TWLO is down almost 4% in the early hours based on the news.
Why would they not discuss this at the earnings call? And what are their plans for the cash? I can’t find anything. Even the SEC Form 425 doesn’t indicate beyond standard boilerplate verbiage of “We plan to use this money for “stuff”!”
I had gotten out of TWLO a while back, and was thinking of getting back in, especially based on their recent quarter. But now I’m wondering about the dilutive effect of this move and what impact it’ll have on their growth.
It’s like 2.5%-3.0% of their market cap at a price that was pretty darn close to the market price.
They roll-up other companies into the communications platform, often. Probably plan on them spending it on buying a competitor or adjacent communications platform that makes Twilio better.
Twilio’s made good acquisitions in line with Lawson’s vision to dominate customer engagement and latest results prove he’s earned our trust. He likely has his eye on something that can strengthen their offering.
I see this as positive. In my view, TWLO has demonstrated they will aggressively buy or build to achieve a dominant market position. Getting as much cash as possible to make more acquisitions is exactly what I want to see and why I remain long.
I think this is the leap most developer-driven companies can’t make. They are too focused on their abilities to write code and either right or wrong, they view outside products as inferior. This is why they never develop the culture required to successfully make big acquisitions. This limits growth after a certain scale and the business starts to slow.
The SaaS space has too many players and you can see all their product roadmaps are now starting to converge. For example, everyone now has a security play on top of their core offering. Jeff Lawson correctly sees the big picture and has been positioning TWLO to be the next Salesforce-style market leader. At this stage, marketing starts to become a bigger and bigger part of the game. His book tour, all the moves he is making are right out of the Mark Benioff playbook.
Remember, the coolest and most cutting-edge tech doesn’t always win. FSLY?
The SaaS space has too many players and you can see all their product roadmaps are now starting to converge. For example, everyone now has a security play on top of their core offering. Jeff Lawson correctly sees the big picture and has been positioning TWLO to be the next Salesforce-style market leader. At this stage, marketing starts to become a bigger and bigger part of the game. His book tour, all the moves he is making are right out of the Mark Benioff playbook.
I thought this was an insightful comment and wanted to emphasize and expand on it. One of the things we love about SaaS companies is the asset-light and innately recurring business model. You don’t need factories nor line workers to build more product or provide more services, and thanks to widely available public clouds (and available on-prem cloud technology) you don’t have any scale-up problems. See the threads on Peloton for an obvious comparison.
The other side of the coin is that it doesn’t much to startup a SaaS company. You can do it in your garage. Frankly, the hardest thing is knowing the technology and market well enough to be sure your idea is useful, desirable, technology-differentiated and implementable. It’s also a relatively young industry. Even things that have been around for decades, like databases or CDNs are seeing rapid shifts the past year or two, some of which is due to new use cases, but some of which is due to technology improvements. And, of course, bringing it back to Twilio, the need for communications is over 100 years old.
As the SaaS industries mature, I suspect the technology differences between them will become smaller and smaller, companies with better sales & marketing, customer service, etc. will be the one to thrive. I had TWLO in my portfolio back in the day, and sold out of it for other companies. I just picked up a tiny starter position so I’ll be tracking it further.
TWLO is one of those companies where I have always believed in the CEO. He strikes me as an aggressive business leader that wants to dominate the market and that is why I have held on for so long.
The CEO of DDOG is a good example of what I would call an engineering-driven leader. While I own both stocks, my guess is DDOG will peak at the point where the product development is no longer the primary driver of the business.
I think it’s ultimately SNOW that will make a lot of these SaaS companies irrelevant. But there is a lot of money to along the way.