Last week TechCrunch sat down virtually with Jeff Lawson, the CEO and co-founder of Twilio as part of our long-running Extra Crunch Live series. As I expected, the chat was a good use of time.
Why? Lawson was early on the idea that software companies could deliver their features not through a web app, but through an API. Back when Twilio was getting started, the world was still uncertain on the future of cloud. But Twilio was already skating past that puck toward a more distant target.
And his company has been largely proven right in its view of the future. While cloud software is now the de facto position for startups and legacy providers alike, API-powered startups are having one hell of a year according to founders and investors.
The growing wave of API-delivered software is not looking set to slow down, with Lawson telling TechCrunch during our chat that “the world is getting broken down into APIs,” as “every part of the stack of business that a developer might need to build is eventually turning into APIs that developers can use.”
So, expect more startups to ask you to snag an API key instead of signing up for a 12-month commitment. That said, don’t get too excited, yet, as Lawson was also clear during our chat that “not everything that can be broken down into an API will end up being a huge business.”
As Salesforce helped set the stage for SaaS startups in year’s past, Twilio’s $40 billion market cap today could prove a similar North Star for API startups.
A big thanks to the Extra Crunch crew for showing up and helping us ask some fun questions. I’ve snagged some favorite quotes below and embedded the YouTube clip of the whole chat. Let’s go!
On APIs and building
What APIs allow is for developers to start with great building blocks, infrastructure, and then add and combine them in a way where their secret sauce … their idea … comes forth quickly and easily and scalably. So that instead of like hacking something together with duct tape and glue, you’re actually building something right. And you’re doing it easily. Then when it takes off, it continues to work in scale, as opposed to the duct tape and glue stuff that you might try to hack together on your own, where it’s like, well, it doesn’t doesn’t really work.
So it makes sense to me, that really what the world needs is every major category of software and business to be broken down into its building blocks, so that it is a platform upon which companies can build.
Why API companies can scale quickly
Twilio is incredibly fast-growing at our scale, we’re not selling seats and many other companies like us are as well. That’s because what we’ve done is instead of selling to a line of business owners, we sell through developers. And instead of selling seats on a multiyear commitment, we have a very small usage-based pricing model. What’s amazing about this business model is two things. First of all, it benefits customers, because they can get started very easily, with very little friction. When we started Twilio, most B2B experiences as a developer [were like] “Oh, I want to try out this thing.” [But contacting] sales was the only way to make any progress, right? And if you went, “Oh, can I see the documentation?” Well, you have to sign an NDA. How much does it cost? Well, you know let’s see. [ … ]
I don’t want to go through a sales process. I don’t want to wait a week to get a call back. I just want to start exploring now. That’s why our business model is so powerful, that platform business model. Which is we help developers get started incredibly easily, sign up, get started. Look, we’ve got a sales team too. And they’re going to help customers adopt, make sure they’re successful, make sure that they’re successful in their rollout and then help them with more use cases over time. But ultimately, our job is to empower customers to get started and to be successful with our product, not get in their way. So I think that the general trend toward the usage-based model where getting started can cost us dollars [is the future].
The future of APIs
The great thing is that the world is getting broken down into APIs. So that every part of the stack of business that a developer might need to build is eventually turning into APIs that developers can use. You know, there’s obviously all the AWS products for compute and storage and everything else. For payments, there’s Stripe. For communications, there’s Twilio. For CDN [there’s] Fastly. Eventually every part of the developer stack will be delivered as a service.
Pop-Tarts
Jeff: We were doing skateboarding, snowboarding, surfing, BMX biking. The idea was to do for extreme sports what REI has done for outdoor hiking, climbing, camping sports. We [said] that those are the granola-eating sports, ours were the Pop-Tart eating sports. And we wanted to create this really experiential in-store experience, like we had a skatepark right in the store. We had every —
Alex: I used to skateboard, this is right up my alley. I like Pop-Tarts. Keep talking, Jeff, this is great.
Jeff: Pop-Tarts are fantastic.
Alex: Thank you.
Is my API market big enough?
Here’s the thing, it’s still business, right? So you still have to be addressing a large market. So the way I think about it is, what you want is the combination of a large market [like] communications [which is a] huge market, [a] trillion dollar market. Payments? Huge market. Data centers? Huge market. A place where companies need more flexibility and need to invent. You know, there are certain categories where the off-the-shelf is fine. In fact, that’s preferable, because it’s just like easy, you know, let it go. But there are other areas where every company needs to build in order to compete and win, and those are the best categories.
On getting dissed by VCs
You know, early on, there were investors who said Twilio was a nice small business, [that it was] a lifestyle business.
Like I said, we had a good time.