Twilio, a communications software company with Seattle roots, is acquiring Seattle-based business-texting startup Zipwhip for approximately $850 million in a cash and stock deal, the companies announced Monday.
Founded in 2007, Zipwhip originally targeted consumers and set out to be the “Facebook of text messaging.” But it pivoted around 2013, taking a different approach by working with wireless carriers to enable hundreds of millions of business landlines to receive and send text messages. This allowed companies to text with their customers from landline phones, VoIP services, and toll-free numbers.
“Twilio and Zipwhip share a vision for the future of business messaging and its growing role within customer engagement,” Zipwhip co-founder and CEO John Lauer said in a news release. “Zipwhip’s goal is to make sure every business we serve can text their customers using their existing business phone numbers and, together, we have a unique opportunity to elevate the customer experience, helping brands better communicate via a trusted and growing channel that’s been proven to drive long-term customer satisfaction.”
Twilio actually started in Seattle 13 years ago, the brainchild of founder Jeff Lawson, who previously served as one of the first product managers at Amazon Web Services. The company later relocated to San Francisco.
While the acquisition ranks among the more substantial in Seattle’s startup scene, it’s certainly not Twilio’s largest acquisition. The company has flexed its muscle in recent years with the purchases of email API platform SendGrid for $3 billion in 2019 and customer data platform Segment for $3.2 billion last year.
Twilio’s fast growth and expansion into the communications field has been richly rewarded on Wall Street. The company now boasts a market value of $51 billion, and the stock has climbed 62% in the past year.”
The company reported revenue of $590 million for the first quarter of 2021, and non-GAAP profits of $17.3 million, up from $6.1 million. The company has more than 235,000 active customer accounts as of March 31, up from 190,000 a year ago.
Zipwhip raised $51.5 million in a January 2019 Series D round led by Goldman Sachs Private Capital Investing group, along with existing investors including OpenView, M12, and Voyager Capital. The company was valued at $261.5 million after that financing, according to PitchBook, and total funding in Zipwhip was $92.5 million.
Lauer said at the time that he believed texting software could become as widely-used as email software — maybe even more so.
“You’ve probably given up on your email inbox. I have 20,000 unread emails,” Lauer said. “But in my texting inbox, I have zero unread texts. That’s because texting is a high priority medium; email is a low priority medium. If you really want to get ahold of your customer, texting is the medium to do it with.”
In an emailed newsletter about the acquisition on Monday, Voyager Capital shared some history of its dealings with one of its portfolio companies. Voyager was originally introduced to the Zipwhip opportunity and Lauer in 2009, when the CEO hosted a meeting in his home office and participants sat on bean bag chairs in his basement.
Voyager’s Bill McAleer and Randall Lucas “both saw that [Lauer] was on to something big,” the newsletter stated. The firm returned and led Zipwhip’s Series B round with a $3.0 million investment in September 2016 and McAleer joined the startup’s board.
According to Zipwhip’s State of Texting 2021, the company said more businesses adopted texting as a way to connect with customers during the pandemic.
“Twilio, a long-time partner of ours, has seen the immense value we’ve built and the potential for even greater expansion of our offering,” Lauer said in a blog post about the deal. “By acquiring Zipwhip and joining our teams together, we’ll be able to execute our shared goals of changing the way businesses and consumers communicate.”
A University of Michigan graduate, Lauer found entrepreneurial success early in his career, starting in 1997 as a 21-year-old CEO at Rootlevel, a web application development company that built GM.com and Ford.com. He moved on to become CEO of Simplewire, one of the mobile industry’s first text messaging aggregators, in 2002.
Zipwhip employs about 275 people and moved into a new headquarters space in the Elliott Bay Office Park in 2019.
Zipwhip will become part of Twilio’s Messaging Business Unit, and the boards of directors of both companies have each approved the transaction. The deal is expected to close by the end of 2021.