The Exchanges

Q Um, as you, you know, began to, just from a business perspective, right, as you begin to get some investors and more interest, um, into 2000, you know, 10, for example, um, how did you go about hiring people? I mean, did you, did you have, like, that massive expansion Quickly, or were you still relatively small?

A You know, one of the things that I have always taken from my entrepreneurial endeavors, because most of my companies, like, we did not have a lot of money. And so in the early days of Twilio, uh, we sat about, we said one of our values is, is be frugal. And sure enough, I remember we hired our first software developer who was not a founder joining the company, a guy named Adam Belli. And I remember Evan saying, hey, Adam is great. We really got to hire this guy, but he wants a salary of like a hundred K. And I was like, whoa, you know, the sticker shock of like paying someone that much money when, you know, the founders had made nothing. And then we gave ourselves a meager salary in the very early beginning. I'm like, wow, this is like, oh, and I remember telling Evan, like, All right, like, we're gonna hire him, but like, better be worth it, right? And, and started growing the team at that point. But it wasn't for a couple of years, because we just started to stay small and lean in those early days while we were building out with, um, you know, really pretty limited resources.

AI assessment note: “we just started to stay small and lean in those early days”

Q working at another startup, which was called StubHub, which we know, of course, of today, because I just, I think it had just launched at the time. But I guess you, you weren't really into it, because you, I guess, pretty soon after you started there, you, you began meeting with people about other things that you might want to do, right? Like, Like other companies you could work at?

A Yeah, so Kevin O'Connor, who was the founder of DoubleClick, who had invested in my first company, I was in New York, and I was having lunch with him one day while I was, you know, still working on StubHub, and, you know, he said, you know, what do you, you know, what are you doing, or what are you thinking about, and I was like, you know, I just, I'm not sure I'm going to be long for the StubHub idea, and he said, well, why don't, why don't you move to New York, and we'll start a company together, and I said, okay, like, Doing what? He said, I don't know. Let's brainstorm and come up with an idea. He's like, why don't you go find another entrepreneur that you really respect and move. You can live in my summer home in the Hamptons. Uh, which is like empty most of the year.

AI assessment note: “I was like, you know, I just, I'm not sure I'm going to”

Q I think while you were still trying to get that first store off the ground, you actually decided to go back to school, back to, to University of Michigan to finish your degree. Uh, and, like, what was your plan after you finished? Were you just gonna head back to LA and, and kind of pick up where you left off?

A Yep. Yep. And first of all, going back to school when you are in your mid twenties is a blast. It is like literally the movie old school. And I kept in contact with my co-founder who did actually in that, that summer started building out the store and I said, great. So when I finished, um, college, I moved back to the West side of Los Angeles and we got hustling to get that store open. So did this thing, got the company off the ground. We opened the store and And we're running this store, this retail store. I'm sitting in the back of the store writing code for this point of sale system. I've got, you know, skate kids who are skating in every part of the store, making all this noise with their skateboards. Cause we made the whole store basically a skate park. You could skate everywhere inside the store. And so kids are skating everywhere. You kept hearing these like bang, bang, bang of like the skateboards landing everywhere. The employees are like these young skateboards. Skater guys, and they're like running in like, hey, bro, do you know where the size nine shoes are? And I'm like, no, I don't know where the shoes are. I'm trying to write code here. And after a while I realized I actually hate this business. I hate the customers. I hate the employees. I hate the stuff we're selling. And for a software developer sitting in the back of a skate shop, trying to focus on writing c…

AI assessment note: “Yep. Yep... when I finished, um, college, I moved back to the West side”

Q you was, was, or maybe not, I don't know, but, but Uber started to use Twilio, and I guess this is probably still early in Uber's history, so maybe it wasn't a significant, um, amount of revenue at the time. I think the first time I used Uber, maybe it was 2012, I can't remember, 2013. Um, but was that a turning point or not quite yet in 20 11?

A You know, looking back at it, Uber, it was not clear that Uber was going to be such a big deal. Right. Cause at the time they were like town cars. It was like fancy and Uber, when we won them as a customer, I think the whole company was about five people. Right. So it's very early in their history, but there's a funny thing. Like I look back at that period of time, 20 11, 20 12, where, you know, Uber was a few blocks away in that direction. And Airbnb was a few blocks away in that direction. And the floor above us was Instagram. And like, we would Throw a, like an office party on a Friday evening and all of the people who founded these companies and were building these companies would just come over for a beer. And, you know, at some point it was the, it wasn't just Uber, I would say, but it was the sum of all of that entrepreneurial activity going on in our backyard who were almost all of them, our customers that started to like really propel the growth of the company, especially after we added text messaging, which was the service that, um, This new whole category of mobile apps that was getting born really needed, and we were the one everyone turned to.

AI assessment note: “it wasn't just Uber, I would say, but it was the sum of all”

Q I mean, as a twenty-one-year-old, you were gonna recover. Obviously, you did, and that was, I'm sure, not fun, but do you remember how that felt, like, all those people, like, family and friends and, like, investors who lost everything?

A Yeah. You know, I remember conversations with some of the employees, because we moved down to San Diego, and people were kind of moving at various times. And they, like, right when we get down there, they basically start saying, look, we're gonna, we have to lay off basically your whole company. And I was like, are you serious? They're like, yeah, we've been burning, you know, fifty million dollars a month or some ungodly number. And now that we're not going public, we don't, we're not, we don't have the money. And so we've got to reduce our burn, like, immediately. And so they said, you need to go talk to all your employees and lay them off. And it was just devastating. I mean, talking to folks and, and having this whole thing unwind so quickly.

AI assessment note: “And it was just devastating. I mean, talking to folks and, and having this whole thing unwind”

Q Um, was that something that, um, I don't know, freaked you out?

A You know, I, it actually didn't worry me. You know, our business model is usage based, right? So when a customer sends a text message, it costs a very little amount of money, but like those things add up over time. And what results from that business model is that a company like Uber, when you get in, in the early days, as they expand, our revenue expands. But in some ways, like when a customer is growing so fast as Uber was during those days, you look at it and you're like, do I want my company to actually become just like the Uber story? Not really. Like I've got tens of thousands of customers at that time. So they were growing to be like a quarter of our revenue. I'm like, that's actually a problem. That's not, that's not something to celebrate. That's actually something to worry about.

AI assessment note: “it actually didn't worry me. You know, our business model is usage based”

Q in September of 2022. Um, I mean, do you, do you think, and, and, and, and also the explanation that we hear is that there was over hiring, you know, in the last, in the previous two years. Um, is that the, the beginning and end of, of why there are layoffs in your view? I mean, for example, with Twilio, is that, is that why did you over hire?

A You know, overhire is a, like, a simplified way to talk about it, but I think you have to, like, look at the, the root cause, but, like, the end result is, like, yep, if you have to let go of people, it means you hire people that, in retrospect, you wish you maybe hadn't hired, um, but the reasons why are, are more interesting. Um, when you are operating in an environment where, um, Interest rates are very low, meaning an investor can put their money into a, um, a very safe account, like a savings account, and make nothing. Then they're much more likely to want to put their money into a more speculative, um, stock, like a tech company, but once the, the, the savings account is making five, six percent, whatever, in a higher interest rate environment, you're like, well, now I'm less likely to take risk. That's why the equation of tech companies That are gonna spend a lot today To go build market share. And if you remember, like the internet is a massive market. And so for everybody who's building a, a, an online business, you're like, I've got billions of people who are my potential customers. There's tremendous amount of entrepreneurial activity. I'd be a fool not to invest as much as I can and go building my market share today for this enormous market we're in. And that's what people have done. But once you change that story and say, well, actually, The profits that we said wi…

AI assessment note: “overhire is a, like, a simplified way to talk about it”

Q I mean, every time I talk to the head of a public trade company, they say, I don't pay attention to the stock price. I don't believe that. I just, I just don't believe that they don't. I mean, do you, it must weigh on you to some extent, or do you, do you just feel like, well, you know, there's not much I can do to move this thing?

A You know, everything guy is about, about timeframes. Right. If you look at the stock on a hour by hour or even day by day basis, it, you know, I kind of liken it to imagine you were playing in a basketball game, but the score did not go up when you made a basket, the score randomly changed. You know, you're dribbling up the court and you get 10 points and then you make a shot and you lose five points. And it's like a rand, like the score is disconnected from the thing you're doing. Would that be a fun game? Like, no, right? You'd be like, this is a bunch of BS. Like, why am I doing this? And so if you look at a stock price on the day by day, minute by minute basis, you're like, this is completely disconnected from what I'm doing today. Right? Like what new information exists in the market On like a Tuesday afternoon when we're not reporting earnings about our company's future profit potential. There's no new information. So what's causing the stock price to move? I don't know, a bunch of stuff that's not in our control. And so in order for you to actually believe that you have agency over the outcome, you have to ignore the short term. But you also have to believe that in the fullness of time, the activities we undertake do affect. And, but that plays out over years, not over, like, you know, minutes, hours, days, or even quarters.

AI assessment note: “in order for you to actually believe that you have agency over the outcome, you have to ignore the short term”

Q And by the way, at its height, how many stores did Nine Star eventually open?

A Well, this is where we ran into the fact that retail is a brutal business. We, our first store did very well, actually. We put, so we put a skate park in the store. Like there was a kids could skate, uh, In the store. We had a video game lounge in the store. We had amazing selection, great employees, knew the sports inside and out, and the store was like the place to be. In fact, we put a half pipe in the parking lot, and it drew people in the door. It was amazing. So we said, oh, this is great, and so we raised some more money, and we opened store number two inside a mall in Orange County, and it was a dud. And so we had one store that was doing really well, one store that was not doing well, and so the average of both was the company was just basically staying afloat.

AI assessment note: “we raised some more money, and we opened store number two”

Q like, that the vast majority of people who listen to our show, right, they're listening for consumer-facing brands. So, I mean, Twilio, I think, I think you'd admit, it's a little bit hard to explain to people who don't know what it is. We'll get there. But, but what was the insight that you had at Amazon where you thought, oh, you know, I can turn this into a business?

A You know, I've always wanted the, like the things that the big companies have, I had always wanted. And I remember like, I'm called an Apple store one day and I got this amazing, like, hello, thank you for calling the Apple store for hours. Press one for, you know, you get the typical thing. And I was like, that's so cool. And how did they do that? Like when you call my store, like someone has to answer the phone and be like, hello. And And I was like, how do they do that? And I researched it a bit, and it was like, very expensive, very sophisticated, like, you have to go buy hardware, you have to go work with carriers, you have to roll out copper wire to a carrier, to your, to your closet, you gotta go buy software, there's people involved who are the experts in telephony. Yeah, right, it was incredibly complex. And, you know, in the, in the skate shop business, I remember, like, I would work in the store, I'd work in the front of the house, and I'd be at the register, and And the phone rang all day, every day, and you pick it up, and every time it was someone saying, hey, I got a question for you. Is my, uh, you know, my surfboard repair, is it done yet? And I'd be like, well, okay, tell me your email address, and I'd like, you know, have the phone hunched in my ear with, like, my shoulder holding it up while I'm typing in a keyboard, and looking up in the system that I wrote…

AI assessment note: “I researched it a bit, and it was like, very expensive, very sophisticated”