Twilio set to acquire Segment for $3.2B

https://www.forbes.com/sites/alexkonrad/2020/10/09/twilio-to-acquire-cloud-startup-segment-for-3-billion/

by harryzhang • 6 years ago

533 93 6 years ago

forbes.com

tosh• 6 years ago

Twilio feels like a great fit for Segment, all the best to the team and the next steps.

Show HN: Analytics.js (2012)

https://news.ycombinator.com/item?id=4912076

via @rauchg

https://twitter.com/rauchg/status/1314709848030756864

tootie3• 6 years ago

It's kinda nuts. They have some videos on startup school. They basically just threw spaghetti for months building random products for markets they barely understood until they landed on analytics and it just snowballed. This isn't even a brilliant idea. They entered a crowded market with a solution that was just a bit better than everyone else and now have a $3B exit.

kfichter• 6 years ago

The invisible hand of the market sprinkles its fairy dust

fblp2• 6 years ago

How was this market for customer data platforms "crowded" in 2012?! :)

XCSme4• 6 years ago

I am currently working on a self-hosted analytics platform, and even though the space seems crowded, there are only a few good players. The thing is everyone started creating an "analytics platform", only that they just do it for money, thinking it's really easy to implement and don't care about the actual product, user experience or quality in general.

My point is, yes, the analytics market is crowded, but it's mostly crowded by low-effort players or archaic products. That being said, someone reading this will probably think it's a good idea to enter the market, thus leading to another below-average product.

tito2• 6 years ago

So cool. "We did it HN!" hehehe

esotericimpl• 6 years ago

This seems cheap, segment was doing great especially with sass the way it is now.

lmeyerov• 6 years ago

congrats to the team!

after a certain sales price, there are very few potential buyers, and unclear if the usual top acquirers would want to pay the premium (google, ms, salesforce, ...). likewise, always risk of things going sideways wrt ipo. $1-3B exit in this situation makes a lot of sense.

more interesting to me is twilio seems to be such an operationally awesome company, going through each phase of growth so well

teej2• 6 years ago

Segment (and any other SaaS that wants to own the event firehose) has pricing issues as the customer scales. As a customer you are charged on data volume[0], but your data grows at the rate = (Users x Engagement X Features X Data Sources). That rate can easily be the square of your revenue growth.

This pricing issue makes it easy for Segment's fast-growing customers to justify an in house replacement. This puts huge down-pressure on their "revenue retention" rate and makes it hard to raise more VC or go public.

[0] - Segment technically prices on user volume but in reality it's a mix of users + objects depending on what your sources are

texasbigdata2• 6 years ago

So what’s the end state solution? The tools change and/or mature slower than a fast company will grow. Where are you going from here?

Are you eventually running your own cluster? Or, are you paying per Gb per second how GCP bills with decoupled compute / memory / storage? Or maybe with a little bit more overhead with the orchestration cost on top of consumption with how azure bills for ADF.

Just from reading blog posts, Spotify’s move was interesting, regarding their annual “songs you liked” at the holidays, where they sort of ran a hybrid.

Sorry to digress but what is the end state. Is there just a number where it makes sense to hire people and build and/or shift vendors? And if yes, what vendor is “after” stich? Astronomer maybe. Sorry if that’s basic.

evrydayhustling• 6 years ago

This goes against my intuition in several ways, so I'm curious if there are examples to discuss.

- Scaled deployments have Segment connecting many systems run by many teams, so the cost of coordinating a replacement can go up just as fast as Segment's.

- High growth companies have fires everywhere, including other infrastructure, so it's not obvious that Segment makes it to the top of the list.

- I expect the bulk of Segment revenue is not from companies with "high growth" by HN standards but scaled enterprises with high complexity and lower growth. These can dominate net rev retention even if there are smaller companies growing faster.

Again, no data to support the above, just a different narrative. Anyone have facts?

aeromusek• 6 years ago

Genius move for Twilio, honestly. Segment can supply the central hub to tie in all channel spokes Twilio already powers (especially after the SendGrid acquisition from a couple years ago).

I can't help thinking Segment had much more room to run though...everyone I know who uses them loves them, and they were still only just scratching the surface of the addressable market.

raiyu• 6 years ago

With how frothy the public market is for SaaS companies with growth looks like their growth may have stalled out.

Usually board will look to make changes, replace founder CEO and if that doesn’t work then push for a sale.

Very smart acquisition for Twilio though.

rasen58• 6 years ago

With how frothy the public market is for SaaS companies with growth looks like their growth may have stalled out.

Can you explain what this means. Why does the first part of the sentence imply the second?

brogrammernot• 6 years ago

The other case is they didn’t want to deal with going through an IPO, got a great offer for their business and a major liquidity event for their employees.

Going public, despite profits made, really sucks the soul out of a company.

Twilio and Segment’s visions align pretty well so I think that played a role as well. Outside of golden handcuffs, a large portion of their employees are liquid immediately as opposed to an IPO with a 6-12 month lockup for employees plus the rise/fall of a stock price during that time.

All in all, I think they made the right choice to sell instead of going for an IPO.

peter_mcrae• 6 years ago

Agreed really good fit. I bet a large % of Segment's customers were using Twilio endpoints. Really nice combination of a data hub / last mile across multiple channels...fully expect they will continue moving up the stack towards a CRM / Marketing automation solution.

rubyfan• 6 years ago

Who’s a likely candidate for CRM acquisition? Seems like the space is a bit crowded and Salesforce is the big dog and lots of second tier but who’s a good fit for Twilio?

m00x• 6 years ago

Not really. It's not one of the top 10 most popular destination by either event volume or counts.

shostack• 6 years ago

Yeah, it's pretty interesting as somewhat of a "bottoms up" approach vs the Salesforce approach.

I swear there's some law for these sorts of things where they inevitably end up as a marketing automation platform.

soumyadeb4• 6 years ago

Segment published a report on tool usage. "SMS and Push" was @ 12% and was not in the top-10. Even in the "SMS and Push", there was Braze/Iterable etc but no Twillio.

https://segment.com/blog/customer-data-platform/

This is not surprising. The personalized SMS/push notification use cases (for which you need Segment data) are commonly implemented via marketing platforms (like Braze etc) as opposed to directly via Twillio.

I think this was the other way around. Twillio is powering a lot of these new age marketing automation tools. Instead of just being at the infrastructure layer, it wants to go up the stack and own the marketing applications. Sendgrid and now Segment acqusitions are part of the same strategy.

They did the same thing for the contact center (call center) software space. Lot of the cloud contact center companies were using Twillio and now they launched their own contact center product. That has been one of the key drivers in their 3x increase in valuation in the last 1 yr.

https://www.twilio.com/use-cases/contact-center

Segment's partners like Braze etc should be worried.

knes2• 6 years ago

That sounds like a sweet deal, especially as Twilio stock is current "overvalued" (like most tech stocks right now).

Jeff Lawson continues to follow the SFDC playbook of buying companies (and existing revenue growth) with stocks everytime their stock pops ;)

hlth• 6 years ago

I'm not sure that it's Jeff Lawson as much as George Hu. 13 year SFDC veteran and credited by Benioff for many successful initiatives in his cloud book.

Separately, when George joined Twilio, they didn't really have a sales team. Started working on contract terms, raising prices and a host of other things. He's very systematic.

https://www.linkedin.com/in/georgehusf/

knes2• 6 years ago

Yes you are correct that he probably played a big part in all of this.

noway4212• 6 years ago

Last round's valuation seems to be $1.5B, so it looks like the acquisition price is 2x that so everyone hopefully walks off happy. I hope Accel, GV, etc. didn't have a crazy liquidation preference.

mikeyouse• 6 years ago

Liquidation preference usually just bases itself on the amount of money invested -- If Crunchbase is right, they've "only" raised like $280M, so even with 3x liquidation preference, they're well clear of the $850M number that would trigger any of the annoying rights that strip stock from common sharedholders. Everyone will have done well on this deal.

paulyacoubian• 6 years ago

Only 1x liq pref in this case.

sqs• 6 years ago

Congratulations to all Segment folks! I’ve met so many amazing people at Segment.

soumyadeb4• 6 years ago

Wow, congrats to the team @ Segment. This is very well deserved - they created this category. Also, looks that Twillio is investing big time in owning the marketing stack.

siquick• 6 years ago

Hopefully this means Segment dropping their prices - $120p/m for 10k users is out of the range of a lot of potential customers, and changing around an established analytics setup later on is always a pain.

Aeolun• 6 years ago

They used to be much cheaper too.

Nextgrid• 6 years ago

You have to justify the valuation somehow. Of course, whether that validation is truly justified is another matter and I guess the market will decide in due course.

spondyl• 6 years ago

This is the same Segment that started out as a single Javascript file that a couple guys threw together before rebranding right? I mean, they're so much more now (or so it seems) but feels like it was just yesterday... and I'm only 26!

tito2• 6 years ago

10 bajillion percent HN / YC success story. Congrats to all -- especially the person on the original thread who said "this is a cool idea"

divbzero• 6 years ago

Here’s the original post [1] and another early thread [2]. Always fun looking back with 20/20 hindsight.

[1] https://news.ycombinator.com/item?id=4912076 "Analytics.js"

[2] https://news.ycombinator.com/item?id=5116832 "Segment.io"

sjg007• 6 years ago

Yeah I agree, amazing.

hestefisk• 6 years ago

Interesting. What does Segment do?

guessmyname• 6 years ago

Segment is a customer data platform (CDP) that helps you collect, clean, and control your customer data. Here’s more information [1] from Peter Reinhardt, one of the co-founders.

[1] https://www.quora.com/What-is-Segment-io-all-about

tomnipotent4• 6 years ago

It's basically a really complex distributed pub/sub tool. It ingests data from sources, say Shopify and Heap Analytics, and can then send that data to 1 or more other supported platforms along with some user-defined transformations. Like a really fancy IFTT.

Sebguer3• 6 years ago

Step one towards rebranding Sendgrid as a marketing platform and getting them away from the cesspit that is transactional email.

bertjk• 6 years ago

(real question) Why is transactional email considered a cesspit?

Sebguer3• 6 years ago

A few reasons that all connect to each other. The biggest, most foundational one is that spammers are highly sophisticated criminal organizations, and will constantly be trying to figure out how to leverage your product for spam.

If they are successful, it is extremely costly for you (primarily in terms of IP reputation, which is very difficult to maintain) and cheap for them.

If they are unsuccessful, well, they'll keep trying and stopping them continues to be costly for you and they only need to get lucky once every so often for it to be worthwhile for them to continue.

Exacerbating all this, it's extremely commoditized, so even fairly large customers aren't going to make you that much money, especially given all the hassles of maintaining it.

Wintereise• 6 years ago

Indeed. One would think that given the notoriety associated with "marketing" emails, that would qualify for the cesspit title.

Though, I suppose the margins are much higher there.

dmix• 6 years ago

I follow(ed) Segment’s GitHub branches and always felt they adopted the latest and best front end tooling. I usually let them being the testing ground at a real company in between the stuff they developed themselves.

This goes from using Metalsmith early for their single page web sites, some coding practices (mono vs micro), some CSS frameworks and design patterns and other library choices when there always seemed like a barrage of new choices (like css in JS ) and React.

Anyway I much appreciate their efforts in this area as inspiration and real world examples published on OSS sites. Even if it was simple stuff like their marketing websites.

They clearly had respectable and internally influential talent working in this area.

It’s been a while since I’ve explored their GitHub repos for fun but the I still respect the stuff I learned.

alexjray• 6 years ago

Most of that is Ian Storm Taylor. This is what happens when software is treated as a first class citizen and the co founder(s) are technical. It's a specific class of companies like Stripe and Square. The business itself is treated as a software product, internal influences external.

Toine• 6 years ago

Can you elaborate on "internal influences external" ? I don't get it.

topicseed• 6 years ago

That would explain why Ian Storm Taylor slowed down on slate, his text editor, over the last few months. He must have been very busy with this deal.

He is a wonderful software maker. All the best to him!

fblp2• 6 years ago

Ian Storm Taylor departed the company in ~2013 i think - but was all a technical team with strong opensource culture.

zed88• 6 years ago

Hopefully they drop the pricing after this, else I am moving to Rudderstack.

supergirl• 6 years ago

is rudderstack cheaper? not obvious from their pricing. unless you go open source but then you don't have all the features

soumyadeb4• 6 years ago

RudderStack (https://rudderstack.com/) founder here. We have a different pricing vector (event-volume vs monthly-users/MTUs of Segment) so it's not directly comparable. Having said that, RudderStack can be much cheaper in two scenarios

1) Low # of events per users. For example, if you have a lot of anonymous users who don't do many events and leave. In this case, you may have a lot of MTUs but low number of events. True for a lot of consumer businesses.

2) You have a huge scale (10s to 100s of millions of events per day). In that scenario, we support deploying enterprise RudderStack inside your VPC but still managed by us. In this case, we don't have to incur infra/data-transfer cost (and charge 80% margin) so can be much much cheaper. We have a couple of customers in this model. Some choose this for privacy/security reasons.

In normal scenarios too we can be 50% or more cheaper. Unlike Segment, we don't store any data (which is a major cost) so our COGS are quite lower. We use your warehouse for all the CDP features.

arrty88• 6 years ago

Who's gonna pick up Zapier??

mercwear2• 6 years ago

I hope they stay independent as long as possible however if I had to take a guess I would say Salesforce.

dereg• 6 years ago

Dear god no.

est• 6 years ago

Offtopic: what's the best self-host tool for Intranet analytics? Would be best if can track user keystroke/mouse without predefined events, like what heap.io do.

huy• 6 years ago

I know of three (all OSS)

* https://www.posthog.com/ (more mixpanel alternative, can auto-track events too)

* https://snowplowanalytics.com/

* https://rudderstack.com/ (explicitly say it's Segment alternative)

robbiemitchell• 6 years ago

Really happy for the team. Huge fan of Segment from the start, and Twilio is slowly getting itself into the middle of everything. (I realized only recently that they've owned Authy for years following the recent rebranding.)

I find it interesting that Segment (and thus the entire downstream ecosystem) has gone this far while staying strictly oriented around users and accounts, without first-class support for other entities -- namely a notion of workspace/team/contract/opportunity/etc. "Groups" was sort of a false start that didn't get a new direction. There's still a ways to go connecting all the dots between how companies structure their data and how all third-party products are prepared (or not) to mirror that structure.

gigatexal• 6 years ago

The article is so dumb. Not a single sentence on what Segment does.

m463• 6 years ago

From wikipedia (deleted?)

Segment is an American customer data infrastructure company based in San Francisco, California. Its software allows enterprises to combine the collection of data from their customers, whether through a mobile app, by e-mail or in a store. Segment was founded in 2011 and accepted into Y Combinator in the same year.

So nobody feels comfortable talking about what they do.

Segment | Customer Data Platform (CDP)
segment.com
Segment collects user events from your web & mobile apps and provides a complete data toolkit to every team in your company. Marketing Single view of the customer.

fancyfish• 6 years ago

Really happy for the team and especially for the founders. They proved to be very technical and assembled a truly impressive engineering team, culminating in a huge exit.

The founders deserve every penny of that $3.2b and deserve the very nice lifestyle that will afford them. A great story that will inspire others including myself.

emdowling• 6 years ago

A fantastic outcome for a fantastic team and product. I've worked closely with both Twilio and Segment for a number of years as the internal driver behind large enterprise deployments.

I first encountered Segment when they were a young company and would frequently chat directly with Ian if I needed support or needed feedback. He was always gracious and humble, despite no doubt being ridiculously busy.

Twilio has gone from strength to strength - they have an agility that is only possible from a company that is willing to deeply listen to the market and stay one step ahead. Very excited to see where this leads!

maerF0x0• 6 years ago

All the parties declined to comment. How can forbes report on this if no one is willing to say it's happening?

lasky• 6 years ago

/strums G, D, C on guitar/

“If I had a billion dollars...”

ajit_singh• 6 years ago

Was a segment user around two years ago. Felt like a software that is made at exactly the moment when it should have, for a really hungry audience. Their success never surprised me. They also had a capable alternative- mParticle. Not sure what are they upto.

Twilio set to acquire Segment for $3.2B

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