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Billion Dollar Unicorns: Twilio is Revolutionizing Telecommunications

Posted on Wednesday, May 27th 2015

According to a MarketsandMarkets report, the global Unified Communication as a Service market is projected to grow 12% annually from $13.1 billion in 2014 to $23.3 billion by the year 2019. San Francisco-based Twilio is a leading player in the market which is helping other customer service providers to reap the benefits of Communication-as-a-Service. Earlier this month, Twilio joined the ranks of the Billion Dollar Unicorn club.

Twilio’s Offerings

Twilio was founded in 2007 by Jeff Lawson, Evan Cooke, and John Wolthuis. Today, Twilio has evolved into a company that helps simplify the telecom investments of an organization by shifting the telecom hardware requirements to the cloud. Organizations are able to migrate to a globally available cloud API that their developers can use to interact with and to build intelligent and complex communications systems. Twilio also recognizes the importance of variable costing in today’s P&L analysis and lets organizations scale up or down based on the usage of the apps. Organizations are able to do away with the fixed costs and capital expenditure involved in running a hardware based telecom service such as that provided by Cisco and replace it with a flexible pay-for-what-you-use service.

Twilio is operating on a mission to “migrate 150 years of telecommunications history – that 150 year old hardware – into a future that is in software”. They are able to do this through their relationships with over 100 telephony carriers around the world and by building a platform that is able to route phone calls and text messages in the cloud. Earlier this year, they improved their offering by building video call capabilities within their apps.

Twilio’s product has helped them bag an impressive list of customers that ranges from new age providers like AirBnB, TaskRabbit, Uber, and Lyft to more traditional retailers like the Home Depot. For Home Depot, Twilio helped deliver their call center capabilities within two months instead of the two years that would have been needed if Home Depot had chosen Cisco. For companies like Uber and Lyft, they have integrated communication into the workflow so that the service users are able to hail a cab with a smartphone, get alerts about the status of the cab on the phone, call or text the driver of the cab—all with the touch of a button in the app.

But the competition for Twilio is heating up. Recently, Cisco announced the acquisition of Tropo, a privately held company providing a cloud API platform that makes it simple for customers and developers to embed real-time communications within their applications. The acquisition will help Cisco provide a cloud based and a flexible communication-as-a-service offering that Twilio has been boasting about.

Twilio’s Financials

Twilio earns revenues by charging their customers a fee based on the consumption of their services. Consumers can pay low per-minute rates for the capability to connect and route voice calls to over 200 countries, communicate over VoIP to browser or mobile apps. Additional revenue generating services include charges for sending and receiving SMSs and MMSs, signing up for VoIPs in more than 40 countries, provision IP infrastructure and explore connectivity and termination coverage. Their detailed financials are not known, but recent reports suggest that the company ended fiscal 2014 with a revenue run rate of over $100 million and is estimated to be adding $1 million in annual revenues every week.

Twilio is venture funded with $110 million raised from investors including Redpoint Ventures, Draper Fisher Jurvetson, Bessemer Venture Partners, Union Square Ventures, K9 Ventures, 500 Startups, SV Angel, Lowercase Capital, Mitchell Kapoor, David Cohen, and Founders Fund. A funding round held in 2013 had valued them at $500 million. The market is eagerly waiting for them to IPO, but the company appears to be in no rush right now.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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