Twilio IPO Offers Impressive Growth At Reasonable Valuation

The cloud communication service provider startup Twilio is expected to go public in 2016 after it had confidentially filed for IPO at the end of 2015. The JOBS Act of 2012 enables emerging growth companies with less than $1 billion dollars in annual revenues to confidentially file for IPO and keep their financial information sealed for 21 days before the IPO road show. This is a commonly used process that allows startups to sense the reaction from potential investors and market participants before proceeding to a full-blown IPO process. In the past, companies like Twitter (NYSE:TWTR), GoPro (NASDAQ:GPRO) and Square (NYSE:SQ) used this IPO track by pursuing that process; we understand that Twilio generated less than $1B in annual revenues.

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Twilio was founded in 2007 and offers application programming interface (API) services that enable developers to add voice, video, text, and picture messaging to any app in a simple way. Twilio uses AWS infrastructure to offer telephony services in the cloud that are very commonly used in many popular apps like Wal-Mart, e-Harmony, Hulu, Uber, Airbnb, eBay, Shopify, Salesforce and many more. In July 2015, Twilio raised $130M in Series E funding round at a valuation of $1B and entered into the one-billion dollar startup club that includes the most valuable startups in the world like Uber, Snapchat, Airbnb, Palantir, SpaceX and more.

After the market had started declining last year, mutual funds firms, Fidelity and Blackrock started to reevaluate their investments in privately held tech companies. The most vocal outcome from this re-evaluation was the markdown of the investment value in Dropbox and Snapchat, two of the top ten most valuable unicorns. However, in a recent report published by Fidelity, the mutual funds firm valued its stake in Twilio 31% higher than it was evaluated in the series E round and reflects a $1.3B valuation for Twilio.