May 27, 2021 · 42m · 20vc
20VC: The Twilio Memo: Bessemer's Byron Deeter on How a $125K Initial Check Became Bessemer's Largest Position, What The Influx of Late-Stage Capital Means For Venture Today & Why The Incumbent Advantage Is Now An Incumbent Disadvantage
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of 20VC, host Harry Stebbings interviews Byron Deeter, partner at Bessemer Venture Partners, discussing the journey of backing Twilio from a $125,000 seed check to a public cloud giant, alongside insights on enterprise go-to-market scaling and late-stage venture capital dynamics.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 28.2% of the talking time here. How this is scored →
Harry as informed peer 4.6 Guest teaching 4.2 Guest disagreement 0.8 Harry pushing back 2.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:37 Byron rejects host premise on late-stage funds
Byron explicitly reframes Harry's complaint about crossover funds making venture hard, arguing instead that downstream capital is an asset when managed responsibly.
Hardest push from Harry ▶ 29:15 Harry challenges crossover fund dynamicsHarry forcefully questions Byron on whether preemptive rounds from crossover funds are ruining venture dynamics, using sharp language to press his point.
Biggest teaching moment ▶ 13:35 Byron breaks down underlying infrastructure vs UI proprietary valueByron educates Harry on customer perception of proprietary software, noting that end users care about UI rather than underlying API plumbing.
Harry holds his own ▶ 21:36 Harry asserts thesis on founder sales playbooksHarry directly asserts a firm operational thesis that founders must craft and fine-tune their own sales playbooks before hiring any sales leadership.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Origin Story of Bessemer's Twilio Investment | 4 | 5 | 1 | 3 | Harry brings specific insights from other cap table investors like Scott Rainey and asks targeted questions on timing and market sizing. Byron provides historical context on early revenue decline and why telephony incumbents failed to capitalize on voice APIs. | |
| The Incumbent Disadvantage and Startup Agility | 5 | 5 | 1 | 3 | Harry challenges Byron's optimistic view on startup agility by bringing up developer churn risks and citing Algolia's early challenges. Byron explains platform retention economics and why underlying infrastructure rarely gets churned out. | |
| Product Evolution, Multi-Channel Layering, and Missed Markets | 3 | 4 | 0 | 1 | Harry prompts Byron to discuss past misjudgments and unexpected market developments. Byron admits where he was wrong about video adoption speed and explains how new communication channels layer on top of old ones rather than replacing them. | |
| Scaling Go-to-Market and Transitioning to Enterprise | 4 | 4 | 0 | 1 | Harry relies on cap table sources to press Byron on Twilio's enterprise evolution. Byron details their go-to-market iterations and how solutions selling enabled enterprise adoption. | |
| Building the Sales Playbook and Knowing When to Hire a CRO | 6 | 4 | 1 | 4 | Harry puts forward a strong opinion that founders must craft the sales playbook before hiring a head of sales. Byron endorses the thesis while adding nuance around the differences between product-led growth and outbound sales. | |
| Jeff Lawson's Leadership, Paranoia, and Community Commitment | 3 | 3 | 0 | 0 | Harry explores Jeff Lawson's scaling journey as CEO. Byron highlights Lawson's paranoid yet humble leadership style, as well as his civic commitment to San Francisco during COVID. | |
| Doubling Down on Winners and Late-Stage Capital Dynamics | 6 | 5 | 2 | 6 | Harry pushes Byron aggressively on whether crossover and late-stage preemptive funds are making venture investing overly difficult. Byron reframes the flood of downstream capital as a net benefit for founders. | |
| Navigating Preemptive Term Sheets and Cloud Valuation Cycles | 6 | 5 | 1 | 5 | Harry directly challenges frothy cloud market valuations and asks if a crash is imminent. Byron acknowledges high multiples while explaining how revenue growth compounds value through multiple compression cycles. | |
| Quickfire Round and Iconic Twilio Stories | 4 | 3 | 1 | 2 | Harry runs a fast-paced quickfire round featuring internal Bessemer lore and humorous anecdotes. Byron shares the story of Jeff Lawson's bike crash right before a Forbes photoshoot. |
Statements from this episode (22)
Byron Deeter Has Backed 19 Unicorns and 10 IPOs
“With 19 of Byron's investments, valued at over a billion dollars, including 10 IPOs and counting.”
Twilio Is Bessemer's Largest Investment in Total Dollars and Returns
“The initial investment started with David Callen leading a 125,000 dollar seed investment as part of this seed extension round that Mitch Kapoor led, and Ethan Kurzweil, who's now one of our great partners, was a senior associate at the time, and Ethan slid a …”
Twilio's Revenue Was Declining Month-Over-Month When Bessemer First Invested
“When we made the investment, not only was the revenue tiny, but it was actually down month over month.”
Tech Incumbents Face an Incumbent Disadvantage Against Lean Startups
“When realizing that this notion of an incumbent advantage, I firmly believe now is an incumbent disadvantage. It is really hard to beat a focused, you know, lean team with their head down going after a problem set.”
PaaS Customers Graduate to In-House Infrastructure Far Less Than Feared
“Whereas I think the market and the investors, and frankly, even the teams were very worried about this graduation phenomenon, it's happening way less than anyone feared. And it's really just very specific cases where people go narrower, not broader.”
Shopify Remains One of Stripe's Largest Customers Instead of Building In-House
“They're certainly one of Stripe's largest customers, if not the largest, and yet it's a great relationship. And at any point, of course, Shopify could have brought that in house.”
Founders Should Default to APIs Because Companies Rarely Replace Them
“If I was a CEO today, and when I'm in the boardrooms today with CEOs, my advice is where you can plug in APIs and use them for whatever the capability is, do that first. And over time, constantly look at designing it out, but you almost never will.”
Deeter Expected Video to Overtake Voice and SMS Much Faster
“I certainly have expected video to take off faster than it did. As you think about the Twilio product set, for instance, and all of the channels that we've entered now, I would have thought that voice and SMS would have plateaued earlier, and that video would …”
New Communication Channels Layer on Older Ones Rather Than Replacing Them
“What you find is that these new channels don't replace each other. So Video and push notifications and things. They don't replace SMS, so you don't have the situation where the SMS market plateaus, or the email market with the synchronization, you know, where …”
Stripe Is Number One on Bessemer's Private Cloud 100 List
“Stripe, which is cloud number one on our private cloud 100 list today with Snowflake's graduation, most likely.”
Twilio Went Through Multiple CROs Trying to Crack Enterprise Sales
“We went through several chief revenue officers who were quite capable, and yet couldn't fully crack it.”
Hiring a Big-Company CRO Too Early Disadvantages Early-Stage Startups
“And so hiring the big company CRO at that point is not only overkill, but it probably sets you up at a disadvantage because they're going to be disconnected. They're going to be layering in other execs. They're going to be working on process when really you ne…”
Founders Cannot Outsource Early GTM Discovery to Early Sales Hires
“And you can't outsource that to your sales team early, or you're going to lose the magic. You're going to lose the insights, and you're going to shoot the rocket off, 10 degrees off target, even if it's working.”
Twilio Allocated 1% of Pre-IPO Equity to Charity, Not Founding Equity
“He early on came to the board and said, I want to allocate one percent of Twilio's equity and not in like a marketing way where it's one percent of when we founded it, but like one percent now immediately pre IPO, which by the way is now worth hundreds of mill…”
Home Run IPO Valuations Expanded 100x to $50B+ Over 15 Years
“What used to be a home run at a half billion dollars for an IPO, is now a fifty billion dollar and above IPO. I mean, literally two orders of magnitude bigger than”
Venture Capital Will Bifurcate Into Regional Seed Firms and Global Platforms
“I do believe that the world is going to skew to a bimodal curve where there's going to be Super stage or regional firms. I put you in that bucket where you are going to be a fantastic early stage European partner for seed stage firms, and we look forward to co…”
Mega-Checks Fail in Enterprise Cloud Because Growth Isn't Paid Acquisition
“They haven't done much in the enterprise cloud world, but I think there's a reason why, which is it's hard to put hundreds of millions of dollars into mid-stage companies. You run the risk of overfunding them, and it's not a paid acquisition game in the way th…”
Bessemer Holds 25 to 30 Unicorns in Its Private Cloud Portfolio
“Within our private cloud portfolio right now, I think we have between 25 and 30 Unicorns that have obviously chosen to raise, you know, large financings north of a billion”
Startups Facing Preemptive Term Sheets Should Raise Half-Rounds Ahead
“Raise a half round ahead, not a full round ahead. So this idea of if you can envision deploying more capital and initially we are going to raise this money to get through these phases, let's think about the intermediate milestones where we can then go out and …”
Cloud Valuations Over 20x Revenue and Snowflake at 80x Are Unsustainable
“The average multiple is trading north of twenty-x revenue, and you look at a snowflake that's trading at 80 times revenue. That's not sustainable.”
Cloud Companies Will Absorb Multiple Compression Through Strong Revenue Growth
“These companies are growing at north of 40% on the public side, and on the private side, usually growing 80 to a hundred percent plus for the best companies, and so you can absorb some multiple compression and still compound value and be a win for everyone inv…”
Twilio Built Software Layers to Avoid Becoming a Commoditized Infrastructure Pipe
“The commoditization of communications or the migration of their larger customers. So I think you asked a very insightful question along the way, which I probably didn't give enough due to, which is we worried about that very heavily. And so part of our Preempt…”