Taking Your Tech Company Public? Take a Page from Twilio’s Playbook
An interview with Lee Kirkpatrick, CFO of Twilio, on the IPO process and critical steps to take before ringing the bell
At Silicon Valley Bank, we work with highly driven entrepreneurs building successful and lasting companies. I was fortunate enough to sit down with Lee Kirkpatrick, the CFO of Twilio, and get a candid look at the challenges of taking a tech company public. During our conversation, Lee talked about managing the IPO process and getting the right people on board, all while maintaining an exceptional corporate culture.
Mark Harris: You joined Twilio after nine years in operational and corporate finance roles at Reuters America. What were some of the challenges of joining an early-stage startup from a large corporation like Reuters?
Lee Kirkpatrick: I joined Twilio as the second finance employee, so in the early days I was doing a lot of blocking and tackling as well as wearing multiple hats. Operationally, we were creating forecasts, implementing systems, reviewing sales operations and creating basic reporting. Strategically, we were building a foundation for how Twilio should spend time and money to successfully achieve our short-term and long-term goals.
You took Twilio public in 2016. How did you prepare?
We were adamant about preparing early and were actively working toward the IPO more than 18 months in advance. Most of the preparation was assembling strong cross-functional teams because if you get good people in the right positions early, you can move forward faster. Our focus for the finance team was increasing revenue predictability, enhancing operational processes and organizing the rapidly growing team.
For the IPO, we were approaching the market with no real comparable companies, and the IPO environment was chilly to say the least. Twilio was the first big tech IPO of 2016.
Many of SVB’s clients hit pause at that time. What gave you the confidence to move forward?
We were confident because our business had stable fundamentals. Our strong SaaS metrics, like customer acquisition costs (CAC) and customer lifetime value (CLV), created further tailwinds. We also had a publicity element. People were like, “Wow, this must be a really strong company if they’re going public right now!” In retrospect, because of the low supply of IPOs, investors dug deeper to understand our unique business model.
Speaking of SaaS metrics, how was Twilio able to achieve such great numbers?
Byron Deeter, Partner at Bessemer Venture Partners, is one of the great cloud investors and was an early supporter of Twilio. Having him on the board provided vital support for our metrics-driven business. Also, my background with Reuters and its subscription service offering provided a pretty good understanding of SaaS metrics before joining, so we were tracking these metrics from day one at Twilio. It is funny to think we take most of the standard SaaS metrics for granted now, but back then we were still figuring out the market standards.
It’s been two years since the IPO. Looking back, is there anything you would have done differently?
I would have assembled our finance team even earlier than we did. We received a great piece of advice from board member Jim McGeever, the former CFO and COO of NetSuite at the time, who knows the finance teams of many high-growth companies very well. He told us that in almost every case when NetSuite is working with a company preparing to go public, the finance and accounting teams are understaffed. Naturally, he strongly encouraged Twilio to build a finance team early.
What were some of the key hires you made as part of the transition from private to public?
The head of investor relations isn’t as active when you’re private, but our hire in this position proved beneficial as a fantastic interim project manager to assist the finance organization. Hiring SEC and SOX accountants early was immediately impactful as it allowed us to prepare mock Form 10-Qs in advance our S-1 filing. When our team walked into the first S-1 drafting session, we presented a nearly complete draft of all the documents, which saved a lot of time.
From startup to IPO and beyond, how have you been able to maintain Twilio’s culture?
Culture and values are fundamental at Twilio and embodied by our CEO, Jeff Lawson. One of our core values is “no shenanigans.” For example, during my first month at Twilio, our developers identified that our usage pricing tiers were not adjusting appropriately and some of our customers were being incorrectly charged. None of our customers knew about it, and no one was calling or complaining, but the engineers spent tireless hours fixing the issue. Once a solution was devised, we reached out to every client affected to explain what happened and give them a credit they were not expecting — no shenanigans. When employees do the right thing and operate that way, it reduces strain on processes and procedures. We reiterate our values and leadership principles throughout the entire hiring process. Continually reinforcing our values keeps Twilio focused on our long-term mission.
What is one bit of advice you would give a CFO looking to take their company public?
Leverage the network. There is a terrific group of CFOs in the Bay Area, many of whom I met through SVB. A vast majority of discussions with other CFOs were just to confirm that we were doing it right, but it was nice to get confirmation from people who had done it before.
When reminiscing about the IPO, any funny stories that come to mind?
If you look at the picture of the Twilio team ringing the bell, you’ll notice then-president of the NYSE Group, Tom Farley, standing with the team and exuberantly cheering. Tom was a great supporter during the process, and I think he was more enthusiastic and involved in our IPO than most because there weren’t many IPOs that year.
Another cool thing was that Twilio hosted live coding sessions on the floor of the stock exchange. Seeing the delight on traders faces as they were coding live was special.
Also, our CEO, Jeff Lawson, wore a suit, which is quite a rarity.
Lee, thank you so much for sharing your story.
Thank you, Mark, it has been a pleasure.
Even though Twilio has been a public company for nearly two years, it’s amazing how relevant their story is today. While an abundance of private capital still makes going public a bit less enticing than in years past, companies contemplating the decision to go public might want to borrow a page from Twilio’s playbook. While strong metrics may give you the confidence to go for the IPO, make sure you prepare by building a dynamic team and instilling your corporate values long before you decide to ring the bell.
I want to thank Lee for taking the time to discuss his experiences and share his thoughts. These are the types of conversations that can prove so valuable to all participants in the venture ecosystem, and I’m glad I was able to be a part of the discussion.
