Twilio

Prospectus Summary

PROSPECTUS SUMMARY
This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, the terms "Twilio," "the company," "we," "us" and "our" in this prospectus refer to Twilio Inc. and its consolidated subsidiaries.

TWILIO INC. Overview

Software developers are reinventing nearly every aspect of business today. Yet as developers, we repeatedly encountered an area where we could not innovate — communications. Because communication is a fundamental human activity and vital to building great businesses, we wanted to incorporate communications into our software applications, but the barriers to innovation were too high. Twilio was started to solve this problem.

We believe the future of communications will be written in software, by the developers of the world — our customers. By empowering them, our mission is to fuel the future of communications.

Cloud platforms are a new category of software that enable developers to build and manage applications without the complexity of creating and maintaining the underlying infrastructure. These platforms have arisen to enable a fast pace of innovation across a range of categories, such as computing and storage. We are the leader in the Cloud Communications Platform category. We enable developers to build, scale and operate real-time communications within software applications.

Our developer-first platform approach consists of three things: our Programmable Communications Cloud, Super Network and Business Model for Innovators. Our Programmable Communications Cloud software enables developers to embed voice, messaging, video and authentication capabilities into their applications via our simple-to-use Application Programming Interfaces, or APIs. We do not aim to provide complete business solutions, rather our Programmable Communications Cloud offers flexible building blocks that enable our customers to build what they need. The Super Network is our software layer that allows our customers' software to communicate with connected devices globally. It interconnects with communications networks around the world and continually analyzes data to optimize the quality and cost of communications that flow through our platform. Our Business Model for Innovators empowers developers by reducing friction and upfront costs, encouraging experimentation and enabling developers to grow as customers as their ideas succeed.

We had over 28,000 Active Customer Accounts as of March 31, 2016, representing organizations big and small, old and young, across nearly every industry, with one thing in common: they are competing by using the power of software to build differentiation through communications. With our platform, our customers are disrupting existing industries and creating new ones. For example, our customers have reinvented hired transportation by connecting riders and drivers, with communications as a critical part of each transaction. Our customers' software applications use our platform to notify a diner when a table is ready, a traveler when a flight is delayed or a shopper when a package has shipped. The range of applications that developers build with the Twilio platform has proven to be nearly limitless.

Our goal is for Twilio to be in the toolkit of every software developer in the world. As of March 31, 2016, over 900,000 developer accounts had been registered on our platform. Because big ideas often start small, we encourage developers to experiment and iterate on our platform. We love when developers explore what they can do with Twilio, because one day they may have a business problem that they will use our products to solve.

As our customers succeed, we share in their success through our usage-based revenue model. Our revenue grows as customers increase their usage of a product, extend their usage of a product to new applications or adopt a new product. We believe the most useful indicator of the increased activity from our existing customers is our Dollar-Based Net Expansion Rate, which was 155% for the year ended December 31, 2015. See the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Dollar-Based Net Expansion Rate."

We have achieved significant growth in recent periods. For the years ended December 31, 2013, 2014 and 2015 and the three months ended March 31, 2016, our revenue was $49.9 million, $88.8 million, $166.9 million and $59.3 million, respectively. We incurred a net loss of $26.9 million, $26.8 million, $35.5 million and $6.5 million for the years ended December 31, 2013, 2014 and 2015 and the three months ended March 31, 2016, respectively.

Industry Background

Trends in Our Favor

Rise of Software Developers

Today, software is used to disrupt industries and transform products and services, thereby redefining how organizations engage with their customers. This shift has significantly increased the value and influence of software developers across organizations of all sizes and industries.

Differentiation Must Increasingly Be Built, Not Bought

In order for organizations to deliver differentiated customer experiences that build or extend competitive advantage, they are increasingly adding the software development competencies necessary to build applications that delight their customers. In fact, Gartner predicts that by 2020, 75% of application purchases supporting digital business will be "build, not buy."

Cloud Platforms As Building Blocks for Modern Applications

Cloud platforms, a new category of software that enables developers to build and manage applications without the complexity of creating and maintaining the underlying infrastructure, have arisen to enable the fast pace of innovation required by modern applications. These platforms typically provide global, scalable and cost-effective solutions. Cloud platforms are emerging across a range of categories, including analytics, communications, computing, mapping, payments and storage. These cloud platforms are enabling every organization, from small startups to Fortune 500 enterprises, to experiment, prototype and deploy next-generation applications.

Agility of Software Accelerates Pace of Innovation

The way organizations build, deploy and scale modern applications has fundamentally changed. Organizations must continuously bring new applications and features to market to differentiate themselves from their competitors and to build and extend their competitive advantage. Heightened consumer expectations for real-time, personalized interaction further necessitate rapid innovation. In order to satisfy these needs, developers must be empowered to freely experiment, quickly prototype and rapidly deploy new applications that are massively scalable. Legacy infrastructure does not support this new paradigm for developers because it typically has been slow, complex and costly to implement, and inflexible to operate and iterate.

Contextual Communications Are Transforming Applications

Communication is fundamental to human activity and vital to building great businesses. While software has transformed business, communications technology has largely failed to evolve. In fact, the phone app on today's smartphones is merely a touch screen representation of the push-button phone invented in the 1960s.

Today, there is demand for communications to be embedded into applications where communications can be deeply integrated with the context of users' lives, such as personal and business identities, relationships, locations and daily schedules. This type of contextual communications enables developers to build the powerful applications that are differentiating organizations. Whether an application is designed to book a hotel, hail a ride or aid a delayed traveler, enabling users to seamlessly communicate in context is critical to a delightful experience. Contextual communications are transforming applications and replacing siloed communications applications, such as the phone app.

Limitations of Legacy Products

Legacy products were not designed with the software mindset and are therefore unable to address the foregoing trends. These products tend to be monolithic, costly, complicated, geopolitically bounded and impractical to scale, all of which hinder innovation. As a result, many innovative ideas have never even been attempted with legacy products, let alone realized. Over time, many attempts have been made to evolve the communications industry with software. However, we believe that no legacy product has truly empowered the global developer community to transform their applications with communications.

Our Platform Approach

Twilio's mission is to fuel the future of communications. We enable developers to build, scale and operate real-time communications within software applications.

Our Programmable Communications Cloud, Super Network and Business Model for Innovators work together to create value for our customers and a competitive advantage for our company.

Our Programmable Communications Cloud. Our Programmable Communications Cloud consists of software products that can be used individually or in combination to build rich contextual communications within applications. Our Programmable Communications Cloud includes:

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Programmable Voice. Our Programmable Voice software products allow developers to build solutions to make and receive phone calls globally, and incorporate advanced voice functionality such as text-to-speech, conferencing, recording and transcription. Programmable Voice, through our advanced call control software, allows developers to build customized applications that address use cases such as contact centers, call tracking and analytics solutions and anonymized communications.


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Programmable Messaging. Our Programmable Messaging software products allow developers to build solutions to send and receive text messages globally, and incorporate advanced messaging functionality such as emoji, picture messaging and localized languages. Our customers use Programmable Messaging, through software controls, to power use cases such as appointment reminders, delivery notifications, order confirmations and customer care.

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Programmable Video. Our recently introduced Programmable Video software products enable developers to build next-generation mobile and web applications with embedded video, including for use cases such as customer care, collaboration and physician consultations.


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Use Case APIs. While developers can build a broad range of applications on our platform, certain use cases are more common. Our Use Case APIs build upon the above products to offer more fully implemented functionality for a specific purpose, such as two-factor authentication, thereby saving developers significant time in building their applications.


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Add-on Marketplace. Launched in May 2016, our Add-on Marketplace allows third parties to integrate their capabilities directly into our Cloud Communications Platform, which allows us to further leverage our community to provide new and differentiated functionality for our customers.

Our Super Network. Our Programmable Communications Cloud is built on top of our global software layer, which we call our Super Network. Our Super Network interfaces intelligently with communications networks globally. We do not own any physical network infrastructure. We use software to build a high performance network that optimizes performance for our customers. Our Super Network breaks down the geopolitical boundaries and scale limitations of the physical network infrastructure.

Our platform has global reach, consisting of 22 cloud data centers in seven regions. We interconnect those cloud data centers with network service providers around the world, giving us redundant means to reach users globally. We are continually adding new network service provider relationships as we scale.

Our Super Network analyzes massive volumes of data from end users, their applications and the communications networks to optimize our customers' communications for quality and cost. With every new message and call, our Super Network becomes more robust, intelligent and efficient, enabling us to provide better performance at lower prices to our customers. Our Super Network's sophistication becomes increasingly difficult for others to replicate over time.

Our Business Model for Innovators. Big ideas often start small, and therefore developers need the freedom and tools to experiment and iterate on their ideas. In order to empower developers to experiment, our developer-first business model is low friction, eliminating the upfront costs, time and complexity that hinder innovation. Developers can begin building with a free trial. Once developers determine that our software meets their needs, they can flexibly increase consumption and pay based on usage. In short, we acquire developers like consumers and enable them to spend like enterprises.

Strengths of Our Platform Approach

Our platform was built by developers for developers, and our approach has the following strengths:

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Developer Mind Share. We are recognized as the leading platform for cloud communications, and we believe we set the standard for developers to build, scale and operate real-time communications within software applications.


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Composable. We are a platform company focused on providing software developers with the necessary building blocks to compose communications solutions that can be integrated into their applications. We believe this enables developers to build differentiated applications for a nearly limitless range of use cases.

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Comprehensive. Our Programmable Communications Cloud offers a breadth of functionality, including voice, messaging and video, all with global reach and across devices.


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Easy to Get Started. Developers can begin building with a free trial, allowing them to experiment and iterate on our platform. This approach eliminates the upfront costs and complexity that typically hinder innovation.


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Easy to Build. We designed our APIs so developers could quickly learn, access and build upon our Programmable Communications Cloud.


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Easy to Scale. Our platform allows our customers to scale elastically without having to rearchitect their applications or manage communications infrastructure.


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Multi-Tenant Architecture. Our multi-tenant architecture enables all of our customers to operate on our platform while securely partitioning their application usage and data. In addition, our Solution Partner customers, which embed our products in the solutions they sell to other businesses, rely on our multi-tenant platform to independently manage their own customers' activity.


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Reliable. Our platform consists of fault-tolerant and globally-distributed systems that have enabled our customers to operate their applications without significant failures or downtime.


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Global. Customers can write an application once and configure it to operate in nearly every country in the world without any change to the code.

Our Opportunity

Gartner estimated that in 2015, $3.5 trillion would be spent on information technology globally, and 42% of all IT spending would be on communications. The $1.5 trillion spent on communications services represents almost five times the amount spent on enterprise software and nine times the amount spent on data centers. We believe the limitations of existing hardware- and network-centric communications products historically have anchored the communications technology market in high cost and low functionality. Over time, we believe that a meaningful portion of the $1.5 trillion spent on communications services will migrate from existing hardware- and network-centric communications products to contextual communications solutions that are integrated into software applications.

Our Programmable Communications Cloud includes a suite of software products, including Programmable Voice, Programmable Messaging, Programmable Video and Programmable Authentication. As a result, our platform currently addresses significant portions of several large markets that, in aggregate, have been estimated by IDC to be $45.6 billion in 2017.

Specifically, IDC estimates that, in 2017:

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The Worldwide Application-to-Person SMS market will be $29.4 billion. Our Programmable Messaging products address portions of this market.


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Certain segments of the Worldwide Unified Communications and Collaboration market will be $14.1 billion. Our Programmable Voice and Programmable Video products address portions of these market segments.


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The Advanced Authentication segment of the Worldwide Identity and Access Management market will be $2.1 billion. Our Programmable Authentication products address portions of this market segment.

Our Growth Strategy

We are the leader in the Cloud Communications Platform category based on revenue, market share and reputation, and intend to continue to set the pace for innovation. We intend to pursue the following growth strategies:

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Continue Significant Investment in our Technology Platform. We will continue to invest in building new software capabilities and extending our platform to bring the power of contextual communications to a broader range of applications, geographies and customers.


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Grow Our Developer Community and Accelerate Adoption. As of March 31, 2016, over 900,000 developer accounts had been registered on our platform, and we had over 90,000 paying customer accounts, of which over 28,000 were Active Customer Accounts. We categorize a customer account as an Active Customer Account in a quarter in which it generates at least $5 of revenue during the last month of the quarter. We will continue to enhance our relationships with developers globally and seek to increase the number of developers on our platform. In addition to adding new developers, we believe there is significant opportunity for revenue growth from existing paying customer accounts that we seek to grow into Active Customer Accounts.


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Increase Our International Presence. Our platform operates in over 180 countries today, making it as simple to communicate from São Paulo as it is from San Francisco. We plan to grow internationally by expanding our operations outside of the United States and collaborating with international strategic partners.


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Expand Focus on Enterprises. We plan to drive greater awareness and adoption of Twilio from enterprises across industries. We intend to increase our investment in sales and marketing to meet evolving enterprise needs globally, in addition to extending our enterprise-focused platform capabilities and use cases.


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Further Enable Solution Partner Customers. We have relationships with a number of Solution Partner customers that embed our products in the solutions that they sell to other businesses. We intend to expand our relationships with existing Solution Partner customers and to add new Solution Partner customers.


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Expand ISV Development Platform and SI Partnerships. We intend to continue to invest and develop the ecosystem for our solutions in partnership with independent software vendor (ISV) development platforms and system integrators, or SIs, to accelerate awareness and adoption of our platform.


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Selectively Pursue Acquisitions and Strategic Investments. We may selectively pursue acquisitions and strategic investments in businesses and technologies that strengthen our platform.

Our Values and Leadership Principles

Our core values are at the center of everything that we do. As a company built by developers for developers, these values guide us to work in a way that exemplifies many attributes of the developer ethos. Our values provide a guide for the way our teams work, communicate, set goals and make decisions.

We believe leadership is a behavior, not a position. In addition to our values, we have articulated the leadership traits we all strive to achieve. Our leadership principles apply to every Twilion, not just managers or executives, and provide a personal growth path for employees in their journeys to become better leaders.

The combination of core values and leadership principles has created a blueprint for how Twilions worldwide interact with customers and with each other, and for how they respond to new challenges and opportunities.

Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled "Risk Factors" immediately following this prospectus summary. Some of these risks are: