Who do you think should define the M&A strategy? Who does this within Twilio?

At Twilio, M&A strategy is defined by a core team that, generally speaking, includes Finance, Product, Corporate Development, Go-To-Market (GTM), and the CEO. Perhaps the most important component of M&A strategy is making sure the Product team has initial buy-in on every deal. If there’s not at least one person in Product pounding the table for a deal to get done, it’s most likely not a great deal.

There have been a few exceptions to this at Twilio, like the acquisition of Segment and SendGrid, which were largely driven by the CEO, but in both cases Product didn’t oppose the deal either.

Once the process gets underway, Finance and GTM usually have heavier hands.

In most cases as well, if a transaction is sub-$1B, the CEO will let us run with the deal because it’s not as large of a capital outlay and doesn’t require much Board interaction.

If a transaction is $1B+ or if we're going to use a significant amount of equity, then we’ll absolutely engage the CEO and the Board, which has an Investment Committee.

‍What are best practices for executing M&A strategy?

Perhaps the most important piece of M&A strategy is having a very active game board, and these don’t have to be outright purchases. They can also be partnership, teaming arrangements, or small equity investments.

But to have a really healthy pipeline, you should always have 100+ ideas at any given time in the funnel. Corporate Development should always be pushing the envelope on developing new new ideas and meeting with VCs and CEOs. There should also be Product folks who are dedicated to understanding what’s happening under the hood at these companies. You should also keep the executive team engaged, so deals have internal sponsors and large deals don’t appear out of thin air asking for approval.

You should also be okay with not every deal going through. If your metric is 100% success, that’s never going to happen. I’d rather have more looks and miss a few swings than have fewer looks at all. I’d generally be okay with a two-thirds success rate.

‍What are your thoughts on capital allocation against both organic and inorganic opportunities?

There should also always be an ongoing discussion between Product and Corporate Development about buying vs building. I always tell my team, “Don’t be afraid to build it.” The trade off here is often cost vs speed. We were evaluating a deal that was $3B+ recently and had a really rigorous evaluation around whether it would be worth building it instead. It might take a little longer, but would ultimately have a much lower price tag.

There’s also always considerations around acquisitions such as integration tax, whether the founders/team will stick around, etc.In some cases, we just can’t replicate it or it would take way too long or there’s a distribution restraint.

Beyond that, the other capital allocation conversation that we have is “What's the trade off between go-to-market and product?” For Twilio and our current state, I’d rather put money in go-to-market because these folks often need unique skill sets or have to be in a certain locale versus you can usually hire engineers globally.

‍How should you position yourself as a seller?

‍It’s pretty similar to the buy-side. You should always be prepared not to sell. I often like to say, “You should fall in love with your family, but don't fall in love with another company.” If you feel like the price isn’t right, stay the course and don’t sell. If you feel like there’s not a culture fit, don’t try to convince yourself in your mind that there is. Sometimes, you just have to walk away.

‍What are best practices for the integration process?

‍There are three key steps to executing a successful integration process.

Firstly, every deal should have an executive sponsor for the integration. This person can be different from the executive sponsor that pushed for the deal––for example there have been deals where the CEO of Twilio was the original executive sponsor for the deal but I was the integration sponsor––but someone from the executive team with clout and decision-making power should be responsible for overseeing the integration process.

Second, it’s critical to staff the teams to be ready for the integration. Managing the integration will be on top of everyone’s day-to-day jobs, so it often can be swept under the rug. Having designated folks responsible for all the work involved in integrating the teams is essential to having a smooth transition. Some iconic companies like Salesforce, Cisco, Oracle, and others even have standing teams that have the ready infrastructure to manage integrations.

Lastly, a lot of teams forget about the integration process a year after the deal, but it’s important to remember the technical overhang that will still exist such as email aliases, integrating technical platforms, etc. You have to have a team that will keep an eye on this even two to four years out, as the original team might be moving on to managing the next integration

‍How do you spend your day-to-day time as CFO?

‍I spend about one-third of my time on people, and I make sure to do this very deliberately for several reasons. Particularly in a software, everything that happens is a result of having great people. I spent a lot of time when I first became CFO of Twilio making sure I had the right direct staff on my team because it’s just impossible to do everything yourself at this scale and speed of growth. Secondly, the market for talent is the most competitive it’s ever been. You’re far better off taking the time to develop and invest in your internal talent to make sure that you retain them, and also that they can grow into more Senior roles.

Another one-third of my time is spent on financial matters such as talking to investors and internal planning. The last one-third of my time is spent on a variety of things including governance and administration. For other areas of my org like corporate development and cybersecurity, I’ll sometimes provide air cover, but I largely place senior folks in those positions and trust them to run those areas.