Twilio Files for IPO

Jeff Lawson, chief executive officer of Twilio Inc. ENLARGE
Jeff Lawson, chief executive officer of Twilio Inc. Photo: Simon Dawson/Bloomberg News

Despite a cool market for initial public offerings, San Francisco communications company Twilio Inc. is taking the plunge.

The company on Thursday disclosed that it had filed for an initial public offering. It is the first private company valued by venture capitalists at $ 1 billion to file for an IPO since the data-storage hardware vendor Nutanix Inc. filed in December.

Twilio said it intended to raise as much as $ 100 million in the IPO, which would list its shares on the New York Stock Exchange under the symbol TWLO.

The eight-year-old Silicon Valley startup has been a hit with software developers who use its services to quickly add voice or text communication features to their apps. Its Internet-based software and networking platform connects Uber’s mobile app to the telephone network, for example, allowing passengers to call or text their driver.

Twilio’s Form S-1 didn’t specify how many shares the company intends to offer or what price. Twilio’s previous funding round in April 2015 valued the company at roughly $ 1 billion. Last March, Fidelity Investments marked down its Twilio shares by 11% to $ 13.05 per share. However, that was still up 15% from the price Fidelity and other investors paid in the April 2015 round.

The filing showed that the company is growing quickly: Annual revenues jumped from $ 49.9 million to $ 166.9 million between 2013 and 2015. Facebook Inc. FB 1.34 % is one of Twilio’s largest customers, with the social network’s WhatsApp messaging software accounting for nearly $ 9 million of the $ 59.3 million Twilio brought in during the first three months of this year, the company disclosed.

But the company lost money every year from 2013 through 2015. The company lost $ 35.5 million last year and another $ 6.5 million in the first three months of this year, the filing disclosed.

Twilio’s software developer accounts stand at 900,000, according to the filing. Accounts that generated $ 5 in revenue or more numbered more than 28,000 as of March.

Although tech companies typically drive the IPO market, they have been largely absent this year. Many highly valued private companies are sitting on the IPO sideline, uncertain whether the public markets will endorse their sometimes sky-high valuations.

Only four tech firms have gone public this year: SecureWorks Corp. SCWX -0.94 % , Yintech Investment Holdings Ltd YIN -0.64 % , Acacia Communications Inc. ACIA -1.02 % and Cotiviti Holdings Inc. COTV -9.95 %

Twilio’s unicorn peers will watch the company’s IPO to see how closely its private valuation bears out in the public markets, said Lise Buyer, a partner at Class V Group LLC, an IPO advisory firm.

“Depending on the result, it will encourage others to step up to the plate as well,” she said.

Twilio is one of a handful of technology companies, all with billion dollar valuations, that late last year were said to be preparing for initial public offerings. Those companies included Nutanix, Okta Inc. and Coupa Software Inc., according to regulatory filings and people familiar with the companies.

Since then, however, U.S. public offerings have fallen off sharply in what has been the slowest year for IPOs since 2009. In January, no companies filed for IPOs, and since then filings have trickled out at about a third of last year’s rate.

After January’s slowdown, valuations were too low for most tech companies to consider an IPO, said one member of the investment community who spoke on condition of anonymity. Software-company valuations have improved by “20% to 30%” over the past six weeks, he said, but that hasn’t been enough to push most IPO candidates forward.

“There’s a growing backlog of companies that would like to go [public],” he said.

Many of these companies have enough cash on hand to continue operations, even if they are losing money, as they wait for market conditions to improve, he said. “When they face the challenge of raising another private round, that may push them,” he added

Nutanix filed for its IPO in December but hasn’t yet offered its shares.

Nutanix declined to comment for this article but Nutanix CEO Dheeraj Pandey tweeted that the delay should not be taken as a sign that the company is looking to be acquired while filing for an IPO, a process known as dual tracking.

“While it’s a cliché, we’re building for the long haul,” he wrote.

Beyond Twilio, bankers expected only a few unicorns to go public this year. Dropbox Inc. and Uber Inc., the most well-known consumer-facing tech companies, are unlikely to be among them, according to sources at investment banks. Meanwhile, a host of smaller software companies are weighing IPOs this year, the sources said.

A Dropbox representative didn’t immediately respond to a request for comment Thursday. Uber declined to comment.

By going public, Twilio will provide liquidity for shareholding employees and other investors, but it will also help reassure larger businesses that may want to do business with the 567-person company.

“It absolutely serves as a validation of your business,” said Ms. Buyer, “and smaller companies that want to sell to larger entities want that seal of approval.”

Write to Robert McMillan at [email protected]


WSJ.com: US Business

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