How I Built This with Guy Raz - Twilio: Jeff Lawson

Episode Date: April 3, 2023

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 ArabloueiEdited by Neva Grant, with research help from Sam Paulson.You can follow HIBT on Twitter & Instagram, and email us at [e-mail] Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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Visit Upwork.com to get hiring talented professionals today. We had this very fateful meeting, I remember, where we said, look, you know, investors have told us we're wrong that this is stupid. These are smart people. These aren't dummies that are smart. Like 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 like we've got to follow through on delivering for those customers and at least get a product to launch and see what happens. Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. 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. 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. 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 Dober or Doors. or even Nike and Toyota to consumers in ways that have become so natural, so intuitive,

that we barely even think about them today. 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. 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 in bar mitzvahs. He started his next business as a student at the University of Michigan. 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 going to go party or you going to 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. 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? Well, so we looked at. We looked at. We looked at the university. We looked at, around at a variety of things that we could do and realize that there was, you know, in every campus there were these lecture note companies. 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

When you say we, who's we? You know, I started the company with two friends of mine, Brian Levine and Michael Krasman. Both students at Michigan. Yep, both students at Michigan. We were in the same dorm. So you're looking at this cottage industry and you guys are saying what? We're saying, well, why should you walk across campus in the snow, remind you this is Michigan, to go pick up, like after every lecture to get a copy of these notes?

It's when the internet you could just sit at your computer and download. 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.com. Mind you, this is like 1996. We could have had any domain we wanted. You know, Google was available. And we picked notes. Notes for free.

The number four, free. But if they were going to be notes for free, how is that going to be a business? Ah, great question. If we gave them away for free, which 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 eyeballs. It was, you know, page views. It was hits and... Still is in some places.

Yeah, absolutely. And so what we're basically building was a very early content management system for lecture notes. How did you, yeah, how did you know how to do that? I mean, was it you or was it your other, one of the other friends? Like, because building a website in 1997 was hard. Like, people, even big businesses would hire, like, you know, anyone to build a website. It wasn't like you just go to Squarespace or something. You had to know how to code it.

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. 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%. Well, we, so the sweet spot were these courses, you know, that like every freshman and sophomore had to take. Yeah, right? Because you 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? Right. So what we started doing is we got a little smarter and we put up flyers around campus and

say, are you an econ 101? one, we'll pay you for your notes. And it was like every week. And it would say, want to make extra cash? Sell your notes. Like, by the way, I still think the flyer method, especially on a closed environment, like a college campus, is a great marketing tool, I have to say.

I don't know if people, I haven't been on a college campus in a while. 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. Yeah, it's like, like someone had to take the time to actually go there and tape it up. Yeah. 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. Yeah. I think, I think it was around 1997 that, that, that one of your partners on this venture was doing an internship out in California. And he met this guy named Kevin O'Connor, who is the co-founder of DoubleClick, which is obviously well-known internet ad company, that's eventually about by Google. And I guess he told him about varsity and Kevin O'Connor liked the idea. And then he even said, like, maybe want to invest, or something like that? Exactly. And that led to a meeting actually the following week. Wow.

Where I flew out and Michael flew out. 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. Yeah. And it sounds like you guys are working on this interesting thing. And you have the whole internet. Why are you focused it on like, you know, a one square mile radius of potential customers? Yeah. Like, why don't you go use the internet for what it's good for, which is like scale.

Yeah. 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? So you dropped out of college to do this. You guys moved to Silicon Valley, California, to pursue this idea atversity.com full-time. Yeah, well, we raised first like 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. That's insane. I'm just... Well, you know, because at that time, This is like 1990, maybe eight at this point. Like every, every dentist and everybody is being told, you got to invest in this internet thing.

And so people just throw money at us. And so we raise 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. Wow. You raised 11 million to you.

You were 21 years old. And that sounds super small by today's standards. It's nuts. That was nuts to me. That was a lot of money back then. 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. Yeah. And just to curiosity, I'm assuming your parents were like, yeah, you can't do this. 11 million bucks. You've got this thing going, yeah, drop out. You can always go back to school if you want. Not at all. Our parents were horrified by this whole thing. They were like, you know, why aren't you finishing school? You got to become professionals. You know, you got to be doctors and lawyers. And, you know, that's what their generation really valued was those professions. And this idea that you drop out of school because, you know, you're making something on the computer, right, 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 started to come around. And I remember we opened an office. We had an office in... Where was it? In Ipsilani, this town right outside of Ann Arbor, 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 Ipsilani.

And did you... So you had this office in Ipsilani, but you didn't have to... They didn't... Your investors didn't say, hey, you've got to build this in... Silicon Valley? Well, they did. So then we raised our venture round. 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 Ipsilani. And on Monday, we were all at work in Silicon Valley. Wow. And just picked up going out here. And we then expanded from, you know, I think the 10 campuses

that we were on to 50 the next semester, and then after that to 200. I'm still trying to wrap my head around the fact that this content was free. 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, U.S. News and World. report ratings plus like, you know, what Yelp eventually, like all those things. Like, did anybody say that? 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. 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. We did from a, from a rival company. 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 college club.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, you know, Facebook became one of the largest website, right? But so I, you know,

I made this bold declaration. Well, meanwhile, the college club company, they had been acquiring their eyeballs. So they were in the eyeballs game too. Yeah. 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. Yeah. And when you took the entire cost of operating our business, including paying these note takers, we were like a dollar to acquire a customer. It was so much more efficient.

And 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 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. 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? It was an all-stock deal, but they were giving you $30 million worth of stock. I mean, that's a pretty great outcome. I mean, for you, for your investors in such a short period of time. Yeah. And I think when it was the 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, yeah. Hey, wow, look at that. You're putting down pay. You're putting a down payment on like a mansion.

Well, and think about it. Yeah, at 21, I don't think you're really thinking about mansions. You're more like, that's a lot of like subway or something. Um, so we went from nothing being college students to like raising this small round of friends and family investors to now have this thing that's going to be public and worth hundreds and 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 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 just starts to collapse yep

This is the beginning of the dot-com bubble bursting. It's the beginning of the bust, and they are bankrupt by August. So all that work, all those investors, like all that money was gone. Everything got. Like it was worth zero. Wow. You know, by within months. 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. 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 going to, we have to lay off basically your whole company. And I was like, are you serious? They're 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. Yeah. But in a sense, I mean, what happened to diversity 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. Yeah. But, you know, I just, it was sort of like what just happened, right? We had this whole internet bubble and it burst. And no one was really, like it felt like nobody was like, you know, manning the door. Like, who's in charge here of this internet now, right? If everybody agreed that revenue didn't matter and now suddenly it does, 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? Huh. So I guess spring of 2000, this thing basically unravels. And you decide to start spending a few months working. in another startup, which it was called Stubhub, which we know, of course, of today. Because I think I had just launched at the time. But I guess you weren't really into it because you, I guess pretty soon after you started there,

you began meeting with people about other things that you might want to do, right? Like other companies you could work at? 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 still working on StubHub. and, you know, he said, you know, what do you, you know, what are you doing or what are you thinking about? And I was like, you know, I'm not sure I'm going to be long for the 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. Nice. And we'll just brainstorm a bunch of business ideas. And we'll come up with my summer home in the Hamptons. Yeah. And I'm like, well, that sounds nice.

And so I move out in November, the middle of winter. Yeah. Right. And it's kind of this old beach shack. Like it sounds great like the summer home in the Hamptons, but it was like this old beach shack with very poor electrical infrastructure. and everything else. And were you by yourself in that house?

So I grabbed one of my other co-founders from Versaity. One of our actually one of my key hires at Versity. And we came out to this guy named Matt Levinson. So we moved out in the middle of winter. And by the way, 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. Yeah.

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 your brainstorming ideas Scene setting for you The tinyest violin in the world is playing now For your time, but the Hamptons

So but what is the process? You guys are sitting there all day Just doing what? Yeah, because there's nothing else to do. Tell me with the conversation, like how do you start to brainstorm a new idea? Okay, so we spend the first week brainstorming Different groups of human beings

That might have interesting problems. Okay. 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 come up with 200

different groupings of human beings. And then we rank which ones we thought were most interesting and 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 brainstormed, okay, well, like they need to acquire customers,

they need to accept payment. They need to do marketing. They need to security. They need to get their store online. All these list of things that they might need to do. And then at the end of this process, like we spent a few months, maybe like a month. And we had a list of like a thousand ideas of like problems that needed solving. Okay.

Then we moved to the second phase of this. Wow. Which was, okay, let's brainstorm new technologies that are emerging that might allow. was to go solve some problems. So you'd brainstorm 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'd get on a big whiteboard. And on the horizontal axis, you would write all of the new technologies. And then on the vertical, you would write a bunch of those problems. And then you would kind of draw. line and connect them or something? Well, like you brainstorm. You'd say, like, well, if a business needs to acquire new customers, can Bluetooth solve that problem?

Well, I remember my favorite one was called the Thing Locator. And the observation was that you had pagers. You remember pagers like doctors would have, you know, there's always doctors and drug dealers, right? Of course, yeah. Yeah. Sure. Well, pagers were going out of style. People didn't need them anymore.

But yet every city was blanketed with infrastructure to do. two-way paging. And we said, well, if you're always losing your keys or your car or your whatever, couldn't we put a GPS chip and a like a pager radio into a small package and let you just keep track of where things are? And this was in 2000. Yeah. Called the thing 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. Yeah. And so, like, you wouldn't put it on your keychain. Right. 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. 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 business that you decide to pursue is a brick-and-mortar retailer for extreme sports called Nine Star. And you would sell skateboards, BMX bikes, and snowboards. That is surprising that that was the idea that you all landed on.

In what probably was a condemnation of this brainstorming process. Yeah. I mean, totally. My co-founder, Matt, had had this idea, like, five years earlier for a, like, what was called the category killer retailer for extreme sporting goods. Because what he observed, he grew up in Santa Barbara. And he observed that these sports, you know, skateboarding, snowboarding, surfing, they were exploding in popularity. You know, 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.

I was like, but if you're going to carry, you know, 300 surfboards and a thousand skate decks and BMX bicycles on that, like, you need a big footprint store. And we looked at it and like, we were looking at retail in this time and saying, well, everything seems to be either going online or is becoming really experiential. Think REI. Think like there's a climbing wall in the store. They've got great selection. The salespeople are knowledgeable.

The salespeople do the sports. You wanted to do an REI for extreme sports, essentially. Yeah, if we said if REI is the granola eating sports, where are the Pop-Tart eating sports? And by the way, were you a skateboarder or BMX or snowboarder or anything like that? I did none of these sports. Okay, I got you. All right. So what was your role be in this company?

Like you would do the, like if this was a brick and mortar retailer, what was the technology aspect of it? Well, you know, I was asking myself that same question. I immediately said, okay, well, like, why am I doing this? Like, I'm not doing these sports. You're not a, you don't know retail. 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 Bricks and mortar retail business from scratch in the year 2000 and, you know, basically this is 2001 at this point, I could build whatever technology I want to make this a great customer experience. What would I do? What can we build? And I kind of latched 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 is just commit yourself to the domain and go figure it out.

When we come back in just a moment, how Jeff discovers that selling skateboards is not his true passion in life. and how that discovery eventually leads him to Twilio. Stay with us, I'm Guy Raz, and you're listening to How I Built This. 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. 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. Where was the first store? The west side of Los Angeles. and it took us a couple years to get the store open, but we finally opened it in basically Westwood and the corner of Olympic in Spolvada. And so I spent the next, like several years, actually building a point of sale system from scratch

to run the business on. And by the way, at its height, how many stores did Nine Star eventually open? Well, this is when we ran into the fact that retail is a brutal business. Our first store did very well, actually. 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. And so the average of both was the company was just basically staying afloat. I think why you were still trying to get that first store off the ground, you actually decided to go back to school, back to University of Michigan to finish your degree. And like, what was your plan after you finish? We're just going to head back to L.A. and kind of pick up where you left off. Yep, yep. And first of all, going back to school when you are in your mid-20s is a blast.

It is like literally the movie Old School. And I kept in contact with my co-founder who did actually in that summer, started building out the store. 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. Because we made the whole store basically a skate park. You could skate everywhere inside the store. And so kids are skating everywhere. You kept hearing these like bang, bang, bang of like the skateboards landing everywhere. The employees are like these young skater guys.

And they're like running in like, hey, bro, do you know where the seat? 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 made the same mistake I made at StubHub, which 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'm actually not even meeting my minimum payments at this point. And I'm like, something's got to give. And so I kind of float my resume. 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. 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. Yeah. And I'm like, I feel like if I want to be an entrepreneur and like succeed in building a great company knowing what happens in one would be really useful knowledge. And by the way, recharging my bank account is another added bonus. Yeah. So, so naturally you go to work for Amazon. Yeah. And I think this is around 2004. And presumably you moved to Seattle and you go, I think you went to work for what at the time was

a new division, which was AWS, Amazon Web Services, which I, obviously now is I think this is the 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. Yeah. But what was the insight that you had at Amazon to make you think, 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 what was the insight that you had at Amazon where you thought, oh, you know, I can turn this into a business? You know, I've always wanted the 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. 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. Do 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 where the experts and telephony. Just to have that automated phone line? 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 repairer. 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? Yeah. And what I saw at AWS was this idea that like, oh, now every business can have the most sophisticated technology. The same infrastructure that the giants that the Amazon's 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. I was like, you know what I would really want it for. It's like, how do I talk to my customer? I bet a lot of entrepreneurs, a lot of software developers are having this problem too. So essentially the idea was to make it easy for companies, technology companies, to communicate with their customers or to enable some kind of communication with their customers using a phone, 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 we do this with telecommunications? Well, you know, like I remember, I would call, I would say, okay, we want that fancy, like, phone thing. Yeah.

So it would be like, I don't know anything about that. I'm a software developer. I don't know the first thing about how to make a phone ring. So I call the people who, it seemed like they did. Like I call like Cisco and say like, hey, you know, it seems like you people know how to make the phone ring. Like tell me how to go about doing this. And they'd say, well, you know, it's going to take us two years and cost us about $4 million. But, you know, sign here will 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 is 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. Yeah. I would kind of look at it and say like, well, actually, you don't, is you. 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 sprint's 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, projects because those always tended to fail. 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 for all this. And why can't we fix that? Why can't that just be a line of code? And that was where Twilio started. All right.

So you decide that you're going to pursue this, and you're going to do it with two friends, Evan Cook and John, is it Waltius? Waltice. Woltice. And so did you leave Seattle? Did you move to back to California? 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, have this idea where there's this, like, service that's running in the cloud that with, like, you know, line of code, you could hit it and you could make the phone ring and you could do all these neat things. You know, would you have use cases for it? And a funny thing happened. the developers would first say, uh, that's a, you know, yeah,

how about, how about the Mets? You know, and I was like, well, okay, well, maybe this is a bad idea.

And then every single time, about a minute later, they would say, hey, wait, can you go back to that phone thing you were just talking about? You know,

could I, could I notify my customers when a package ships from an e-commerce I was recently building? And I'd say, yeah, yeah,

you could. And they'd say, oh, interesting. You know, like one of our early customers was Uber. And they came to us and said, well, actually, we want to let you know when your rides arriving. Can we do that? Which is out, 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. Okay. Just a question here, right? This is 2008. Obviously, everything we're talking about today is just normal. Like, I think everyone listening takes us for granted. But when a developer would say, oh, wow, I can notify my customers when a package arrived.

I mean, they could do that with email at that point already. So what was the, you know, when somebody would say that to you, say, well, I can't really do that through email. Like, what would you say about your product or your idea that would make it better? Well, 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. for a text message in a lot of these cases. 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.

I want to ask you a bit more about that in a moment, but I want to ask you about how you, when you started to explain this idea to people, because to build this, you were going to need money. You're going to need a lot of money because, you know, you had to fire software developers and engineers and all kinds of people. what was the reception from, 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 they puzzled looks? Was it like, oh, my God, you've got a hit? What do people say to you? Well, you know, in the early days of a company, the two people you really need to explain yourself to are, customers and investors, if you're raising investor money. Yeah, yeah.

And so we talked to customers, you know, the developers, and they would 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, you know, oh, can I launch this? And we'd be like, well, maybe not yet. This is like super prototypey. So you could build the prototype with Twilio. And initially the way you would make money or how you pitch it to investors was, we get a cut, a penny or two pennies for every automated outgoing call and then every incoming call, we get a penny or something like that. Yep. Yep. And so every phone call would be like, 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 lot. little bit of money every time they're used, but those are going to add up over time. So the summer of 2008, we feel like we're rocking and rolling. We're going to go raise our first round of financing, and then, you know, later in the year, we're going to launch, and this is going to be amazing. Yeah. 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 2000. Not a good time to be raising money.

The financial crisis is in full swing. I mean, they are, like, many of them were just like, our checkbooks are closed. I'm sorry, 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 and 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, 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. 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. 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 think about it again. And I remember, like, meeting so many investors. They all had basically the same feedback that at the end of that summer, 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 not. Yeah. And so we spent that whole summer and did not have a dollar to show for it from investors. We raised no money. So we're like back where we started. We have no money.

We have no investor interest. We didn't even have a bank account because you need like money to open a bank account and we had no money. 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. 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. And we had this very fateful meeting, I remember, where we said, look, you know, investors have told us we're wrong that this is stupid. These are smart people. These aren't dummies that are smart. Like, maybe they're right. Maybe we're on the wrong track.

And so we said maybe we should either just give up. this is a bad idea. All right, let's just go get jobs somewhere. Or maybe we should just pivot and, like, build one of those apps. They told us to go build, even though we're not that passionate about it. And I remember we said, yeah, but our customers, like those developers who are early customers, they are loving it. They are building.

They are using this. They're launching things. And having all these ideas, I think what we got to do is, like, we got to follow through on delivering for those customers and at least get a product to launch. and see what happens. It seems like your earliest customers, because you were, of course, eventually able to raise some seed money and then you would raise 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, right? You could say, you start to see these things. It was like, text, you know, dollar to five or two ones. or whatever and you would sign up for whatever that was. Like that was that a function of what you were you had built? Yeah.

So we launched and at first we were voice only. So we launched. We had basically nothing in our bank account. By the way, who was your, I mean, who was your first significant customer? I remember the day we launched, Sony reached out. And you'd say, Sony. What did Sony? And you sort of think about some big enterprise use case.

Well, it was actually Sony music. And there was a music promoter who worked at the record label who was like, oh, I saw your launch post. I want to build this service. There's a band called Lamb of God. It's like a metal band. Yeah. He said what we've had this idea in our mind forever that we want to do was called

log rolling our customers, our fans, where they can sign up to get a daily phone call. And the band is going to record a. like an 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.

Wow. And I was like, that was the day after we launched. Like, I'm on the phone with a, you know, a music promoter at Sony. And I was like, huh, there's like some real, like, you know, business needs are coming out of left and right here. 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 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, 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. As you, you know, 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? Did you have like that massive expansion quickly or were you still relatively small?

You know, one of the things that I have always taken from my entrepreneurial endeavors because most of my companies, like we did not have a lot of money. And so in the early days of Twilio, we sat about, we said one of our values is be frugal. And sure enough, I remember we hired our first software developer who was not a founder joining the company, a guy named Adam Belli. And I remember Evan saying, hey, Adam is great. 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. I'm like, wow, this is like, well. And I remember telling Evan like, all right, like, we're going to hire him. But like, better be worth it. right? And it started growing the team at that point. But it wasn't for a couple of years because we just tried to stay small and lean in those early days while we were building out with really pretty limited resources. 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? 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. 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, 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 and were building these companies would just come over for a beer. And you know, at some point it was the, it wasn't just Uber, I would say, but it was the sum of all of that entrepreneurial activity going on in our backyard, who were almost all of them, our customers that started to like really propel the growth of the

company, especially after we added text messaging, which was the service that this new whole category of mobile apps that was getting born really needed. And we were the one everyone turned to. How, and essentially, it sounds like, was it just basically developers talking to other developers and that's who you're, that's how grew? You know, in those days, the notion of like anything is possible, with code was really permeating the world. And so you had these like hackathons.

Yeah. And they were happening all the time. Like every weekend, every college campus, every major city. Wow. And we were right there. And we made sure to go to every hackathon. I remember one of the big hackathons in San Francisco was going on. And it was happening over a weekend.

And like the hackathon organizers got wise to this. They started charging a lot of money to sponsor it. Yeah. Like, oh, you want to sponsor our hackathon? Great. That's $50,000, right? Yeah. And so they started getting wise to it.

So I remember I showed up at one of these hackathons at 2 a.m. With about $700 with a Taco Bell. Wow. That was probably the best marketing dollars ROI we ever got. And you just walked around handing people tacos. Tacos. Waring my Twilio shirt and just handing out tacos. And I remember I closed down that Taco Bell.

There was a Taco Bell in Oakland that was still open at that hour. And I went on, I pulled into the drive-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. 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 Versa.

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. 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. And at that time, no one else was trying to reach them. We were like one of the only ones. Yeah. I'm curious about competitors as you started to grow because, you know, you're going, you start, 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 sounds like a shot across the bow. I mean, did you start to see competitors in some of the big companies like Cisco come in and say, well, we should do this too. We can do this. you know, it was interesting because one of the early questions we got from like investors, they said, well, won't carriers do this? Won't AT&T just do this? Right. You know, they could, I guess. But, you know, people always overestimate the ability for a big company to see an emerging

market like this and actually invest in it because it is, in its early days, small peanuts compared to the scale of those big companies are operating at, right? Yeah. So, inevitably, like the carriers, they weren't dummies. Like, they saw this trend of APIs and developers and innovation. They saw all this stuff happening. 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. Why? Because it didn't immediately pass their bar for like, well, is it making us a billion dollars of revenue? And if it's not, we don't care about it because it's not moving the needle for our big company. And that's the advantage that every small company has. It's like when we were our first year, we made $200,000. Our second year, we made $2 million. For a startup, that's a huge success story. Yeah.

For a carrier-sized company, that's a miserable failure and 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 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. Yeah.

Uber eventually became a significant, very significant. I think Uber and WhatsApp became two of the most significant drivers of revenue. I think Uber at a certain point was like 12% of your revenue is coming from Uber. Because every time you're in Uber, Twilio was powering that in the background, right? They would tell you how long your driver was going to take. And, I mean, that was all basically coming through Twilio. But they essentially pull out of their relationship with you or drastically reduce it, I think, in like, 2017. Yeah.

Was that something that, I don't know, freaked you out? You know, it actually didn't worry me. You know, our business model is usage-based, right? 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's 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 something to celebrate. That's actually something to worry about.

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

that they're like, 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 need to know that person. And even though the customer was saying, like, we're fine, we're okay, like, we don't need you. And we had assigned our sales resources elsewhere.

The mistake we made was saying, like, no, we needed to be walking the halls. We need to be really working that account. Like white glove treatment. Well, and figure out, okay, if the developer doesn't want to be talking to us, so be it. Somebody else might. There's a budget owner somewhere who's spending. now millions and going on tens of millions of dollars on our services, we at the very least have to know that person really well.

Yeah. 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're going to use less of your services. So it was a bit of a tough transition for us. But I remember standing up in front of the company the day after that happened. And in the company, we're a newly public company.

I think it was our third quarter report. as a public company. Everyone was like, well, what happened? Like, I thought being public was just like, you know, up into the right. Yeah, right. And, you know, I remember saying like, look, you know, this company is not about one customer. We've got tens of thousands of customers. And we're building this for an enormous opportunity 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. 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, you know, 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, 2020 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 a poll. the head of a public trade company, they say, I don't pay attention on the stock price. I don't believe that. I just don't believe that they don't. I mean, do you, it must weigh on you to some extent or do you, do you just feel like, well, you know, there's not much I can do to move this thing? You know, everything guy is about about time frames, right? If you look at the stock on a hour by hour or even day by day basis, it, you know, I kind of liken it to, Imagine you were playing in a basketball game. But the score did not go up when you made a basket. The score randomly changed. You know, you're dribbling up the court and you get 10 points.

And then you make a shot and you lose five points. And it's like a ran, like the score is disconnected from the thing you're doing. Would that be a fun game? Like, no, right? You'd be like, this is a bunch of BS. Like, why am I doing this? And so if you look at a stock price on the day-by-day, minute-by-minute basis, you're like, this is completely disconnected.

from what I'm doing today, right? 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 of 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 effect. But that plays out over years, not over like, you know, minutes, hours, days, or even quarters. Yeah, 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, you know, the golden era of Silicon Valley or the golden era of tech is over, right? And you've seen these, and I'm sure you've seen these 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 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 why? Did you overhire? You know, overhire is a like 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 account is making, five, six percent, 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 and 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, it's the eventually part that changed. Because the eventually became, well, now it's like a lot closer to today. And that's what makes this period so hard. Now, this happens, this is a business cycle. This business cycle happens all the time. This is not the first time we've been through one of these cycles. But the one thing that's different is the last business cycle, the boom time, the low interest rate environment went on for a pretty historically long time. So there's a lot of people in the workforce, for example, who have never seen a high interest rate environment in their career.

And that created a whole generation of entrepreneurs and workers and investors too who are accustomed to like revenue growth, future opportunity, all that. And suddenly you look at it and you're like, oh, actually, current day. profits are highly valued. And that's the change that the whole industry, especially in tech, is going through. And that's a difficult transition because our muscle memory is so oriented towards the last 10 and 15 years. You've got, I think, roughly 7,000 employees all around the world. Is that about right? About right. Yeah. And we're now in this new kind of phase where, you know, a lot of companies are still grappling with how to, whether to bring people back, right? There are lots of companies that are demanding it. And I know you are essentially fully remote company.

Some of the concern that I'm hearing from leaders and founders and CEOs is that it's really damaging to the company culture when everyone's remote. that actually, it's hard to cultivate a sense of belonging and other things involved in working in a space where you're interacting with other people. How do you feel about that? Do you think that's a fair? Because I think it's a pretty fair assessment of what's going on. What's your take? You know, I think the hard thing is when you go extended periods of time without the ability to have that face-to-face. challenge that a lot of companies are having in the current environment.

Because you see, there's a lot of startups that were born during the pandemic. Right. That were purely distributed because, like, look, that's all you can do during a pandemic. And, like, I think their cultures are probably doing fine. But then you've got a lot of companies that have a big investment in real estate. 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. Right. I got to pick one or the other because I only have so much budget.

So just said curiosity, you've got a lot of real estate. We do. Yeah. And it's not used. Yeah. And there's a building on the side of the 101 in San Francisco that, right, your headquarters here. Yeah. Our headquarters is in Soma. You know, at the beginning of the pandemic, we had, I think, three buildings in San Francisco. And, and, you know, And today, you look at those offices, they're about, you know, low single-digit percent utilization. Wow. Yeah. So what are you guys going to do?

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

the place where you bring customers or like recruits or like a place that looks really fancy and nice and like, you know, people are looking, but it just looks like your company. It's a physical manifestation of your company. Yeah. The second is you need off-site space. If, you know, once a quarter,

employees are traveling from, you know, wherever they are to meet, wouldn't it be nice if they had an experience that felt like your company? company. And those are like regional. Like, you know, you can have one in North America. That's where teams do their off-sites. 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

as 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. I got to get away from like a distraction at home or I just want some energy around me. So I'm going to 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 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. You know, when you reflect on your journey 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 where you are today do you attribute to your work, your work ethic, your skill, your intelligence and how much do you think has to do with getting lucky? 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 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. 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, Tweed, 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 H-I-B-T at ID.Wondery.com. If you want to follow us on Twitter, our 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.org. This episode was produced by Kira Joaquin with music composed. by Rumtin Arablewey. It was edited by Neva Grant with research help from Sam Paulson and technical assistance from Hans Copeland. Our production staff also includes J.C. Howard, Casey Herman, Carrie Thompson, Alex Chung, Elaine Coates, John Isabella, Chris Messini and Carla Estevez. I'm Guy Raz and you've been listening to How I Built This.