Twilio S-1 Amendment | Hacker News Reader

Twilio S-1 Amendment

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147 pointscoloneltcb45 comments

Looking at their buy-sell margins, Twilio has successfully changed the telecom paradigm, or at the least the vanguard of it. That is Big. APIs instead of circuits. Microservices instead of canned products.

I say that because this shows Twilio is both charging a (small) premium compared to traditional telcos, and have a less expensive operating model.

Most of their success is with startups and SMBs. It will be interesting to see their enterprise traction because Twilio's model puts the enterprise software developers and business units towards the front of the "buy" decisions, rather than traditional enterprise IT and telco teams.

> Looking at their buy-sell margins, Twilio has successfully changed the telecom paradigm, or at the least the vanguard of it. That is Big. APIs instead of circuits. Microservices instead of canned products.

Telecom had already been headed that way for the better part of the last decade. Twilio doesn't own any infrastructure, and the expensive part of telecom has always been operating the legacy infrastructure.

>Looking at their buy-sell margins, Twilio has successfully changed the telecom paradigm, or at the least the vanguard of it. That is Big. APIs instead of circuits. Microservices instead of canned products.

I think that's a bit of a stretch. Twilio isn't doing anything new here.

Their tremendous growth is impressive, but the product isn't.

From the first pages, a huge middle finger to new investors:

"We have two classes of common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except voting and conversion rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to 10 votes and is convertible at any time into one share of Class A common stock. The holders of our outstanding Class B common stock will hold approximately 98.6% of the voting power of our outstanding capital stock following this offering, with our directors, executive officers and significant stockholders holding approximately 66.2%."

Obnoxious, perhaps, but not unprecedented; Google and Facebook have similar structures now, and it's not unprecedented outside the tech industry. (The Ford family used this kind of structure to keep control of their Motor Company.)

> [This is] not unprecedented; Google and Facebook have similar structures...[t]he Ford family used this kind of structure..."

Alphabet's B shares hold 64% of its voting power [1]. Zuckerberg controls 57% of Facebook's votes [2]. And Ford's Class B shares hold 40% of the voting power [3]. Selling the public 10% of your company while retaining 99% of the vote is a huge red flag.

[1] http://www.investopedia.com/articles/markets/052215/goog-or-...

[2] http://venturebeat.com/2012/02/01/zuck-power-play/

[3] http://venturebeat.com/2012/02/01/zuck-power-play/

Those companies were profitable when they went public, and their founders were credited with their success. Twilio is losing money.

Any thoughts on the automatic B->A conversion after a few years?

That gives a market cap of $1.15bn (82,200,793 shares*$14/share). Based on public information, Twilio's revenue run rate would be around $150M, so that's x8 for Revenue and x20 for EBITDA (40% margin seems reasonable in the telcos industry). Fun fact: AT&T market cap is $248Bn, x5 EBITDA. Just thought it would be funny to compare the two

Previous discussion, before the current amendment: https://news.ycombinator.com/item?id=11779453

$14/share @ 11.5M shares

Title of Each Class of Securities to be Registered: Class A common stock, $0.001 par value per share

Amount to be Registered: 11,500,000

Proposed Maximum Aggregate Offering Price Per Share: $14.00

Proposed Maximum Aggregate Offering Price: $161,000,000

Twilio finished 2015 with a $35.5 million loss on revenue of $167 million. For the year, it listed research and development costs of $42.6 million and a combined $85.3 million in operating expenses.

I'm not sure if that justifies $161M market cap.

161M isn't the market cap. It's the value of the shares they plan to sell at IPO.

With 82,200,793 shares outstanding after IPO if the price holds at $14 that's a market cap of 1.15B.

About 7x revenues. That's a pretty high multiple, but hopefully they can pull it off.

Recent IPOs weren't nearly as aggressive, but of course different industries. Will be interesting to see how investors react to lack of long term customer commitments and instead relying on tech integration stickiness to drive repeat spend.

investors primarily care about future profits. trailing twelve month revenues are just one of many potential indicators of future profit. a 7x multiple of revenue _is_ very high for a slow or no-growth company, but for a high growth company, it can be very reasonable.

Not saying it couldn't be, but as of late the overall market seems to be more pessimistic and therefore discounts prospects of future earnings more than usual. That said, I'm no expert.

This is actually fascinating - I like stock forums like Stocktwits a lot, and you often see people who's only argument against growth stage tech companies is that they're not currently profitable. I always assumed that logic has an end at some valuation - in this case, imaginenore doesn't believe a company that isn't profitable yet is worth even 1x revenue! Amazing!

Market cap isn't $161M - they're issuing 11.5M shares, but there will be over 80M outstanding after the IPO. Market cap will be just under $1B.

just over 1B (1.15b) but yup you're spot on

Excellent. I shall re-send them an undisputed invoice they haven't managed to pay since 2011. Great tech, total amateurs running the business side. Proof anyone can IPO if you pay the right people the right fees.

Edit: downvote away, boys. Doesn't change the facts.

I apologize if this real world example of how Twilio runs their business is out of place in this Twilio thread where they're asking the general public for $160 million to fund a business that doesn't make money.

Serious question, what does Twilio need to go public for? They have a solid business model, with huge companies using them. Is this just so venture capitalists can get paid out? Edit: I guess this has been asked, and answered in the previous thread.

One of the few companies that can benefit in a non-financial way. For a core service like telecom, the scrutiny in being public is comforting to prospective enterprise customers. Company is almost 10 years old so pretty reasonable, if late, timing.

The money is nice, especially for early employees. It also helps close more big deals, large enterprises like working with public companies because they're not going to go anywhere quickly.

Employees also might want to sell their shares which is much easier after an IPO.

Why wait 10-20 years for the same amount to come in via a steady income when you can get it all in one go?

Maybe they need cash to grow more aggressively.

It's purely subjective, but I really wish Twilio well for this - something about Patio11 speaking highly of them probably.

Resident of Canada here with 0 experience in investing. What steps can I take to invest in this company right from the onset of their IPO?

It will be virtually impossible for you to be involved in their IPO. You can contact your brokerage and see if you can be involved but usually there is either a restriction based on how much money you have in your brokerage account or how many transactions you have participated in. As a new investor they are likely just going to say no.

That said, if you can wait until just past the IPO you will be able to purchase shares just like any other symbol.

Thanks a lot! I'm going to assume I just have to wait a little bit and figure out how I'd purchase shares the regular way.

Well the IPO has to actually happen before you can buy the shares on a normal exchange. This is just a filing with the SEC for a proposal to have an IPO.

Do you have an investment account and associated financial advisor? If so you can can ask them if there are shares available for you. During the initial "road show" where the people bringing the company to market visit various banks, those banks will "subscribe" to buy a number of shares at the IPO price. If you bank was one of the ones subscribed you may be able to request some of the shares.

If your bank is not participating, you can simply put in a market order to buy shares on the first day. That isn't particularly smart because if the shares are in a lot of demand the tend to "pop" up in value before sinking again. So for example I watched the Facebook IPO but didn't actually buy any until it dropped down to $18[1] (which was below the IPO price).

The important thing to remember is that if the company is going to be successful, there will be lots of room to grow after the IPO, and if it isn't there will be plenty of opportunities to buy the stock below the IPO price. There is a tremendous amount of activity right around the IPO as the new and old investors sort out their opinion of the value of the company. Its often better to wait a month or two to get a look at how the company is doing before deciding to invest or not.

[1] I then sold half when it hit $36 and the rest when it hit $54.

I would assume it's too late for Twilio, but the next time this happens, there are many companies now that arrange secondary sales where employees can sell some shares so they can use the money to buy a house, car, fund a college education for their child, etc. It is not a liquid investment like a publicly tradable security, but this is a solid option in many cases where you are unlikely to be able to participate in the IPO without connections or a large bank account balance.

Secondary sales will typically be limited to accredited investors, so you'd need either a) $1 million in net worth exclusive of positive equity in your primary residence or b) two years of $250k+ income and the reasonable certainty you'd have it in the following year.

You probably can't. The IPO price is what's being shopped around to private institutional investors via the underwriting bank. You can get in early in public trading, however, though that's historically at a higher price.

While I'm not sure starting with IPOs is the best idea for a novice, I recommend questtrade for a cheap canadian brokerage. Here's how you'd do it with them:

https://community.questrade.com/b/diy_investing/archive/2016...

Most brokerages have set aside IPO shares once they have the underwriting all settled in. Contact your brokerage and they will be able to give you more information. They might have certain terms and conditions, such as minimum buy ins, etc.

Consider applying for a job with Twilio.

I like how the SEC filings now contain slides like from a round pitch. "Here is a graph. Here are reference. Buy our stock. Go technical! Underlying?, meh... we chose not to"

A good pitch deck is like a prospectus summary. So yes, there should be similarities.

I have a very difficult time understanding how Twilio can justify such a high flying IPO ($1B+ mkt cap). This is a classic business (Enterprise PBX and Services) with lipstick on it. Look at Polycom, Mitel and Alcatel-Lucent as their comps and try to justify these multiples.

That said, I respect Twilio a lot. They've been a great innovator.

> This is a classic business (Enterprise PBX and Services) with lipstick on it.

In this case that "lipstick" is one of the most popular APIs in the startup world - you'll need to face the fact that this is a big selling point.

They have great APIs, but from what I have seen and used them for they wrap a bunch of services that have no stickiness. If I am using their API today and a competitor comes out tomorrow that will save me 10% it will make total sense to switch as it will be seamless to my users. I also don't get their pricing models at all. For the tiny guy, it's free. For the slightly larger guy it is the most expensive per use and then it tapes off so that the big users pay a fraction of that. Why should text message number 1 billion cost 1/8 what text message one costs. They are either losing money on their big accounts (doubtful) or they are severely overcharging most customers.

No need to wait until tomorrow. ALL of Twilio's existing competitors (and there are many, and many more coming especially from the big telcos) will save you much more than 10% for essentially the same range of services.

I'd be surprised if the telcos offer everything Twilio offers, but I would expect them to be able to offer the biggest line item for me (SMS) more cheaply.

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