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Comment by citricsquid | Hacker News Reader

If the next logical step for Twilio is an IPO, does that mean that they're not profitable? If they are profitable, why is an IPO the logical next step, does an IPO provide specific value to the company (or any company) beyond financing?

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This makes no sense. You can be profitable, and still would like to raise money from the public stock market to pursue activities that are more expensive than what your currently profitability can sustain, like expanding the business globally, or enter in new markets, or build new products. It's about business and the business it's about money, so there's nothing else that an IPO provides except immediate liquidity. The side effects are bad, like sustaining lots of bureaucracy because of the heavily regulated public stock market, or exposing your company.

An IPO creates a liquid market for existing shareholders (management, private equity) to cash out. Seriously. There are cheaper forms of financing if all they wanted was to expand operations.

indirect marketing. press coverage. easier to recruit people based on equity compensation (liquid market for shares). 'legitimacy' in the eyes of some potential customers. connected into investment banking world for future transactions (debt issue, equity issue, M&A, etc).

Aren't IPOing companies almost universally profitable?

Groupon was not profitable when they filed for S-1.

No. The main point of an IPO is to raise money which profitable companies need less.

Telco is a commodity. You want to raise as much money as possible and you want to drive your margins down as it makes competition impossible.

Twilio runs on cloud providers (Amazon and Rackspace, at least when I interviewed with them). Anyone can build what Twilio does, whether thats a group of devs in a co-working startup space, or a large telcom (NTT, AT&T, Verizon, Deutsche Telekom).

On the web, there are no longer barriers to entry.

Strong competition is a barrier to entry.

If I'm an enterprise, I'll go with Twilio over some 2 week old startup because of its proven track record and the likelihood of being around in a year.

You don't start at the top. Barriers really are incredibly low but that's not to say its realistic to expect to land enterprise clients on day 1. The key is o build a sustainable business and work your way up while creating that track record. I think we've gotten way too used to these overnight success stories about startups (which aren't really true a lot of the time).

I hate to use this example because its a bit cliche but Google entered late into a field of established players and won. Microsoft beat IBM (this one applies only to the PC, I know IBM is still a force to be reckoned with). Stripe, Balanced, and Square are able to compete with PayPal for accepting payments. I know these arent all enterprise-specific but I didn't take the parent's comment to be about enterprise only.

It depends on the industry. There is no risk if I try out a new search engine as a consumer. But, if I'm building a phone application, there's a huge risk if I build it on a weak platform.

Really? Because AT&T went with Tropo over Twilio, and Tropo isn't nearly as big as Twilio.

What you'd do as an enterprise and what real enterprises would do are two different things.

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