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Why Twilio looks better from afar
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iPost Unified Messaging

I’ve been in the computer telephony game for a while.  I launched my first startup in this space, InterGalactic Research, in 1995.  We had a product called iPost, one of the world’s first Internet-based unified messaging platforms. iPost combined a Google Voice-like phone interface, a Gmail-like web interface, plus everything that eFax does and you could even send notifications via SMS to your favorite mobile devices.  Pure messaging bliss.

People loved it. Carriers, infrastructure providers, telephony card makers, text-to-speech providers, everyone loved iPost.  We secured investors in short order, we announced a partnership with Ericsson, licensed it to Motorola, won Info Magazine top 100 awards, cover of Home Office Computing magazine, we’d made it big.

But we were also frustrated.  We realized how insanely difficult it was to make computers talk to telephones.  Back then they called our industry ‘Computer Telephony Integration’ (CTI).   We thought, hey, if a few kids in a garage Central Florida could be this disruptive to the entire communications space, why not move out to Silicon Valley and do it even further?

So we did.

In 1999 we launched Voxeo.  Instead of building a specific CTI application (like iPost), we wanted to build a platform that let any developer build any telephone application. We created a super-simple, XML-based telephony language (here’s a document about CallXML from 2001 that describes it), raised initial funding from a very high-profile group of Angel investors, (including now-Google-Chairman, Eric Schmidt) and later did a high-profile VC round with Mayfield and Crosspoint. We invested most of that money in R&D and building a broad developer community. Soon thousands of developers were signing up every month.

Now the Voxeo and Tropo community boasts over 250,000 developers.  Voxeo is employee-owned, global, profitable and can call half of the Fortune 100 our most important customers.  I’m not saying this to brag (well, maybe a little), but I prefaced all of this by saying, “I’ve been in the computer telephony game for a while.” Back in 1999, I was Voxeo’s Vice President of Community Development, now they call me a Chief Evangelist.

I’m telling you all of this because, by the title of this post, you’re probably wondering why I say “Twilio looks better from afar”.   I’ve watched Twilio closely for over two years, since shortly after they launched.  I’ve talked with current and former Twiliots (Twilions? Twilioers?), venture capitalists, telephony geeks, coders and Silicon Valley “insiders”. And I’ve come to a few certain conclusions.

Twilio is certainly a Silicon Valley darling, but like some darlings, they look much better from afar.  Here are biggest three reasons why:

1.  Twilio is Still Losing Money

This one is easy to explain.   Twilio launched in 2009 with $1 million in seed money.   Every subsequent round of funding they’ve raised always happens in Q4 (November or December):

Series A:  12/09 $3.7 million

Series B:  11/10 $12 million

Series C:  12/11 $17 million

For you math geeks out there, that’s a total of $33.7 million.   It might also give us a good reflection of Twilio’s actual annual burn rate.  My guess is that we’re going to hear some kind of announcement in the next month or two.

Basically it comes down to this:  Twilio is going to have to convince investors to put in more money (my guess is they’re asking for somewhere in the range of  $30-$50 million. Heck, it could be some insanely skewed SV numbers like $150 million, who knows?)  Historically, investors who put money in a Series D round can already see the exit.  It’s typically known as the “bridge” round and it only happens if existing investors are 100% gung-ho about an IPO or acquisition.   Given the tech-IPO climate in the last year with giants like Facebook falling flat, that seems unlikely scenario.

2.  Twilio is Losing Talent

Let’s face it, the face of Twilio is vastly different than it was 18 months ago.   Danielle Morrill, Jon Sheehan, Stevie Graham and John Britton, all the most visible people who did the heaving lifting in Twilio’s early days are gone and have been quietly replaced with “telco industry insiders” like new Marketer-In-Chief, Lynda Smith of Nuance and Genesys and Euro-Marketing-Director James Parton of Telefonica.   I don’t know about you, but when I see almost all of a company’s most public-facing developer evangelists leave within a year, it smacks of a core strategy change, one of replacing established mojo with a briefcase-wielding enterprise sales team with commission quotas.

Twilio has already experienced rapid growth.  I’d say it’s probably not difficult for smart engineers to see the writing on the wall and they would rather take their chances at a new startup with exponential growth possibilities rather than one obviously at the ‘winding down’ phase of startups.

3. Twilio is Displaying Increasing Signs of Desperation

Last week someone called me to comment on a TechCrunch article “announcing” “Twilio’s biggest partnership yet.”    This “announcement” caused quite a stir in the Twittersphere.  I keep putting “announcement” in quotes, because in reality there was no “announcement”.   As Dave McClure gives Michael Arrington Rosescommunications industry analyst Dave Michels pointed out on his blog, Talkingpointz.com, to this date, no one at AT&T or Twilio can confirm any sort of partnership.

Another sign of desperation? Re-releasing old news. For instance, today Twilio just did a press release “renewed alliance with Microsoft“. What’s particularly meh about this announcement is that they already made the same exact announcement in May.

These are exactly the kind of things startups do when are trying to attract investment: leverage advertisement buying power to get fluff pieces written about them and re-hash old announcements to create fake buzz.  No doubt, Twilio certainly knows how to churn the Silicon Valley hype machine, but when you start to peek behind the red curtain even a little bit, it starts to look full of fluff.

Even Twilio’s own biggest fanboy, Super Angel Dave McClure, agrees, “Last time I checked, you can’t even provision a phone on Twilio or AT&T’s service (or at least they are not allowing it).  I am still waiting for the real disruption to begin.

Well, Dave, we’re all waiting.

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