lunch with him one day while I was, you know, still working on StubHub. And, you know, he said, you know, what are you, you know, what are you doing or what are you thinking about? And I was like, you know, I just, I'm not sure I'm going to be long for this StubHub idea. And he said, well, why don't, why don't you move to New York and we'll start a company together? And I said, okay, like, doing what? He said, I don't know, let's brainstorm and come up with an idea. He's like, why don't you go find another entrepreneur that you really respect and move, you can live in my summer home in the Hamptons, which is like, empty most of the year.

• 28:22Guy Raz?

  Nice.

• 28:23Speaker 02

  And we'll just brainstorm a bunch of business ideas and we'll come up with something that-

• 28:25Guy Raz?

  Come with in my summer home in the Hamptons?

• 28:27Speaker 02

  Yeah, and I'm like, well, that sounds nice. And so, I move out in November, the middle of winter.

• 28:36Guy Raz?

  Yep.

• 28:37Speaker 02

  Right, and it's kind of this old beach shack, like, it sounds great, like, the, the summer home in the Hamptons, but it was like this old beach shack with very poor electrical infrastructure and, you know, everything else.

• 28:48Guy Raz?

  And were you by yourself in that house?

• 28:51Speaker 02

  So I grabbed one of my other co-founders from Versity, or one of our, actually, one of my key hires at Versity.

• 28:56Guy Raz?

  Right.

• 28:57Speaker 02

  And we came out this guy named Matt Levinson. So we moved out in the middle of winter. And by the way, this is this is desolate. Like, there's nobody in the Hamptons. We would order packages on Amazon so that the UPS truck would come and plow the road for us.

• 29:10Guy Raz?

  Yeah, I'm not, I'm not shedding tears for you. You're in the Hamptons. Okay, let's keep talking about what you're doing there, okay? So you're brainstorming ideas.

• 29:17Speaker 02

  Scene setting for you.

• 29:19Guy Raz?

  The tiny, the tiniest violin in the world is playing now for your time at the Hamptons. So, so, but what, what is the process? You, you guys are sitting there all day, just doing what?

• 29:29Speaker 02

  Yeah, because there's nothing else to do.

• 29:30Guy Raz?

  Tell me what the conversation, like, how do you start to brainstorm a new idea?

• 29:34Speaker 02

  Okay, so we spend the first week brainstorming different groups of human beings that might have interesting problems.

• 29:42Guy Raz?

  Okay.

• 29:43Speaker 02

  You know, doctors, small business owners, single parents, you know, teenagers, whatever, like, just groups of human beings that, when you think about them, might have problems. Okay, so we, we come up with 200 different groupings of human beings. And then we rank which ones we thought were most interesting, most promising areas to go explore. So once we settled on like the top five, like small business owners, then we brainstormed what problems do they have? And so you brainstorm, okay, well, like, they need to acquire customers, they need to accept payments, they need to, you know, do marketing, they need to security, they need, like, all this, they need to get their store online, they all these lists of things that they, that they might need to do.

• 30:25Guy Raz?

  Yeah.

• 30:25Speaker 02

  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.

• 30:36Guy Raz?

  Wow.

• 30:37Speaker 02

  Which was, okay, let's brainstorm new technologies that are emerging.

• 30:43Speaker 02

  That might allow us to go solve some problems. So you brainstorm, you know, the web or, you know, at the time it was like Bluetooth or GPS or all these different technologies. So 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.

• 31:13Guy Raz?

  And then you would like draw a line and connect them or something?

• 31:16Speaker 02

  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. You remember pagers, like doctors would have, you know, there's always doctors and drug dealers, right?

• 31:36Guy Raz?

  Of course, yeah.

• 31:37Speaker 02

  Yeah.

• 31:38Guy Raz?

  Sure.

• 31:38Speaker 02

  Well, pagers were going out of style. People didn't need them anymore, but yet there were 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.

• 32:07Guy Raz?

  Hmm.

• 32:07Speaker 02

  Yeah. Called 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.

• 32:20Guy Raz?

  Yeah.

• 32:21Speaker 02

  And so like you wouldn't put it on your keychain.

• 32:22Guy Raz?

  Right.

• 32:24Speaker 02

  And so while I'm sure we could have pursued some other things like, well, you know, trucks or whatever, we kind of abandoned the idea because the original problem we were pursuing was, you know, more for personal use.

• 32:35Guy Raz?

  I'm, I'm just going to interrupt you for a moment because clearly there were a lot of really interesting ideas that would eventually be developed by others and you were looking at technology as a solution to problems. And yet I'm just, you know, spoiler alert here, but the, the business that you decide to pursue is a, 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.

• 33:08Speaker 02

  In what probably was a condemnation of this brainstorming process.

• 33:12Guy Raz?

  Yeah, I mean, totally.

• 33:14Speaker 02

  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. You 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 like, but if you're going to carry, you know, 300 surfboards and 1,000 skate decks and BMX bicycles and all that, like, you need a big footprint store.

• 33:56Speaker 02

  And we looked at it and like, we were looking at retail in this time and saying, well, everything seems to be either be going online or is becoming really experiential.

• 34:07Guy Raz?

  Yeah.

• 34:07Speaker 02

  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.

• 34:16Guy Raz?

  You wanted to do an REI for extreme sports, essentially.

• 34:20Speaker 02

  Yeah, we said REI, if REI is the granola eating sports, where are the Pop-Tart eating sports?

• 34:25Guy Raz?

  Yeah. And by the way, were you a skateboarder or BMX or a snowboarder or anything like that?

• 34:30Speaker 02

  I did none of these sports.

• 34:31Guy Raz?

  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 the technology aspect of it?

• 34:43Speaker 02

  Well, you know, I was asking myself that same question. I immediately said, okay, well, what, like, why am I doing this? Like, I'm not doing these sports.

• 34:51Guy Raz?

  You're not a, you don't know retail.

• 34:53Speaker 02

  I don't know retail, I don't know skateboarding, I don't know anything. But the one thing I thought was interesting, I said, you know what? Starting a brick and mortar retail business from scratch in the year 2000 and, you know, basically, this is 2001 at this point.

• 35:08Speaker 02

  I could build whatever technology I want to make this a great customer experience. What would I do? What could we build?

• 35:18Speaker 02

  And I kind of latched on to 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? It's just commit yourself to the domain and go figure it out.

• 35:32Guy Raz?

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

• 35:54Guy Raz?

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• 36:37Guy Raz?

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• 37:18Guy Raz?

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• 37:58Guy Raz?

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• 38:16Speaker 03

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• 39:01Speaker 04

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• 39:25Guy Raz?

  Hey, 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.

• 39:47Speaker 02

  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. Let's open our first store out there. And, you know, I'll be your first funding. And we'll go find more money, of course, but I'll be your first backer.

• 40:12Guy Raz?

  Where was the first store?

• 40:14Speaker 02

  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 Spalvita. And so I spent the next, like, several years actually building a point-of-sale system from scratch to run the business on.

• 40:36Guy Raz?

  And by the way, at its height, how many stores did Nine Star eventually open?

• 40:41Speaker 02

  Well, this is when we ran into the fact that retail is a brutal business. We, our first store did very well, actually. We put, 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.

• 41:24Speaker 02

  And so the average of both was the company was just basically staying afloat.

• 41:29Guy Raz?

  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 finished? Were you just gonna head back to LA and kind of pick up where you left off?

• 41:46Speaker 02

  Yep, yep. And first of all, going back to school when you are in your mid twenties 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. And 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.

• 42:31Speaker 02

  And so kids are skating everywhere. You kept hearing these like bang, bang, bang of like skateboards landing everywhere. The 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

• 43:12Speaker 02

  is for some reason, I'm building this business without a love for the customer. In 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, and I'm actually not even meeting my minimum payments at this point. And I'm like, something's gotta give. And so I kind of float my resume out there to a few friends and I'm like, you know, 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 nine and left at five.

• 43:55Speaker 02

  But I, like, I had no idea what people at big companies did all day. Because as a startup, you're just, you're just moving, you're just doing all day, every day.

• 44:05Guy Raz?

  Yeah.

• 44:06Speaker 02

  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.

• 44:18Guy Raz?

  Yeah. So, so naturally, you go to work for Amazon.

• 44:23Speaker 02

  Yeah.

• 44:24Guy Raz?

  And I think this is around 2004, and presumably you moved to Seattle and, 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, I think that's our biggest engine of revenue. And you were there, like, a little over a year. But at some point, obviously, you had this idea to start a new company, which would become Twilio.

• 44:50Speaker 02

  Yeah.

• 44:51Guy Raz?

  But what was the insight that you had at Amazon to make you think, and because we should just say this at the start, like, that the vast majority of people who listen to our show, right, they're listening for consumer-facing brands. So, I mean, Twilio, I think, 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, but what was the insight that you had at Amazon where you thought, oh, you know, I can turn this into a business?

• 45:15Speaker 02

  You know, I've always wanted the, like, the things that the big companies have, I had always wanted. And 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. And 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 telepathy.

• 45:56Guy Raz?

  Just to have that automated phone line?

• 45:59Speaker 02

  Yeah, right. It was incredibly complex. And, you know, in the skate shop business, I remember like 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, you know, 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. I'm like, nope, it's still going to be ready Thursday. And I was like, why did I have to do this?

• 46:37Guy Raz?

  Yeah.

• 46:37Speaker 02

  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, you know, 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? It's like, how do I talk to my customer?

• 47:10Speaker 02

  I bet a lot of entrepreneurs, a lot of software developers are having this problem too.

• 47:16Guy Raz?

  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, right? And it was, 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?

• 47:51Speaker 02

  Well, you know, like I remember I would call, I would say, okay, we want that fancy like phone thing.

• 47:57Guy Raz?

  Yeah.

• 47:57Speaker 02

  So it's like, who, 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 called the people who it seemed like they did, like I call like Cisco and say like, hey, you know, you, 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 you know, sign here, we'll get started. And every time I remember having this, like 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. But even if I did, let's say I was some big company.

• 48:27Guy Raz?

  Yeah.

• 48:28Speaker 02

  I would kind of look at it and say like, well, actually, you know, 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.

• 49:03Guy Raz?

  Yeah.

• 49:03Speaker 02

  Instead, 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.

• 49:23Guy Raz?

  All right. So you decide that you're going to pursue this and you, you're going to do it with two friends, Evan Cook and John, is it Woltius?

• 49:31Speaker 02

  Uh, Waltice.

• 49:32Guy Raz?

  Waltice. And, and so did you leave Seattle? Did you move to back to California?

• 49:38Speaker 02

  So 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, had 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, huh, that's a, you know.

• 50:04Guy Raz?

  Yeah.

• 50:04Speaker 02

  Yeah. How about, how about the Mets? You know, and I was like, well, okay. Well, maybe this is a bad idea. And then every single time, about a minute later.

• 50:14Speaker 02

  They would say, hey, wait, can you go back to that phone thing you were just talking about? You know, could I, 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, 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.

• 50:44Guy Raz?

  Okay, just a, 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 you, when a developer would say, oh, wow, I can notify my customers when a package arrives. I mean, they could do that with email at that point already. So what, what was the, you know, when, when somebody would say that to you, say, well, I can really do that through email. Like, what, what would you say about your product or your idea that would make it better?

• 51:13Speaker 02

  Well, and 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? Like, 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.

• 51:55Speaker 02

  And 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.

• 52:03Guy Raz?

  I want to ask you a bit more about that in a, 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, you were going to need money. You were going to need a lot of money, because, you know, you had to hire software developers and engineers and all kinds of people. How, what was the reception from?

• 52:26Guy Raz?

  And from, well, before we talk about investors, just from people that you met. I mean, yes, you know, developers, they got it. They seem to get it. But when you would just explain this idea to people, did they understand it? Did they understand it? Were there puzzled looks? Was it like, oh, my God, you've got a hit. What did people say to you?

• 52:45Speaker 02

  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.

• 52:56Guy Raz?

  Yeah.

• 52:57Speaker 02

  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, when can I get access to it? So we started building the early prototype of the service and started giving access to those developers. And 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 prototypy.

• 53:21Guy Raz?

  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.

• 53:40Speaker 02

  Yep. Yep. And so every phone call would be like, you know, 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. So the summer of 2008, we like, feel like we're rocking and rolling. We're going to go raise our first round of financing. And then, you know, later in the year, we're going to launch and this is going to be amazing.

• 54:04Guy Raz?

  Yeah.

• 54:05Speaker 02

  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.

• 54:21Guy Raz?

  Not a good time to be raising money.

• 54:23Speaker 02

  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, we'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. Like, 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.

• 55:08Speaker 02

  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, I think they were paying attention to AWS and they said, this is going to be amazing. Lehman Brothers collapses and they're like, sorry, we're, we're not.

• 55:39Guy Raz?

  Yeah.

• 55:39Speaker 02

  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.

• 56:01Guy Raz?

  When 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 Raz and you're listening to How I Built This.

• 56:34Guy Raz?

  Hey, welcome back to How I Built This. I'm Guy Raz. 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.

• 56:50Speaker 02

  And we had this very fateful meeting, I remember, where we said, look, investors have told us we're wrong, that this is stupid. These are smart people. These aren't dummies. They're smart. Maybe they're right. Maybe we're on the wrong track. And so we said, maybe we should either just give up. Maybe this is a bad idea. All right, let's just go get a job somewhere. Or maybe we should just pivot and 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 got to do is we got to follow through on delivering

• 57:33Speaker 02

  for those customers and at least get a product to launch and see what happens.

• 57:39Guy Raz?

  And it 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. You started to see these things that was like, text $1 to 5421, or whatever, and you would sign up for whatever that was. Was that a function of what you had built?

• 58:16Speaker 02

  Yeah. So we launched, and at first we were voice only. So we launched, we had basically nothing in our bank account. We launched-

• 58:25Guy Raz?

  By the way, who was your first significant customer?

• 58:30Speaker 02

  I remember the day we launched, Sony reached out. And you'd say, Sony, what did Sony do? And you'd 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, what we've had, we've had this idea in our mind forever that we want to do was called log rolling our customers, our, our fans, where they can sign up to get a daily phone call. And the band is going to record audio from the road. They're on tour. They can 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.

• 59:16Speaker 02

  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, of, of left, left and right here. Yeah. And, 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're, they actually trust us with their credit cards. They 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,

• 1:00:01Speaker 02

  you know, would text you to verify your phone number or would, you know, 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. You know, app developers had wanted to build into their apps, but just never knew how to do before. And now they could.

• 1:00:21Guy Raz?

  As you began to, just from a business perspective, right? As 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?

• 1:00:44Speaker 02

  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 set 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 Bellew. And I remember Evan saying, hey, Adam is great. We really got to hire this guy, but he wants a salary of like 100K. And I was like, whoa, you know, the sticker shock of like 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.

• 1:01:25Speaker 02

  I'm like, wow, this is like, and I remember telling Evan, like, all right, like, we're gonna hire him, but like, better be worth it, right? And started growing the team at that point. But it wasn't for a couple of years, because we just tried to stay small and lean in those early days while we were building out with really pretty limited resources.

• 1:01:45Guy Raz?

  Yeah. 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?

• 1:02:10Speaker 02

  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? So 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 like an office party on a Friday evening, and all of the people who founded these companies or 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

• 1:02:53Speaker 02

  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. And we were the one everyone turned to.

• 1:03:17Guy Raz?

  How, and essentially, it sounds like, was it just basically developers talking to other developers and, and that's who you're, that's how it grew?

• 1:03:28Speaker 02

  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.

• 1:03:38Guy Raz?

  Yeah.

• 1:03:39Speaker 02

  And they were happening all the time, like every weekend, every college campus, every major city.

• 1:03:44Guy Raz?

  Wow.

• 1:03:44Speaker 02

  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. And like, and the hackathon organizers got wise to this. They started charging a lot of money to sponsor it.

• 1:04:00Guy Raz?

  Yeah.

• 1:04:00Speaker 02

  Like, oh, you want to sponsor our hackathon? Great. That's $50,000, right?

• 1:04:04Guy Raz?

  Yeah.

• 1:04:04Speaker 02

  And so they started getting wise to it. So I remember I showed up at one of these hackathons at 2:00 AM with about $700 worth of Taco Bell.

• 1:04:13Guy Raz?

  Wow.

• 1:04:14Speaker 02

  That was probably the best marketing dollars ROI we ever got.

• 1:04:17Guy Raz?

  Hey, you just walked around handing people tacos?

• 1:04:20Speaker 02

  Tacos, wearing my Twilio shirt and, 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 out, I pulled into the drive thru. And I said, how many tacos do you have left? I 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.

• 1:04:45Guy Raz?

  Yeah.

• 1:04:45Speaker 02

  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 a version.

• 1:04:52Guy Raz?

  Yeah.

• 1:04:53Speaker 02

  A lot of the similar things, like you're just getting to where your customers are and like screaming from the mountaintops in whatever the most relevant way is.

• 1:05:00Guy Raz?

  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.

• 1:05:11Speaker 02

  And at that time, no one else was trying to reach them. We were like one of the only ones.

• 1:05:15Guy Raz?

  Yeah. I'm curious about competitors as you started to grow because you're going, you start with a few thousand developers and then tens of thousands and then hundreds of thousands. And you're 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, that sounds like a shot across the bow. I mean, did you start to see competitors and some of the big companies like Cisco come in and say, well, we should do this too. We can do this.

• 1:05:56Speaker 02

  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?

• 1:06:04Guy Raz?

  Right.

• 1:06:05Speaker 02

  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?

• 1:06:24Guy Raz?

  Yeah.

• 1:06:25Speaker 02

  So inevitably, like the carriers, they weren't dummies. Like they saw this trend of APIs and developers and innovation. They saw this stuff happening and inevitably, almost every carrier in the world that I can think of in that era, in those early days of 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.

• 1:06:54Guy Raz?

  Hmm.

• 1:06:55Speaker 02

  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.

• 1:07:08Speaker 02

  And that's the advantage that every small company has. It's like when we were, our first year, we made $200,000. Our second year, we made $2 million. For a startup, that's a huge success story.

• 1:07:21Guy Raz?

  Yeah.

• 1:07:22Speaker 02

  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 innovator's dilemma just play out time and time again inside of the bigger companies while we went about building this. And you know, now today, we're approximately $4 billion of revenue. But like, you know, that's a 15-year journey and that's the nature of that creative disruption.

• 1:07:49Guy Raz?

  Yeah. Uber eventually became a significant, very significant. I 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 revenue is coming from Uber. Because every time you order an Uber, right, Twilio was powering that in the background, right? They would tell you how long your driver is 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.

• 1:08:26Speaker 02

  Yeah.

• 1:08:28Guy Raz?

  Was that something that, I don't know, freaked you out?

• 1:08:34Speaker 02

  You know, it actually didn't worry me. You know, our business model is usage-based, right? So when a customer sends a text message, it costs a very little amount of money, but like 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, like 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. Like 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. That's not, that's not something to celebrate. That's actually something to be worried about.

• 1:09:19Guy Raz?

  I'm curious about that as a case study because at that time it was Twilio had gone public. And so you were a publicly traded company. And when that Uber decision came out, I think the stock, you know, plummeted like 30% for some time. And you, you did talk about this, that, that actually there were mistakes that you felt you, you could learn from. Like, for example, you know, you didn't service them as well as you should have serviced them. Is that, is that true? Do you feel like that was a lesson that you learned from losing that account?

• 1:09:51Speaker 02

  You know, there's a sense in certain customers, especially like very technology driven companies, that they're like, like, yeah, we don't want a salesperson. Like, 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, we need to know that person.

• 1:10:20Guy Raz?

  Yeah.

• 1:10:21Speaker 02

  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, like, no, we needed to be walking the halls. We needed to be really working that account.

• 1:10:33Guy Raz?

  Like white glove treatment.

• 1:10:35Speaker 02

  Well, and figure out, okay, if the developer doesn't want to be talking to us, so be it.

• 1:10:39Guy Raz?

  Somebody else might.

• 1:10:41Speaker 02

  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.

• 1:10:50Guy Raz?

  Yeah.

• 1:10:50Speaker 02

  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, you know, start, we want to use less of your services. So, you know, 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. And in 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.

• 1:11:19Guy Raz?

  Yeah, right.

• 1:11:20Speaker 02

  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 that's far bigger than just, you know, the activities of one customer. And I think that was the right way to look at it.

• 1:11:37Guy Raz?

  Let me talk about heading up a public company because it's a different beast, right? You'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 traded company, they say, I don't pay attention to the stock price. I don't believe that. I just don't

• 1:12:16Guy Raz?

  believe that they don't. I mean, it must weigh on you to some extent. Or do you just feel like, well, you know, there's not much I can do to move this thing?

• 1:12:27Speaker 02

  You know, everything, Guy, is about timeframes, right? If you look at the stock on an hour-by-hour or even day-by-day basis, 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'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

• 1:13:12Speaker 02

  doing today, right? Like, 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, you know, minutes, hours, days, or even quarters.

• 1:13:51Guy Raz?

  I'm curious, your 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, the golden era of tech is over, right? You've seen these, and I'm sure you've seen these over the, not over the many years. And right now, we're in the midst of just a period of large layoffs, you know, 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 over-hiring, you know, in

• 1:14:33Guy Raz?

  the last, in the previous two years. Is that the beginning and end of why there are layoffs, in your view? I mean, for example, with Twilio, is that, is that why? Did you over-hire?

• 1:14:47Speaker 02

  You know, over-hire is a simplified way to talk about it. But I think you have to like, look at the root cause. But like, the end result is like, 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. But once the savings

• 1:15:31Speaker 02

  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 going to 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 in go building my market share today for this enormous market we're in. And 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.

• 1:16:17Speaker 02

  It's the eventually part that changed because the eventually became, well, now it's like a lot closer to today.

• 1:16:22Guy Raz?

  Yeah.

• 1:16:23Speaker 02

  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. So there's a lot of people

• 1:16:42Guy Raz?

  Long time.

• 1:16:42Speaker 02

  in the workforce, for example.

• 1:16:44Guy Raz?

  Yeah.

• 1:16:44Speaker 02

  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, 15 years.

• 1:17:15Guy Raz?

  You've got, I think, roughly 7,000 employees all around the world. Is that about right?

• 1:17:21Speaker 02

  About right.

• 1:17:22Guy Raz?

  Yeah. And, and we're now in, 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, and, and I know you are essentially a fully remote company.

• 1:17:43Guy Raz?

  Some of the, 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, that actually, it's hard to cultivate a sense of belonging and, and other things involved in, in working in a space where you're interacting with other people.

• 1:18:07Guy Raz?

  How do you feel about that? I mean, do you think that's a fair, because I think it's a pretty fair assessment of what's, what's going on? What's your take?

• 1:18:17Speaker 02

  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.

• 1:18:29Speaker 02

  Because you see, there's a lot of startups that were born during the pandemic.

• 1:18:32Guy Raz?

  Right.

• 1:18:32Speaker 02

  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. And 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.

• 1:18:55Guy Raz?

  Right.

• 1:18:55Speaker 02

  I gotta pick one or the other because I only have so much budget.

• 1:18:59Guy Raz?

  So what, so, so just out of curiosity, you, you've got a lot of real estate.

• 1:19:04Speaker 02

  We do.

• 1:19:05Guy Raz?

  Yeah.

• 1:19:06Speaker 02

  And it's, and it's not used.

• 1:19:08Guy Raz?

  Yeah. I mean, there's a building on the side of the 101 in San Francisco that, right, your headquarters here.

• 1:19:14Speaker 02

  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, those offices, they're about, you know, lowest single digit percent utilization.

• 1:19:28Guy Raz?

  Wow.

• 1:19:29Speaker 02

  Yeah.

• 1:19:30Guy Raz?

  So what, yeah, so what are you guys gonna do?

• 1:19:33Speaker 02

  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 a basis as like the nine to five office used to have us doing it.

• 1:19:44Guy Raz?

  Right.

• 1:19:44Speaker 02

  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, the challenge is to get there. I, 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. I think you'll have, number one, Like a showroom, the place where you bring customers or like recruits or like a

• 1:20:29Speaker 02

  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.

• 1:20:36Guy Raz?

  Yeah.

• 1:20:37Speaker 02

  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?

• 1:20:48Guy Raz?

  Hmm.

• 1:20:48Speaker 02

  And those are like regional, like, you know, you can have one in North America. That's where teams do their offsites.

• 1:20:52Guy Raz?

  Right.

• 1:20:53Speaker 02

  And 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 gotta 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 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

• 1:21:36Speaker 02

  day. And I think that combination of like, the showroom, the destination, offsite 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.

• 1:21:49Guy Raz?

  Hmm. You know, when you reflect on, on your journey and, and the, you know, 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, you know, multi-billion dollar giant now. How much of, of where you are today do you attribute to, to your work, your work ethic, your skill, your intelligence? And how much do you think has to do with getting lucky?

• 1:22:20Speaker 02

  You know, I think we're all a product of our environment. You know, 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

• 1:23:02Speaker 02

  of things. And I don't take that for granted. I 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 our people.

• 1:23:21Guy Raz?

  That'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 [email protected]. If you want to follow us on Twitter, our

• 1:24:04Guy Raz?

  account is at How I Built This, and mine is at Guy Raz. On Instagram, we're at How I Built This, and I'm at Guy dot Raz. This episode was produced by Kira Wakeam with music composed by Ramtin Arablouei. It was edited by Neva Grant with research help from Sam Paulson and technical assistance from Hans Kopeland. Our production staff also includes J.C. Howard, Casey Herman, Kerry Thompson, Alex Chung, Elaine Coats, John Isabella, Chris Messina, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This.