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The billion dollar companies you may never have heard of
Big acquisition news in the martech/customer experience tech space this week: Twilio is buying customer data platform (CDP), Segment for US$3.2 billion in an all-stock deal “to build the customer engagement platform of the future”. This is Twilio’s biggest acquisition to date following the acquisition of SendGrid last year.
So, what is Twilio and why is it spending billions to acquire Segment?
Segment’s co-founder Calvin French Owen
If you’re not a developer or in the depths of customer experience you probably haven’t heard of Twilio.
Well, you may have seen it hit headlines as its share price continues to skyrocket on the NYSE - up 3x this year, its market cap is currently sitting just shy of $50 billion.
It is highly likely, though, that you have interacted with a phone system that is powered by Twilio. Its tech is used to run call centres, multi-factor authentication, email marketing campaigns and SMS/text automation for more than 150,000 companies around the world.
Received a text from Airbnb? That’s Twilio. Verified your number by text while onboarding to Zip, Stripe or Transferwise? Twilio. Messaged or called your Airtasker, Deliveroo or Uber driver? Twilio magically masks your number. Called Allianz and spoke to a robot? Twilio.
Twilio currently provides just one layer of the customer engagement puzzle - a communications channel. Another integral layer is customer data.
The tricky thing about customer data is that it is usually spread across many different systems that don’t directly talk to each other, in ‘data silos’. To add to that, data is often duplicated, old or otherwise ‘bad’. This makes finding and connecting the right information slow and difficult, resulting in poor customer experience.
For instance, a company might send multiple copies of the same promotion or, worse, present them with conflicting offers via different ad channels. They might waste marketing dollars by advertising a product to customers who have already bought it. Or text a target customer who has opted out of all communications. That’s almost unforgivable in 2020.
Enter Segment. Segment is a customer data platform used by over 20,000 customers including Instacart, Glossier, VMWare and IBM.
It gathers customer data from systems (e.g. a mobile app or web browser), then links the data to customer identities (single view of the customer), and stores that information in a database available to external systems in real time (e.g. Salesforce, Stripe, Facebook or Google Ads).
Segment helps sales, marketing, customer success, analytics and front-end dev teams understand who customers are, what they’re doing, what they’ve bought and how they’re using a product.
Together Twilio and Segment bridge a big gap in customer engagement. The acquisition means that Twilio can now be connected to every touch point that its customers have with their customers - enabling it to battle for customers against incumbent enterprise vendors like Adobe.
As Twilio’s CEO explains:
the addition of Segment will allow Twilio to integrate data intelligence into Twilio Flex and every one of our offerings to provide highly personalized customer touchpoints.
Twilio and Segment are also complementary in terms of their go-to-market philosophies. Like one of our other favourite tech companies, Stripe, they are both focussed on building API-centric solutions that developers love, buy and then use to build tools for their business users (e.g. marketing and customer support).
These API-first companies are removing huge amounts of technical and operational complexity from doing business, while making integration easier, faster and cheaper than ever before. And they’re morphing into juggernaut platforms as a result.
Deep thoughts with Segment
The multi-billion dollar acquisition has clearly prompted some deep thought and reflection from the Segment team.
We enjoyed this twitter thread from Segment’s Product Lead, Kevin Niparko. Here’s our condensed version:
Solving customer problems > grand visions. Or as we put it, obsess over your customers. Spend lots of time talking to customers.
Your customers *already built* your roadmap. This one is particularly true for startups building solutions for developers. Most of Segment’s major product launches (Cloud Sources, Functions, Personas, Protocols, Data Lakes) were the productised versions of things they saw its customers hacking together.
Building the product is only half the battle. Your product teams must also help build a clear go-to-market strategy. They should consider everything - margin, positioning, pricing, how to demo, onboarding, incentives, financial targets. And they should be across sales playbooks, case studies and marketing copy.
When in doubt, have bias for action.
Talk about the elephant in the room. A fast-growing company is an emotional pendulum between extreme optimism "this is gonna work" and "we're so screwed" (the elephant).
Great products are the creation of high-trust, high-context teams with strong culture. Product, Engineering and Design are collectively responsible for shipping great products.
Yes. Yes. Yes.
Where billion dollar startup babies are born
Segment is accelerator Y Combinator’s biggest acquisition success so far. Segment took over the reigning title from Cruise, a self-driving tech startup acquired by GM for $1 billion in 2016 (more news on Cruise in the rapid fire below).
A huge testament to the value of high-quality accelerator programs.
Dalton Caldwell @daltoncYou should always take young people seriously. On September 23, 2010 a young @ivolo chatted me up at my MIT career fair booth and sent the attached. He wasn't looking for a job but had questions about startups. 10 years later, his startup @Segment sold for $3.2B to Twilio. https://t.co/QeKYEYFeGP
Ilya Volodarsky is the cofounder of Segment. Dalton Caldwell runs admissions for YC.
Australia’s own answer to YC, Startmate is 10 this year! On Thursday it held an awesome virtual demo day showcasing its first all-remote cohort of 16 Australian and New Zealand startups.
Fully embracing the most that today’s conference tech has to offer, Startmate even hosted a Demo Day afterparty using gather.town - a virtual meeting tool that combines 8-bit nostalgia with the best of 2020’s video conferencing tech.
Like YC, Startmate has helped some incredible companies early in their startup journey. Its 130 almuni (Bugcrowd, Propeller, Mentorloop, Elevio, Edrolo, Josef and Work180 to name a few) are now worth more than AU$1 billion.
One of those is JigSpace (backed by Rampersand, Investible and Eleanor Ventures, as well as U.S. investors Boost VC and General Catalyst) who is setting out to build the world’s global standard for 3D presentations using AR.
This week JigSpace ticked off some enviable startup goals - featured in Apple’s iPhone 12 launch AND on Verizon’s website demonstrating the power of 5G. All in one week. If the western world didn’t know about JigSpace before, it does now.
In our first official Weekly Wrap interview (we’ve officially made it - exclusive quotes and all!), we asked JigSpace co-founder Zac Duff to spill the beans and share how they managed to land a spot at the Apple Event. Evading our question with some elegant PR spin (touche Character + Distinction), JigSpace put it down to building incredible product (clearly we should stick to our day jobs).
With thousands of 5-star reviews on the App Store and some big name enterprise customers on its books, there’s surely truth in that answer.
The keynote featured its solution for Medtronic, a medical device giant. Duff explained to us:
We’re seeing fast uptake of JigSpace across durable manufacturing businesses… During the COVID-19 crisis it has been critical to rapidly share complex information remotely. Our work with Medtronic demonstrates the impact of augmented reality on how we collaborate and share knowledge, and the new ways we can solve problems.
For the founders or wannabefounders out there - apply for Startmate’s November Office Hours (free 1:1 mentoring). You never know, you might be blessed (or cursed, depending on who you ask) to be allocated one of the Ignition Lane team as a mentor!
Rapid fire: News that caught our eye this week 🧐
ecommerce continues to trend up, up and away. Prepare yourself, ecommerce-related explosion ahead… The Wine Collective raised $8.3 million. Insurance tech platform Cover Genius went from 120,000 monthly customers in January to 200,000 in October, and raised $15 million. Early investors in Afterpay backed new 're-commerce' startup, AirRobe (buy, sell and rent second-hand clothes - another Startmate alum). David Jones has partnered with Glam Corner to launch a clothing rental service. Catch co-founders invested $9.3 million in rival marketplace, Mysale. Redbubble’s sales soared 116 per cent in Q1FY21. Zip now has nearly as many customers in the U.S. (2.2 million) as it does in Australia (2.3 million). Afterpay’s shares keep climbing after being cleared of a year-long AUSTRAC anti-money laundering compliance investigation. Afterpay, now worth $27.5 billion, will be taking over from Mercedes Benz as the title sponsor for next year’s Australian Fashion Week.
After an oversubscribed $40 million IPO priced at AU$1 per share, Aussie Broadband debuted on the ASX on Friday closing at AU$1.91, after peaking at AU$2.20 during the day. Aussie Broadband was the first in the market to offer the fastest ever NBN plan to residential addresses (NBN 1000) and is winning customers hearts with high-quality customer experience. Congrats Phillip Britt, John Reisinger and team.
Dr Abigail Allwood (NASA scientist) and Tim Kentley Klay (Zoox co-founder) have been jointly crowned as Australia's top expats in the annual Advance Global Australian Awards. Dr Allwood leads a team at NASA's prestigious Jet Propulsion Laboratory that has developed an AI tool that will examine rock chemistry on Mars and search for signs of life. She is the first woman and first Australian scientific lead on a NASA Mars mission. Kentley Klay has been recognised as a creative founder of a commercial animation studio and a video post production studio, as well as leading the way building the next generation of autonomous transport - proving that Australian founders can hold their own against giants such as Google, Uber, Tesla and Apple.
Around the world (all in USD):
Norwegian startup Kahoot raised $215 million from SoftBank for its user-generated, gamified e-learning platform, which has over 1.3 billion “participating players”. As at Friday, Kahoot was valued at nearly $2.6 billion on the Merkur Market in Oslo (a stepping stone between being a private startup and a publicly listed, regulated company). Disney and Microsoft also investors.
Waymo launched an autonomous taxi. Cruise, the self-driving car subsidiary of GM is the fifth company to be issued a permit that will allow it to test fully driverless vehicles on public roads (i.e. without a safety driver). Zoox, AutoX, Nuro and Waymo also have these permits.
Armory raised a $40 million Series C led by B Capital, alongside other investors including Salesforce CEO Marc Benioff. Armory is a continuous delivery platform built on top of the open-source continuous delivery project from Netflix, Spinnaker - the “new standard for cloud-native software delivery”.
Pitchbook’s latest report on U.S. funding for female founders isn’t pretty. Venture funding for female founders has hit its lowest quarterly total in three years. Funding was down 48% from Q2. The report suggests the pandemic is having an impact on multiple fronts: women are shouldering a greater share of child care, elder care and housework; economic uncertainty has forced women to hold onto jobs with steady income and health benefits; lastly, investors are more risk averse at the moment, sticking to their existing networks and pumping excess dry powder into existing portfolio companies.
Nvidia is is going to be powering the world’s fastest AI supercomputer, a new system dubbed ‘Leonardo’ that’s being built by Italian multi-university consortium, CINECA. While we’re on the topic of Nvidia, check this out:
Want to jazz up your Zooms? Lucky for you Zoom just amplified its platform play, launching Zapps this week. Zapps brings third-party app functionality into Zoom. It also launched OnZoom, an integrated online events platform. Zoom is now worth over $150 billion!
That’s a wrap! We hope you enjoyed it.
Gavin, Bex and the team at Ignition Lane
p.s. Melbourne has been in lockdown for 100 days. Send help. Or whiskey.
We love feedback - if you have any or want to continue the conversation, please reach out.
Watch Gavin live on AusBiz at 2pm on Mondays, when he opens the Startup Hour of Power.