‘The most interesting tech IPO of the year’ was founded by alums

A $1 billion cloud communications startup founded by Michigan Engineering alums went public in late June, bringing in $150 million. Quartz called the move “the most interesting tech IPO of the year.”

“(The) closer you look at Twilio, the more it represents a new kind of tech company for a new era of tech,” the Quartz piece argues.

Twilio is an application programming interface, or API, that works behind the scenes of apps by the likes of Uber, Airbnb, WhatsApp, Home Depot and the Red Cross. The software lets developers easily add text, voice and video messaging to their apps. Twilio makes it possible to communicate with your Uber driver or Airbnb host, for Home Depot to connect customers with contractors, for the Red Cross to find local volunteers, and for WhatsApp to verify users identities. Those are just a few of its high-profile customers.

Since its launch in 2007, Twilio has grown to serve more than 1 million developers across the globe. It now operates in 22 data centers in seven regions, and it claims to reach nearly every phone on the planet.

In 2015, it became one of the rare startups to raise more than $1 billion — a “unicorn” in tech parlance. For the past two years, the company was selected to Deloitte’s Fast 500 list.

The company was launched in 2007 by Jeff Lawson (BS CS ’03), Evan Cooke (MS CSE ’04, PhD CSE ‘07) and John Wolthuis (BS CS ’98, BGS ‘98). In this Q and A, Michigan Engineering talks with Lawson and Wolthuis.

In a 2015 article in re/code, Jeff Lawson described Twilio’s technology as a missing piece of the developer tool kit. Could you expand on that? Why was it so hard for companies to communicate with their customers and what was Twilio’s key innovation?

John Wolthuis: Traditionally, you needed quite a lot of specialized knowledge and equipment to interact with the public voice and SMS networks. On top of this, the gatekeepers of those networks (carriers) operated in such a manner that it was very slow and expensive to get access to them, frequently requiring expensive hardware and negotiating long term contracts for the capacity you predicted you might need. This was a very unfriendly environment for people who were used to building software for the internet. Internet developers build amazing things on top of standard protocols and never had to ask a gatekeeper for access. This was not the case with telco.

Twilio’s key innovation was abstracting away both the complexity of traditional telecom technologies and the expense of interacting with the carriers. We provided our developers with an interface that was built around well-known internet standards and offered a pay-as-you-go pricing model. This allowed developers who understood how to build websites to now easily interact with the public telecom network. For a few dollars and a few minutes of effort, they could now add voice or SMS functionality into their software, allowing them to experiment without risk and really innovate.

How did you identify this high-level problem that seems to run across so many different disciplines and business models?

John Wolthuis: Brainstorming mostly. When we decided to start a company, we talked through many different problem areas we’d come across in previous projects and one that stood out was interacting with the telco network. I had several negative experiences with it in my work at Active.com and Jeff had similar problems when working on Ninestar and Stubhub. It was a big enough and difficult enough problem that we felt like it would be a valuable project to tackle.

Jeff Lawson: Like John said, integrating communications was a challenge we had faced at each of our previous companies. A business won’t succeed without a great customer experience and we knew that the customer experience was primarily driven by communications. Once we came to the idea and realized just how large the opportunity was, the idea for Twilio was born – a developer platform for communications.

We’ve seen your team quoted as saying that to be a successful entrepreneur, you have to passionately believe that your idea or your product could make a difference in the world. How do you see Twilio as making a difference in the world and why do you think it’s important to have this broad perspective?

John Wolthuis: Being an entrepreneur is very difficult. It will take up an enormous amount of your time and energy. I can’t imagine putting in the kind of focus and effort you need to without being passionate about the idea. Twilio makes it easier for people to communicate well. Not just more cheaply or through more channels, but more richly and with the kind of context that was difficult to provide before.

Was there a turning point for you during your time here at Michigan and if so, what was it? How did your education here prepare you for the work you do today?

Jeff Lawson: The University of Michigan is where I became a developer and learned to program. That was a big turning point in my life – figuring out that I could use these coding skills to really build cool things and start companies. While at Michigan, I started a company that posted class notes online. Michigan’s School of Education sort of became our working space for that company because they had a color laser printer – which at the time was a pretty rare, new piece of technology – and we used it to print out our marketing materials (apologies for how many yellow toner cartridges we used during those years). Starting that company while at Michigan really sparked the entrepreneurial bug in me, and it led me to start several companies over the years, including Twilio.

John Wolthuis: I think one of the key turning points for me was professor Elliot Soloway’s software engineering class. Up to this point, most of my engineering class work had been centered around homework problems and theory and exams, but in this class you had to design and build something from scratch and you were graded not on whether you demonstrated you understood a theory or that it was the most efficient solution, but on whether what you built worked and was useful. The experience of being on a small team that took a product from nebulous idea to polished product was formative, and shaped my decision to make a career in startups.

Soloway’s response?

Software engineering is arguably the most transformative industry on the planet, and I’ve always thought that in order to prepare students for it, college courses need to be project-oriented and incorporate engineering methods such as agile development and user testing. It is most heartening to hear John’s story, and that my course helped him to develop into a successful entrepreneur. (Soloway is an Arthur F. Thurnau Professor, a professor in Electrical Engineering and Computer Science at the College of Engineering, and a professor at the schools of Information and Education.)