Twilio Raises Venture Funding, Looks to Expand Cloud-Based Phone Services

Seattle and San Francisco-based Twilio, a software startup focused on telephone applications, closed its first institutional round of funding today, according to co-founder Jeff Lawson. The investment was led by San Francisco-based venture firm Founders Fund (which includes founders of PayPal, Facebook, and Napster) and computer industry pioneer Mitchell Kapor, the creator of Lotus 1-2-3 and founder of the Electronic Frontier Foundation. The amount was not disclosed, but it’s enough for the firm to think about expanding its four-person team and its services, says Lawson, who is based in Seattle.

Twilio rolled out its product in late November—a cloud-based tool for Web developers to build phone applications for businesses, such as letting customers call in and get shipping information, record audio as an MP3 and send it as a phone message to friends, blog by phone, or just connect callers to specific cell phones or land lines.

There are plenty of existing tools for building voice applications, of course. But most require upfront payment for software or hardware, or take a while to get started. With its fast setup and pay-as-you-go service, Twilio has quickly amassed a customer base of more than 1,500 developers, who have built applications for businesses and large companies. Its top customers include Sony Music, Earth911, and Tumblr.com.

Lawson says he met his investors through the usual networking channels—events, colleagues, and other contacts. “They bring stellar backgrounds. They’re all coming from entrepreneurial backgrounds,” says Lawson, who notes that he has more connections with investors in Silicon Valley than Seattle. (He moved to the Northwest in 2004 to work on Web services for Amazon.) That is at least partly because there are many more investors in Silicon Valley. “We had great conversations with Seattle investors, but we just had more contacts there,” he says.

As for how the funds will be used, Lawson says, “We want to be able to expand our core offering of telephony operations in the cloud.” He added that the company has gotten some early traction in enterprise software, but wouldn’t say much specifically about what other markets he has his eye on. Twilio will also be growing its team, which is currently split between San Francisco (where co-founders John Wolthuis and Evan Cooke are) and Seattle, where Lawson remains.

“The Twilio team has merged the worlds of cloud computing, Web services, and telecom in unprecedented ways,” said Kapor, in a statement. “I’m excited to help Twilio grow, and explore the range of opportunities in this exciting intersection.”

Twilio plans to introduce a bunch of new features this year. “We listen to our customers a lot,” Lawson says. “There is a very active community on our site.” For example, a number of customers have been asking Twilio to provide services to international numbers—so far, it’s only been within the United States. “For us, it’s less of a technological issue than a pricing and business issue,” says Lawson. For U.S. phone numbers, the pricing is very simple: Twilio charges 3 cents a minute, or 5 cents a minute for toll-free numbers.

In the end, that’s probably the key to getting funded in the current climate. As Lawson emphasizes, “We are generating revenue.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and Editor of Xconomy Boston. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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