What can we learn from the most successful SaaS IPO of 2016?
A lot.
The Twilio IPO has two powerful lessons for all of us, especially Customer Success folks:
Net expansion is king. Boasting 155% dollar-based net expansion, Twilio was able to readily sell shares to willing buyers at a handsome premium. Investors really care about this.
Customer stories are compelling. Twilio lets their happy customers do the talking which creates an undeniable Go-To-Market competitive advantage.
But before we get ahead of ourselves, let's first acknowledge the recent health of the SaaS IPO market:
"Scared and shitty," says one institutional investor when describing the SaaS IPO market. If this trend were to continue, we're looking at the worst SaaS IPO year in six years. Yikes.
But then came Twilio. . .
Bright-eyed and bushy-tailed, Twilio filed its S-1 on May 26th, 2016. But this wasn't just any S-1. This was one of the most unique S-1s we've ever seen (check it out here).
Why was it so unique?
1. They lead with net retention.
Literally. Before you even get to the f*&%$ Table of Contents, Twilio hits you with this image:
Source: Twilio S-1. DBT commentary: "strong to quite strong"
Revenue growth, sure. Active customer growth, join the club. But 155% net expansion?!
OOHH YEAAHHHH [picture Randy Savage saying this, naturally]
155% dollar-based net expansion means Twilio's customers are expanding 55% annually net of churn. These are best-in-class metrics by any benchmark. One might suspect that large customers could skew this number heavily (WhatsApp is 15% of Twilio's revenue), but even that isn't necessarily a bad thing because their technology is considered essential (WhatsApp isn't even in a long-term contract).
2. They include compelling customer testimonials in their S-1.
Who does that?! Before you even get to the S-1 summary, you see Travis Kalanick—the f'ing CEO of Uber—raving about Twilio. Your welcome, Goldman Sachs. I-bankers dream of an investor roadshow like this.
And just in case you hadn't heard of Uber, Affirm, Nordstrom, or ServiceNow. . . Twilio includes another full page of customer testimonials to hammer home the point.
Diversity FTW.
What was the financial impact of all this goodness? In short, they crushed it. Twilio is currently valued at $3.12 billion (as of 7/6/16). The 10 million shares Twilio offered at $15 per share ($150MM raise) is now trading at $37.93 per share, or up 153% in 9 trading days.
Source: Google Finance
For the sake of comparison, what has the NASDAQ index done this year? Answer: -2.96%
Source: Google Finance
See that V-shaped low-point in late June? That was the Twilio IPO. You can see the (partial) impact it had on sentiment and investor appetite for tech/SaaS stocks. So while the NASDAQ was taking a cat nap for the first half of 2016, Twilio is a beacon of warmth in a frigid IPO market.
To recap, the Twilio IPO has two powerful lessons for all of us, especially Customer Success folks:
Net expansion is king. If you are a Customer Success executive, or individual contributor, take pride in the fact that your impact on churn reduction and expansion revenue is a HUGE ARBITER of your company's future success.
Customer stories are compelling. When your company goes public, what customer's would you put on your S-1? Do you have executive relationships that would go to bat for you?