Developers want the customers using their apps to be able to communicate with the businesses that deploy them, whether that's through voice, text, or video.

If that seems obvious, it is. And it's one of the reasons that Twilio, the communications-development platform, based in San Francisco, California, has been so outrageously successful in recent years.

Twilio is one of a new breed of cloud-based software-development companies turning old industries on their heads by empowering coders to test and deploy their products on a vastly compressed time frame, without middlemen, and at a fraction of the usual cost. Along with the newly public Atlassian and the open-source coding platform GitHub, Twilio is also redefining how software is created and consumed, by moving key aspects to the cloud.

Twilio essentially manages the relationship with telecommunications carriers, provides application-interface design tools, and then charges for use of the communications tool. The result is a messaging system that costs far less than what developers could create for themselves, and a considerably streamlined time to market for applications, experts say.

This kind of impact has investors' attention. Since its founding in 2008, the company has attracted $234 million in investment funding from such high-profile funders as Bessemer Venture Partners, Redpoint Ventures, and Salesforce Ventures. Institutional investor T. Rowe Price led the most recent round of $130 million with Draper, Fisher, Jurvetson, which landed Twilio a valuation of $1.1 billion--marking its status on this year's list of unicorns. As such, it joins the ranks of other companies valued at more than $1 billion. 

Founded by the developer and serial entrepreneur Jeff Lawson, who is currently Twilio's chief executive, it has grown from a handful of employees to 500 today. (The other co-founders are Evan Cooke, currently a Twilio board member, and John Wolthius, the company's product architect.)

"We ran into this scenario over and over, where we thought communications would help developers build better software, to reach out into the world and talk to our customers," Lawson says. "We started Twilio in 2008 to solve that problem, and our hypothesis has proven out to be true."

Today, more than 700,000 developers and 20,000 businesses use the platform for application development. Well-known companies that have jumped in include Nordstrom, Uber, Box, Dell, and eBay. Nordstrom, for example, has used Twilio to build an app that lets its sales people text with their wealthy clientele without the intrusion, and potential privacy concerns, of sharing telephone numbers, Lawson says. Uber has also used Twilio to build the app that lets drivers communicate with their customers about their pickup and arrival times.

In addition to the U.S., Twilio, a 2014 Inc. 5000 company, allows developers around the globe to build apps. Although Twilio did not make its most recent revenue number available, for 2013 it had sales of $51.7 million. That same year, its three-year revenue growth notched a swift 2,711 percent. 

"Twilio really represents a huge shift, and over time we will see [its model] transferred to other roles within business," says Ross Fubini, partner at Canaan Partners, in Menlo Park, California. "We will see more and more products marketed directly to developers within the companies, not just to executives within them."

In many ways, the obviousness of what Twilio does is also what makes it stand out, says Michael Facemire, a principal analyst at research company Forrester. And as software layers become increasingly important in the lives of consumers and businesses, companies such as Twilio will only become more necessary. That will be particularly true as the world shifts to the internet of things, with its promise of endless connectivity of everyday devices.

"We need these human touch points to drive better experiences with our products, so there is this great growth opportunity for Twilio," Facemire says.

At the same time, the niche that Twilio has carved out for itself is one that competitors are eager to duplicate. Companies such as Tropo, recently acquired by Cisco for an undisclosed sum, Nexmo, and 8x8 also occupy the space. And going forward, communications companies, realizing the potential loss of revenue, could try to duplicate the service, says Facemire.

In fact, in August, Twilio petitioned the Federal Communications Commission to try to rein in the power of phone companies, by reclassifying text messages under Title II of the Telecommunications Act. In March, the FCC issued its net neutrality order, which will regulate broadband services of such providers under Title II, which is a more stringent regulation than before. In its petition, Twilio has stated that its texts in some instances are being throttled and blocked by phone carriers.

Still, despite the competition and the regulatory stumbling blocks, Lawson is convinced Twilio is a game-changer.

"Our mission for empowering software developers to build software-based communications is no small mission," Lawson says. "We are tackling a big, global opportunity in a pretty exciting space."

Published on: Dec 30, 2015