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
WhatAPIsallowisfordeveloperstostartwithgreatbuildingblocks,infrastructure,andthenaddandcombinetheminawaywheretheirsecretsauce … theiridea …comesforthquicklyandeasilyandscalably.Sothatinsteadoflikehackingsomethingtogetherwithducttapeandglue,you’reactuallybuildingsomethingright.Andyou’redoingiteasily. Thenwhenittakesoff,itcontinuestoworkinscale,asopposedtotheducttapeandgluestuffthatyoumighttrytohacktogetheronyourown,whereit’slike,well,itdoesn’tdoesn’treallywork.
So itmakessensetome,thatreallywhattheworldneedsiseverymajorcategoryofsoftwareandbusinesstobebrokendownintoitsbuildingblocks,sothatitisaplatformuponwhichcompaniescanbuild.
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. [ … ]
Idon’twanttogothroughasalesprocess.Idon’twanttowaitaweektogetacallback. Ijustwantto startexploringnow. That’swhyourbusinessmodelissopowerful,thatplatformbusinessmodel. Whichiswehelpdevelopersgetstartedincrediblyeasily,signup,getstarted. Look,we’vegotasalesteamtoo.Andthey’regoingtohelpcustomersadopt,makesurethey’resuccessful,makesurethatthey’resuccessfulintheirrolloutandthenhelpthemwithmoreusecasesovertime. 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 thingisthattheworldisgettingbrokendownintoAPIs.SothateverypartofthestackofbusinessthatadevelopermightneedtobuildiseventuallyturningintoAPIsthatdeveloperscanuse.Youknow,there’sobviouslyalltheAWSproductsforcomputeandstorageandeverythingelse. Forpayments, there’s Stripe. Forcommunications,there’sTwilio. For CDN [there’s] Fastly. Eventuallyeverypartofthedeveloperstackwillbedeliveredasaservice.
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’sthething,it’sstillbusiness,right?So youstillhavetobeaddressingalargemarket. SothewayIthinkaboutitis,whatyouwantisthecombinationofalargemarket [like]communications [which is a]hugemarket, [a] trilliondollar market. Payments? Hugemarket. Datacenters? Hugemarket. A placewherecompaniesneedmoreflexibilityandneedtoinvent. Youknow,there arecertaincategorieswheretheoff-the-shelfisfine.Infact,that’spreferable,becauseit’sjustlikeeasy,youknow,letitgo.Butthere areotherareaswhereeverycompanyneedstobuildinordertocompeteand win,andthosearethebestcategories.
On getting dissed by VCs
Youknow,earlyon,therewereinvestorswhosaid Twiliowasanicesmallbusiness,[that it was] alifestylebusiness.
Like I said, we had a good time.
