Founder/CEO Lessons from Downturns with Twilio's CEO Jeff Lawson and BVP's Byron Deeter

Hello, hello!

Thank you, Sastre, and welcome to the thousands of people teleporting in from all over the world. I would say welcome to all you cool cats and kittens, but I fear the Joe Exotic references may not age well as this video lives on. So let me just say good day, good night, good morning to all of you in different time zones all over the world. Sincere thanks. I'm Byron Dieter, a partner at Bessemer Venture Partners, and today we have Jeff Lawson, CEO and founder of Twilio Technologies. Thank you for joining us, Jeff, especially during these chaotic times.

Thank you very much, Byron. Great to be here.

So like all of you, I was pretty crushed when the SaaStr Annual had to be canceled in person, as I have attended and presented at every single one in history. And so when Jason said that he was going to try to do a virtual SaaStr in April instead, I committed to getting us a rockstar guest. And quite literally, when looking across the entire cloud industry, Jeff Lawson was my number one choice. He's the perfect speaker for today. He's one of only a handful of CEOs in the world who have built a cloud business to over $15 billion in scale now. But specifically, he did it through the last recession. And even more relevant to 2020, he was also a founder and CEO in the 2000 recession. And so he's got mountains of scars and learnings that he'll share with you today on both sides. Now, we're going to give a little bit of a setup. And I'm going to ask a few high-level questions for Jeff. And then we are going to open it up to Q&A. And I'll try to emcee as many of those as we can get through in the 40 minutes. But let me point out a few additional resources before we dive in fully. Right under Jeff's name, you'll see his Twitter handle here. I highly recommend all of you to follow him immediately. In fact, I won't even be offended if you've got two screens or a phone up and you go over there right now. It's that good and it's worthwhile. I put him in the must-follow camp. My Twitter handle's here as well. I'm not quite as brilliant or charming, but I'll keep trying, so you can follow me as well.

And then you'll see— It's pretty good. It's pretty good. Y'all should go follow Byron too.

We're working for you out there.

Thank you.

And then you'll see the two URLs here at the bottom of the page. We'll come back to those at the end. But you'll see a Bessemer page here, which has a number of resources for CEOs, along with a Twilio page, which has, in addition to their core website, a number of COVID-specific resources that I strongly encourage you to look at. And then for the Bessemer page, there are two specific things that are relevant for today's discussion. The first of which is a deeper conversation with Jeff in a podcast format on the founding and history of Twilio. So it's not as relevant to today's specific agenda, but it's good backdrop if you want to learn more. And that's the Cloud Giants podcast with Jeff Lawson's episode there. And then the second is Bessemer's 2020 State of the Cloud report, which usually we release at the physical SaaStr Annual every year, and had it queued up to release in February. when that was canceled, we've held on to that. We recorded it with a small live studio audience, and we're releasing it today in parallel with this virtual summit to bring it to you. And so the State of the Cloud report's there as well. And so to kick off, I've had the pleasure to be an investor behind Jeff and Twilio for over 10 years now, and I've seen him up close and in action as a board member and as a friend. And so I know you've got awesomeness in store for all of you today. So Jeff, let's dive in. We want to talk roller coasters and recessions. So here's the S&P 500 mapped to your career. And for many entrepreneurs out there who've never built a company in this economic climate, we want to give them a little perspective to set things up. Now, they know Twilio and they know how this story is playing out, but can you give a minute on the Varsity experience in particular so folks know that you've got some battle scars to go with the trophies and establish a little credibility in both environments for today's discussion.

Yeah, absolutely. So Twilio is actually my fourth startup. And also in the middle there, I worked at Amazon. I was one of the first product managers at AWS. But Vercity was my very first kind of real company. And it started actually as a side project. I went to college. I started my freshman year fall of 1995. And, you know, it was like I started, I think it was like a month or so after, you know, the Netscape IPO. When I showed up to college, the most exciting thing for me was the Ethernet jack in my dorm room, and the idea that you got like 10 megabit connectivity when you came from home and you had 144 dial-up. That just started this insane interest in what was possible on this brand new thing called the internet. Some friends and I decided that the best way to figure out a new technology is to just build something. We decided we wanted to start a business. We looked around at a bunch of different ideas of what kind of business we would start as college students. And the idea we landed on were that there are all these services at the University of Michigan, which is where I was, but actually at every campus where they would sell you lecture notes for your courses. And they would pay note takers to go into Econ 101 and Psych 101 and all the major courses. And the note taker would essentially sell their lecture notes to a copy shop that would literally Xerox them on blue paper usually so you couldn't re-Xerox it. And they would sell it to you for like $30 a semester. And so there's this little cottage industry of lecture note providers running out of the copy shops in every major college campus. And we said, well, wouldn't this be better on the internet? Like, you don't have to walk through the snow to go pick up your notes after every course. You just went to a website and got it. And we analyzed the industry, we decided it was our back of the envelope math was, said this was a $30 million industry, which didn't sound like a very exciting TAM. So we just said, we'll give it away for free, we'll put ads on the site. And sure enough, we started this thing. We started at one campus, University of Michigan, expanded to 10 campuses, raised some friends and family money, about a million bucks. We ended up expanding it again, raised some venture capital, took it to about 200 campuses, 10,000 courses worth of content at our height in the fall of '99 and the spring of 2000. And We were— had aggregated an audience of millions of college students that came to our site about every week at least to download their lecture notes and engage in some other academic content on our site. And along the way, we had gone from this side project we were doing out of our dorm room to a company that was a $5 million post-money when we raised our friends and family round, to a $25 million or I think $35 million post-money raise their venture round. Then a competitor actually in the market that was doing non-academic content for college kids, like social stuff for college kids, called College Club, had filed to go public. They actually withdrew their filing in January of 2000 to acquire us and then refiled to go public again, at which point it was expected that, you know, our company was worth, I think, $125 million. But they filed to go public again in April of 2000, just missed the window, and couldn't get out, and they were in bankruptcy by August. And so my wild ride, we went from like, you know, worth nothing side project to $125 million, back down to zero in about 18 months actually for that ride. And so it was my wild, you know, kind of the canonical dot-com experience, if you will, but it was an absolutely wild ride. And the thing I always took away from it is You know, you never know if the financial aspects— and like, oh, by the way, they acquired us all for cash— or, oh, sorry, all for stock, no cash. So we literally didn't make anything.

So paper millions, startup salaries, yeah, quickly became zero. And you, you go through the hard valley here, found Twilio, things are going great, and then 2008 rolls around. And so we're going to go into a lot of details and mainly dive into the Twilio experience today, but Let's start off there specifically. I think you were literally in the middle of your very early financing round as you're driving around Sand Hill Road in 2008 as the market melts down. What happened to you specifically, and what advice do you have for founders that are in that experience today, mid-financing when this volatility spikes to all-time highs?

Yeah, so we had started Twilio like January 1st, 2008 basically. And, you know, the very first thing we did is we talked to potential customers, so developers, and we said, hey, you know, we're thinking about this idea where there'll be a simple API, we're gonna reduce all the complexity of telecom to an API and make it so in your code, you know, you can make a phone ring and you can do all these amazing things. And, you know, would you, you know, would you be interested in using that? And an interesting thing happened, which was, you know, all these early conversations we had, we hadn't written a line of code yet. It was just an idea. We talked to a lot of customers. And to a T, at first they were a little confused. They're like, well, and they kind of changed the topic. They say, oh, how about that weather today? He'd be like, oh, okay, well, I guess, you know, I guess it was a bad idea. But then to a T, about a minute later, they would circle back and say, hey, wait a minute, I have a question for you. That telephone thing you were talking about, could I have— they'd have some idea— could I send a notification when a package ships from the e-commerce site that I was building recently? And I would say, yeah, yeah, you could do that. And they say, oh, that's really interesting. Yeah, I'd love to play around with it. Give me "Can you give me access?" And so after we had that conversation enough times, that gave us the courage. Okay, we should just roll up our sleeves, dive in, and build this thing. So we spent the very big beginning of 2008 building. We had a prototype that we stood up, you know, I think in a matter of months. We got the bare bones working. It was very fragile. We just did the basic stuff, but it was enough to start getting some feedback from customers. We gave access to those developers. They were loving it. They were building stuff. They're giving us all sorts of new ideas. And so the summer rolled around, we said, great, you know, we got this product, developers who we've given access to so far seem to really love it. We're gonna go raise a round of financing, a seed round. Then after we do that, the serialization of this goes, you know, raise the money, then we're gonna go do a big splash launch and everything is gonna be fantastic. We'll be off and running. So we started fundraising in the summer of 2008 and two things happened. First of all, most of the investors we talked to actually said, developers? Like, what, developers are a market? Developers don't have the checkbook, they don't buy anything. Like, no one has ever, you know, run a go-to-market for developers before. You know, this is kind of silly. Why don't you guys come back to us after you've built an app? And, you know, if you want to add an API to it later, go, you know, knock yourselves out. But clearly an app isn't the thing that, you know, one can monetize. And that was the first thing that happened. But there were a few investors who got it. They were like, oh, that's really interesting. They saw kind of beginnings of AWS and they saw the trends with the ability to sell infrastructure as a service. And one of the firms was actually one of the prominent early-stage firms, I won't name them, was like, they bid. They were like, really, they wanted to do it. And so we had the full Monday morning partner meeting. The partner meeting is usually just the rubber stamp, like we are going to do this deal. And the night before was when Lehman Brothers crashed. And so we go in and they were like, this is fantastic, but you know, we're not— we're just not investing now, sorry. And so we literally went the whole summer without a dollar raised of financing. We didn't even have a bank account because we wouldn't— we had no money to put in a bank account. We didn't have a bank account. And I remember my co-founders and I, we had this really like fateful call where, you know, after I heard back from that VC saying, sorry, we're not going to invest, And we asked, is this stupid? Like, do we, you know, is this just a bad idea? Should we listen to all those folks and go build an app instead of an API? Or was this just a stupid time to try to start a company? And so we really questioned whether or not we should keep going. But what became obvious towards the end of that phone call was like, no, wait a minute, hold on. Our customers are telling us they're on the right track. Our customers are loving what we're building. They're enthusiastically adopting it, giving us new ideas. We've even had, you know, some of them have been willing to pay us already. We have all the indicators that we're solving a hard problem for customers who need it solved. Let's follow our customers. And so we ended up raising, I think, $30,000 from friends and from actually our parents. Our parents put in the first money, each of our three parents. Luckily, we had parents with the— able, each able to give us $10K. And that was the money with which we opened a bank account and basically launched the company. And sure enough, customers started coming. They started spending money. They were putting in their credit card. And, you know, every month, you know, our revenues just ticked up. And after a few months— it didn't take very long. We launched in November of 2008. Really, that month we had, I don't know, probably less than $1,000 of revenue. You know, the next month was, you know, maybe a few thousand more. But after several months of just seeing this tick up in usage and adoption and, you know, small revenue numbers, but, you know, still signal there, we could circle back to investors in the beginning of 2009, and A, times were better, but we had more traction, more proof points under our belt, and we were able to raise our seed round and get going. And so, you know, my lesson from that time was, you know, look, well, first of all, you know, we were— we had the privilege of being able to work without salaries for a period of time because of money that myself and my co-founders had saved up. I did, however, get married in that period of time and sold all my wedding gifts. That extended the runway a little bit. But also, you know, we had parents who were able to put in a little bit of initial seed funding, and that mostly was just to be in the bank. We didn't even use a lot of it to get to the launch. But follow your customers. Like, that's the key thing, is if you follow customers, like, the times will change, the markets will change, and if you have customers, that's the raw ingredient of anything you want to do from a financing perspective. But the other thing I'll say for those periods of time, which is the best source of financing is actually your customers. Like especially if you have a B2B or an enterprise product you're building, getting customers to pay you and pay you even before you've built it. Like if you can pitch a really hard problem that they really need solved, you will do like triple duty. Like if your customers will pay you upfront for software you're gonna build for them, number one, it's great market validation, you know, that they're willing to pay you ahead of actually getting the product, that you are solving a really hard problem. Number 2 is it's free financing. Like it's not debt, you don't have to pay it back. It's not equity, you're not diluting yourself. It's just money from customers that you use to finance the company. That's obviously the best kind of financing there is. And then lastly, it is great signal to future investors that you might bring on one day. And so, you know, in times like this, I would just say turn to your customers, both to serve them, but also to see if they can actually be the initial source of financing for you.

[Speaker] And Jeff, so you were looking at customers, one for validation of am I comfortable going all in with calling in the family favors, personally, wedding gifts to fund it, et cetera. And obviously non-dilutive financing. Two things that come out of that I wanna double-click on. One, a question that came in from Joey, thank you, which was essentially, were you working full-time or were you struggling financially and did you put everything you had into Twilio? And then related to that, a lot of times people say, how do you trade off this aggressive versus conservative view? And how do you balance being conservative to survive versus leveraging a downturn to capture market leadership in the long term and just betting it all and saying, like, in the next 9 months, this is going to work, or I'm going to lose everything and my family? What's the rational balance between founder optimism and pragmatism?

Yeah, obviously, that's a very personal decision and is very dependent on one's circumstances. So I don't pretend to have the answer that applies to everybody. The things that I would say I've learned is the more you commit yourself, the higher the probability is that you will be rewarded for that. There's an interesting story, actually. So I was the first CTO at StubHub. And when I was there, I joined right at the same time as one of my other co-founders from my very first startup joined. And my other— the other person who joined was the COO, joined full-time and was like, yep, let's do this thing. I was hedging a little bit, actually. And so I committed, I joined as a contractor, and I got equity and all that kind of stuff, but I never really gave the signals that I was all in. After about a year, I realized this wasn't really the opportunity for me, and I moved on to start my next thing. And about a month after I left, the other guy who had joined when I did, he also left. And at some point, we were comparing notes, and I found out that he got about 5 times as much equity as I got. I was like, how did you do that? We spent the same amount of time like we were on the founding team, you know, we both spent about a year there, like how did you walk away with 5 times equity? He's like, because I at least pretended like I was all in. You didn't, you were like hedging the whole time. And it was a very interesting moment, I think, as a founder and entrepreneur and like thinking about that, which was, I think it was a lesson for me of like, look, pick something you love that you think has merit and to the extent you're able to commit yourself, dive in, and, you know, if you're able to from a financial standpoint, supporting your family and everything else, that increases the chances of, if you're right, of your reward being greater. And I also think that it will, from a passion standpoint, like you won't be conflicted. You'll just be all in and you'll want to do it. And that's kind of where I was with Twilio. We were I did have a full-time job that I was working while we were exploring early the ideas around Twilio. And it was when I got so much signal from potential customers, from developers, that this was something they needed, that's when I decided to jump all in. And I stopped working on the prior thing that I was working on, became the sole founder of Twilio at like one really early point, and I recruited my other co-founders But I think that decision to go all in when I saw all the signs of lots of promise was the right decision for me, because to me, that was when I could see that, you know what, this is worth committing myself to and taking a disproportionate risk on.

Right. And on a— Bon Si asks a question of me related to that and the VC perspective. And I'll add that The entrepreneur's time is almost always coming at a higher cost to them than our cost of capital. And when you see great people making that all-in decision, when they're making the jump, when they're leaning on friends and family— and one of the signals we always love is when people that they've worked with before are those first checks. One of the things when I founded my cloud company I was really proud of is that each of my prior bosses had invested. So it's this idea of those who know this person best, are they all in behind them as well, or at least meaningfully and in terms of support? And I think that's, that's a higher hurdle than raising capital. If you come to those conclusions, you will be able to get some form of financing.

But it's all like, for an entrepreneur though, it's like, it's all risk-reward, and entrepreneurship is around risk-reward, right? And this is just one of those risk-reward decisions that you make.

Absolutely. So Jeff, along with that, there's some questions for people with existing businesses and the idea of for those that may need to cut back spending, including possibly furloughing or even layoffs, and trying to think through this idea of how deep to cut and even what functions to overweight or underweight, what advice do you have? Is there a rule of thumb that you should go long on product when the selling is going to be slow anyway? Or do you need to keep a skeleton go-to-market team at least so you don't lose touch with that customer interaction that you talked about? How should people think about the weighting of a company, and particularly in a cutback scenario that may be different from the all-in growth scenarios that people were thinking 2 months ago?

You know, I think again, I'll preface what I say with this is of course situationally dependent. It depends on your cash position. It depends on your product and your, you know, how, you know, if your customers are shying away from your product, or if they're leaning into your product during this time. But in essence, you know, a corporation, just like a human being, its quest is for survival. And so if you find yourself in survival mode, then what you have to ask yourself is, okay, what is going to enable me to have the best chances of surviving, and then ultimately thriving as we exit this crisis? And, you know, generally speaking, the investments that you make now, and just think of every dollar you spend, every day you spend that dollar is an investment. Okay, what investments are you making now that are gonna have the highest ROI, both to get you through the crisis, and then if you have the luxury of saying it, what are the highest ROI post, exiting the crisis? And obviously weight towards survival first, 'cause that's basic needs, but then weight towards actually having the best outcome after this crisis is over. But I think it's incumbent upon us, A, to one, think about every dollar you're spending. So every person who's on payroll, that's an investment every day that they are coming in and you're paying them. And orient the company towards what activities are going to provide you the highest return on what those people are doing. And so of course, if you are— you know, in some ways it's sort of interesting. What we've come to realize at Twilio is that companies at any given point in time are usually either product constrained or they're distribution constrained. So a product constrained company has a bunch of sales reps and they're saying, "I don't have anything to sell. I already sold everything we got and I got nothing more." And a distribution constrained company has a great product and, you know, essentially customers are piling up at your door, but you're not equipped somehow to sell to them in the way that they want to buy. And so figuring out for your company during this period of time which one of those two you are and then making your investments accordingly is probably the right way to approach it, right? So if you have a great product that you think customers need and you see signals that customers need it right now, but you know, you're hesitant to hire sales reps, well, probably the right thing to do is to hire those reps because that will generate revenue for you that will allow you to grow and survive and thrive. Flip side is if you have a lot of reps and they're saying, you know, I don't have a product to sell, well, then you probably pretty quickly have to figure out how can you get more in the reps' bags. And chances are you're not gonna develop a brand new product from scratch during this period of time if you're, you know, in a tough spot. But, you know, sometimes it's some relatively small tweaks to the product feature set or even positioning in the market that can actually unlock your distribution so that, you know, relatively small investments in R&D during this time can unlock that sales team you have who may be feeling like they're underutilized. And like, those are the things I would be thinking about as you go through this time.

And Jeff, Lisa Bordeaux asks a good question to kind of double-click on that. In her words, "Curious, Jeff, how do you scale the freemium model to profitability? I think you have transactional costs even for freemium accounts. Does it scale?" And so maybe building on your last answer for the models that maybe aren't as dependent on sales reps, how do you think about investments in customer acquisition through assisted selling motions, giving away more value of your product to lure people in? And how do you throttle up or down with efficiency as a short-term essential metric right now?

By the way, distribution constraint doesn't have to be sales-driven. It can be a marketing-driven model too, right? You could say I've got like, there's no more AdWords I can buy. I've got all the SEO. I'm number one on the page. Like, I've got everybody who's interested in my current product is finding me, you know, but growth is plateauing or whatever. And so therefore you would say, great, how do I bring in an adjacent product? To the mix to be able to cross-sell something to those customers, to upsell, get either a bigger package or sell them the next product. So I would just put that into context. As far as freemium goes, I mean, I think the question is, is how can you scale a freemium product to essentially to revenue? You know, I don't know that there's a universal answer to it. Yeah, I've never really thought about what Twilio has done as a freemium model. Because we offer a free trial for people to get started, but pretty quickly you'll realize that you need a full account. And part of that's just the realities of our business. We have some hard infrastructure costs to deliver Twilio. And we also, because there's so many fraud vectors and communications and things like that, before we let people get to scale, it's like we really kind of have to make sure they're legitimate. But in general, what I would just say is, you know, give value to your customers, but when you are providing so much value that they should be paying you, capture that. So you want to essentially give enough for customers to get a taste of what you're made of. But I would say more than anything, what you probably want to do is to provide a— set the context, if you can, in the relationship fairly early for value exchange for money. Because I think what I've observed, and I'm not an expert, like I actually haven't really run a freemium business, so I'm not an expert, there are other people who are, but I would say is that it seems to me like a lot of companies run into a problem where they set too much of an expectation of the free product, and therefore it becomes hard to actually convert people into monetization. Whereas if you look at some great businesses, like famously, 37signals with Basecamp or, you know, like they don't give you so much for free that you just come to expect it. And I think that that's the key line to balance. And so, you know, I've just always been a fan of show enough so people can get a tour, be able to get some value out of it, but pretty quickly set the expectation that, you know, you pay for value received. And I think during this time, it's a good measure because you don't want to dilute yourself as an entrepreneur. By going out and building and building and building and building and building and saying, oh yeah, and I will one day have that feature that suddenly everybody wants to pay for. Because it's very easy, obviously, survival bias means that we see the ones where that worked. You see Slack, where they didn't monetize for several years. Then I think Stewart says he was the fastest company to $100 million in revenue. It's because they had x million users, and then one day, they turned on the revenue thing, and they shot up to $100 million. Very, very quickly. Fantastic, great, it worked for Slack. Good job, Stewart. But you can't expect that everything's gonna be like that. And so I would just say pivot towards getting revenue streams very early in the company's lifecycle. That would be my advice.

And let's talk about different customer types and sector types to build on that. Akshay asks, Twilio is exposed to both positively impacted food delivery apps and negatively impacted travel sector clients. How does a company feel about this diversity? And let's take it one level up. How should listeners think about maybe evolving their go-to-market specifically for sectors that are doing better and maybe away from travel, hospitality, transportation, food, and industries that maybe are particularly wounded right now?

Yeah, I mean, I think two thoughts come to mind. One is just revenue diversification for any company. Company. And as a matter of practice, like especially as you start to get to scale, thinking about your revenue diversification is always a good practice to do. So we had more revenue concentration than we wanted, you know, several years ago, and over several years did a very good job of diversifying our revenue such that our top 10 customers are now a fraction of the revenue that they represented as a total business while we were growing the top line of the business incredibly fast. And so I think that's something that people should be thinking about. You know, if you have an overreliance on certain customers right now, let's say they're impacted industries, you know, it might be painful in the short term, but I would actually consider voluntarily taking down your revenue with those customers. You know, maybe it's just giving them massive discounts right now. A, to keep them as customers and to help your customers. You know, we, at the beginning of the COVID crisis, we at Twilio wrote a planning document. We call them BPMs, and our number one thing was ensuring that our employees were healthy and successful during this time. And number two was shifting to a mindset of service, and we're here to serve our customers during this time. So I think that's a way you can serve customers in impacted industries. But it also helps you because it doesn't dilute you. Like, you as an entrepreneur, you can look at some number that's growing very rapidly from a top-line perspective, but if you're really just growing because you've got a few concentrated customers that continue growing, you know, you may dilute yourself and actually put too much weight in your success that you're seeing that isn't representative of really the business. And so in some ways voluntarily reducing your dependence on a few big customers, especially if they're in impacted industries, helps the customer and helps you, as unusual as that may seem. So diversify your business. The second though is if you're sort of like in a pre-revenue or early revenue stages right now, where instead of worried about like, you know, essentially revenue diversification, you're just worried about revenue period, then what I would just say is, look, right now, you know, your job as an entrepreneur is to find hard customer problems to solve. That's the number one thing that you do as an entrepreneur. Actually, a lot of people focus on the solutions, like they like to tout the shiny, you know, widget that they built, but actually I think the hardest and most important thing an entrepreneur does is find problems that need solving for which customers are willing to pay you. And so if you think about it, a time like this, you know, global pandemic that is unprecedented, nearly a Hey, almost nobody alive today has experienced this before. There are so many customer problems that one could be solving. And those are both in the unimpacted industries, you know, the things that are booming right now, like telemedicine and distance learning and, you know, delivery of everything. But they're also in the impacted industries. I mean, you better believe that, you know, automakers and airlines and hotels, you know, they have a, so many problems right now. And so in some ways, if your job is to solve customer problems, well, in those impacted industries, there are also enormous problems to solve. I highly suggest that those problems involve saving them money right now. But the fact remains, solving problems is your job, and there are huge problems everywhere in the world to go solve right now. And so your job is essentially to figure out in which of those areas can I— do I have my finger on the pulse of a hard problem? To solve. And, you know, look, would you pivot towards an impacted industry or away from an impacted industry? You know, if you really thought you had a great solution for the airline industry right now, by all means, like, lean into it. I don't know that I would bet your company on that right now, but, you know, in essence, if your job is to solve hard problems, you should be looking around at the hardest problems that people are desperate to solve right now, because there are a lot.

And thinking long-term, which maybe that's a good pivot into— there's a number of Twilio-specific questions, or market-specific specific questions that are great, and I wish we could get to all of them, but maybe let's roll them into one, which Luke asks, which is a high level on the telecommunications industry. Where do you think it's headed in the next 2, 5, and 10 years? What do you think is the future of telecommunications? And maybe do you think that the COVID catalyst will actually accelerate some of those moves?

Yeah, well, if you look at what Twilio, you know, we were founded 12 years ago. 2008 is when we started the company. Our observation at that time was that communications was still an industry, surprisingly enough, that was largely based in hardware. That when you needed to build something in communications, you were usually talking to players like carriers or companies like Cisco, and they would talk to you about laying down fiber optic cables and racking up hardware in a closet somewhere and bringing in armies of professional services to come and bang complex esoteric technologies into submission in order to build relatively simple use cases like contact centers or notifications and things like that. And so we started Twilio with the belief that the future of communications was software, that it would move to the cloud, and that the future of communications was gonna be built by the software developers of the world. And so our job was to build the platform upon which the developers could build that future and unleash their creativity. And now we have over 8 million developers in our ecosystem and 180,000 active customers, businesses, built on top of Twilio. And so, you know, what we see across the industry is that if you think about it, the last 10, 15 years of business, like the, the, the buzzword has been digital transformation. And, you know, in every company, in every industry, there's a digital transformation roadmap of how companies can use software and agile, you know, development practices to transform how they do business. And there's these 5, 10-year roadmaps about digital transformation in every company. Well, guess what? A lot of those 5-year roadmaps got accomplished in a weekend because of COVID And so I think the, like, the new thing that we are going to see is that 2020 wasn't the year of digital transformation, it's the year it turned into digital acceleration. And people are realizing out of necessity that they had to get those roadmaps done. And out of necessity, they turned to more agile ways of working, right? Because you couldn't say, okay, well, you know, actually there was, there was a customer of ours that we were talking to. It was actually a government agency, and they had hired a large consulting firm because they needed a hotline for frontline medical workers to call to get up-to-the-minute treatment protocol information for COVID-19. And they needed to be able to call and talk to a specialist usually university medical students they recruited to basically be trained in the most recent protocols and the hotline that was staffed. It was a fascinating use case. And they hired a major consulting company, I won't name which one, who had given them like a, you know, a 9 to 18 month roadmap for how they were going to figure out how to stand up a hotline. And, and, you know, thankfully someone on the team was like, are you kidding me? Right? We need this tomorrow. And I'm not talking like figuratively tomorrow, I mean literally they needed it tomorrow. And so they came to us, and they realized, we can stand it up practically overnight. And so if you think about the digital acceleration, it's not just an acceleration of digital communications, which obviously, it's apparent to us how digital communications has changed our day-to-day life more in the last month than it has in many periods prior, especially working. But it's also in non-obvious areas. Telemedicine got accelerated by at least a decade. Distance learning got accelerated by at least a decade. Bots, actually triage bots in a lot of these cases where organizations are getting floods of inbound calls, whether it's governments like 211 lines, whether it is medical centers, whether it is food banks. I mean, everyone is figuring out how to deal with sudden spikes in demand for what they're doing. And so obviously digital communications, but agility, I think, and cloud scale are two of the other factors that I think have been like thought about in communications, but like, you know, weren't still top of mind for everybody. Yet now they realize when you have to reconfigure the world and the world's economy over the course of a weekend to accommodate people working from home, spikes in demand, drops in demand, all this sort of stuff, well, guess what? Software and the cloud and agility, the ability to have an idea, okay, I think what we need is this, and we're not going to take 12 months to go build it, we're going to iterate in a day. And then we're going to learn from customers and tomorrow there's going to be a new set of requirements that we're going to learn, we're going to build that, we're going to build that, build that. Well, industries that you never would have thought would have been agile are acting that way. Medicine. You know, there were roadmaps at a lot of hospitals to move to telemedicine and those roadmaps were like, okay, we're going to do, you know, a small percent of trial group and we're going to have the controlled trial, we're going to blah blah blah, and then guess what? It got done over the course of a weekend. And for the most part, it's great. And the folks that we've talked to, which is like all the things that people were worried about, oh, I wonder if this, I wonder if that, they all got washed away. And it's just the patients like it. They don't have to commute in. They don't have to take days off of work to travel to regional medical centers. Patients love it because they can get an appointment almost in real time with a lot of providers. And the medical outcomes have been well. For most cases, you don't actually need to see a person. Physically in order to actually treat most situations. And so I just think this great digital acceleration that we have seen is going to persist, and that digital acceleration is going to change the workloads of communications, and more importantly, the agility and the value of cloud scale for the world, because they needed it now and they can realize why were we ever holding back and holding on to on-prem, on-prem systems like we were.

And I do think there are going to be a lot of stories written about how cloud saved the economy in many ways during this time, whether it's business continuity or it's, you know, personal sanity. It would be a very different, you know, stay-at-home situation if we didn't have collaboration tools and communication tools and remote applications. And so for everyone out there who's helping to power this economy through it, we appreciate and thank you for that. There's also another part of leading through this challenging time, and Jeff, I want to give you a moment to talk specifically about some of the initiatives that you've been doing with Twilio.org. And so I'm going to share back the screen now, which hopefully you can see, which speaks specifically to some of the COVID and nonprofit resources that Twilio has available. Can you just share with the group what you're doing here, both as I think an example for other companies to potentially follow? To follow, as well as specific resources that can be helpful.

Yeah, absolutely. And as quick background, you know, we started Twilio.org about 8 years ago, 7 years ago, I think, to serve the nonprofit community around this. So we saw nonprofits were customers of Twilio, because we built a platform, and the platform can be used to build just about anything. And what we didn't anticipate when we started the company was how many use cases were actually of solving the world's problems. Solve problems via communications. And so nonprofits were coming to us and we wanted to make it clear that we were open for business, we wanted to work with them, and to formalize that. So we started Twilio.org and, you know, as you might expect, we got a lot of traction with— from nonprofit customers. But one thing that always bugged me in the early days of Twilio.org, which was essentially was a marketing program, and actually the discounts we were giving to customers or anything that we did, the headcount to actually manage the program was a marketing program, and I could kind of see the writing on the wall, which was like, you know, when times are good, great, let's throw a little money towards the.org thing, and you know, that feels good. But when times are tough, when budgets are tight, what's the first thing that gets cut? You know, it's something like that. And I didn't want that. I didn't want to have this fair-weather commitment to building a just company. And so in 2015, just before our IPO, Thank you to the board and our investors. We committed 1% of the equity of our company to sustainably fund the toyota.org. And the way we did it, the way we structured it was, you know, it's a 1% pledge, but we did a 10th of a percent of our equity every year for 10 years would go to fund toyota.org.

At which point— That's over $100 million of value today. So not a trivial amount.

Yep. And what's nice about it is it creates a virtuous cycle. The better the business does, the better toa.org can do. And the better toa.org does, the stronger company it makes. It creates more employee engagement, it creates more, you know, great PR, and it's a fantastic vehicle just to build a stronger company because it gives another layer of meaning to what your company does. So that's a bit of the background. Now, having done that in 2016, that also enabled me, by the way, to hire an amazing executive director for toa.org, Erin Reilly, who's who's now the head of all social impact at Twilio, as well as the head of twilio.org, and building that up so that we have a team now of give or take 20 people running twilio.org who actually see themselves as enablers of the entire organization. So whether it is selling our product to nonprofits, whether it is community engagement in the cities where we have employees, or whether it is greater social impact measures, their job is to enable and empower the entire company, which is now about 3,000 people. People to actually build a more just company around us. And so I give the whole setup to say when COVID hit and we realized that there would be so many ways in which Twilio could serve the needs of society right now, we were actually really well prepared to be able to do that because we had an entire go-to-market team that was enabled to be able to sell to nonprofits and to speak about our use cases and to enable them and give them all the discounts. We were able to take and immediately create a grant system. So we turned around almost overnight and gave $1.5 million in grant money. That was because we had taken equity pledge and we had a team who knew how to do grants and how to evaluate organizations. And we could immediately turn around and do employee grant matching and things like that. And so there are a lot of things that set us up really well that allowed us to then go help. And we've been working with medical centers, a wide variety of medical centers to build like triage bots to get patient symptoms and then bump them up to video visits if they need to do a video visit, and only then bring them into the, to the ER if they truly need urgent help. We've built, we've worked with like the United Way to build a 211 system to actually move 211 to large swaths of the United States, to move it from on-prem into the cloud, to help the city of Pittsburgh to move their 311, their services, city services, into the cloud overnight because their employees needed to work from home. So there's so many different types of organizations that we've been able to work with through this crisis. In New York City, working with City Harvest, actually amazing program, where they use messaging bots to hook people in need up with food pantries who can serve them. And they've seen something like a 100% increase what did I see, a 400% increase in demand through COVID. And so it's just our ability to scale up and meet the demands of the world right now, you know, does a few things. First of all, we sell at a deep discount, but it is selling. And so that's good for business. But the second thing is it mobilized so many Twillions to actually volunteer and help. So a lot of those things I just described to you were actually built by Twilio employees in their spare time volunteering to help those organizations get live. In a night. And then that increases employee engagement. And during this time, it is so difficult for all of us and for all of our employees to stay focused, to find meaning in waking up every day. Like, it's a confusing time for everybody. Well, you better believe that having that sense of purpose for the company and then the volunteer opportunities for people to get engaged and that sense of meaning behind the product you're building and the company you're building, I think is really important. So, small pitch. No, we don't need a pitch. If you're just getting started now, take the 1% pledge and you don't even have to do anything with it today. You just take the pledge and say 1% of my equity is going to go towards some future program that is gonna help make the world around me better because my company exists. And even for you as a founder, knowing that as you create value for yourself and your co-founders, your employees, and your investors, they are actually creating value that you've stored away to make society better, feels really good. And I do believe that we as entrepreneurs and as founders, we have a responsibility. We can create companies and we can create value because of the strength of the society and the communities that we create our companies in. And our job with having created companies is not just to make a profit, but I also believe is to leave our communities and our society stronger because we exist, and this is one way to do it.

Well, Jeff, we appreciate your leadership for the community as well as for the tech world. And an additional resource, the Pledge 1%, you can Google it, or I think it's pledge1percent.org. And I will note that most of the leading investors also enthusiastically support Pledge 1% and are involved, and so I'm really glad you mentioned that. As part of your efforts. And I do think having premeditated it allowed you to be responsive in this time. I would also note more of the general founder resources that I mentioned up front on the Bessemer website, bvp.com/cloud. We do have the State of the Cloud Report, which we dropped moments ago. So there's a holistic look at the cloud industry, our annual report for 2020, as well as the podcast with Jeff under the Cloud Giants podcast. Podcast umbrella, which talks more about the Twilio story, and I apologize for the dozens of great questions that came in that we weren't able to get to, but many of those answers you'll find in the Cloud Giants podcast off of this bvp.com/cloud page. So thank you, Jeff Lawson, for your leadership. Thank you to the SaaStr community for this forum, and we wish you all a safe, healthy, and prosperous 2020 despite the craziness.