Capital Efficient Entrepreneurship: Venky Balasubramanian, CEO of Plivo (Part 3) 

Sramana Mitra: You didn’t have comparable functionality with Twilio?

Venky Balasubramanian: We actually had better functionality back then in terms of what we launched and in the framework itself. We have a lot of incoming interest from customers of Twilio who liked what they saw. It was hard to believe for a lot of folks back then because it was just two people – Mike and I sitting out of our apartment and writing all this code. A lot of folks came in and said, “Whatever you claim on your website, does all of it work?” The code was all there on GitHub. The code was there right in front of them. We have a lot of consulting projects where they say, “I want to move out of Twilio and onto your framework.” This is around June of 2011. To be honest, we did not have a plan of starting Plivo as a business. It was a still an open source hobby project. We did get a lot of consulting offers from folks wanting to use our framework.

Sramana Mitra: Why did they want to move off Twilio? What was the reason they wanted to move off?

Venky Balasubramanian: I think at that time, Twilio did a great job of marketing to developers. There was a lot of documentation and a lot of developer evangelism. What tends to happen is when companies start to scale, they quickly realize that, at scale, certain price points start to become expensive. You’re not spending $5,000 a month. You’re spending $20,000 a month. It starts to become expensive very, very quickly. That was one of the major pain points that a lot of customers came up to us with even back in 2011.

Sramana Mitra: Your product was open source, but was there any charge?

Venky Balasubramanian: I read that you’ve written about them.

Sramana Mitra: Yes.

Venky Balasubramanian: At that time, Twilio’s offering was a complete bundle offering. Everything is in one package. With our open source offering, we only offered the technology. We did not have any carrier tied to it. A lot of customers sad, “We will start bringing our own carriers and use your open source framework.” Because they were at scale, some of these customers actually got their own carriers. We would see coming and saying, “My carrier is offering me half the cost without Twilio today. I’m not spending all this money with Twilio. I’m just going to use the technology part of it and get my own carrier. The cost did not come down to zero, but they would save anywhere between 25% to 40% of their test. That’s huge because imagine a spend of $20,000 to $50,000 a month, that’s half a million dollars in a year. If you save 25% on that, that’s a lot of money.

The second driver that we saw was quality. When you start scaling and you’re running a call center on  a service which is on the cloud, if you have bad call quality, you can be as good as you want in terms of documentation. It’s very hard to run a business if you have these issues. A lot of customers wanted  control on that because this was open source. They could run their own servers. That was another major reason a lot of customers wanted to move out. These factors became the primary factors for customers moving out.

This segment is part 3 in the series : Capital Efficient Entrepreneurship: Venky Balasubramanian, CEO of Plivo
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