Actual title is: "MessageBird raises $60m Series A funding"
I've never heard of this company but looks like the same space as Twilio. Given how entrenched something like this could be in the API stack of an application, I can see the value in having a large war chest to drive development and adoption. Kudos!
Be interesting to see where the tipping point for adoption would be for companies (guessing if you're using plain SMS, the switching cost from Twilio or Textburst etc... wouldn't be great). At what point does the cost become painful for a small biz doing SMS, and if you can create a plan to grab those before the next growth phase, could be a good strategy.
Definitely an interesting question, here are a couple of ways to look at it:
- For companies doing a lot of messages or calls, pricing becomes a big issue in terms of scaling. Better pricing means they can do more to achieve even greater results, without too big of a restraint of financial overhead compared to competitors.
- For smaller companies doing smaller amounts of traffic, pricing isn't the biggest issue, all though it does become one when scaling.
An alternative benefit, which is applied to all types of companies, is the fact that MessageBird is better for security and quality: having more direct connections and working closely with telco's makes it possible to have complete end-to-end control over the traffic. This is crucial when choosing a partner to do 2FA with or other types of sensitive, security related messaging and calling, but also guarantees an overal better quality of service.
Cool stuff, and as a Dutch chauvinist I like that a fellow Dutch startup does well.
That said, I've looked at MessageBird a bunch of times but I still don't get it. What makes them different from all the other SMS gateways out there? It's the same product everywhere: you invoke some REST API, an SMS is sent to a number and you get billed.
Good question. However, I'm rooting for them "We founded MessageBird in 2011 after experiencing firsthand how poor the quality of service of most communication providers was at the time".
It's 2017 and the incumbent (Twilio) can't explain why I get delays in inbound SMSs.
They blame it all the time on carriers, but if they can work directly with carriers to improve QOS while having Twilio-like ease of use they might have a winner.
There are other providers that promise better QOS than Twilio, but they're very enterprisey (meaning long sales cycle, no ease of testing, etc).
The problem is that to get an SMSC that is respected by all of the operators requires a negotiation with an aggregator who has done contracts with all of the operators. The 2nd order problem is that you don't know the quality of the relationship an aggregator has with operators until you're a customer. All carriers have a prioritization in their SMSC's and, necessarily, no aggregator is in position 1 on all carriers.
We have secured direct relationships with 220 carriers globally essentially skipping the aggregators. That way in terms of support in almost all cases we can at least explain what happened with the message end to end.
Yes, we run our own SMSC but in terms of functionality like routing and quality control we go way beyond what a normal carrier would be able to. CLEC is a US specific term and not needed to sign direct agreements with carriers. We operate our own SS7 stack, global titles and mobile network codes. This way we can interconnect with carriers as a carrier. Deploying an on-premise SMSC or E1's would be an old-school way of doing this. Most carriers use either Sigtran or connectivity through their SCCP provider.
Good question - but all these gateways have tendency to drop messages, report weird errors, messages are sometimes delayed by hours, their MMS support if quirky, etc.
I.e., if you ever worked with Twilio you will learn about "30008 Unknown error" - Twilio support tries but because "Carrier Network" problems these problems cannot be fixed.
In short, reliable delivery of SMS messages internationally is still not solved.
So that error doesn't exist in MessageBird? I don't get it. Is it not dependent on carriers as well? I'm asking how they technically do things differently that would absolve them from encountering that issue.
When you connect directly to a carrier you get so called PTT codes back (industry standard). Not all carriers do this the same way but we standardize this and return them like shown at the link below. When your provider uses a lot of in-between providers its harder to return errors correctly. https://developers.messagebird.com/docs/smserrorcodes
Beating Twilio on either point is setting a rather low bar for comparison. Neither are Twilio’s strong suit, imho. Not saying Twilio is bad, but they are certainly not cheap or rock solid reliable.
Depends on needs. If great documentation and easy to use APIs are important, then I’d recommend a different provider over one for price / reliability. Also depends what world markets you are focused on too. One other major variance is if you need MMS or short code support.
Provider based on price depends on how heavily you use US vs World, and if it's SMS (and/or MMS needed) or Voice or both and what volume you are operating at. For pure SMS with a balanced mix of domestic and international, I would probably suggest AWS Pinpoint at this point. Their international rates compared to Twilio are fantastic for all the locations I spot checked.
It seems like they are cheaper at least for Europe (before volume discounts), with 0.042€/SMS in France (Twilio would be 0.076€). Still 10x as much as the US pricing...
That's because the EU model is the sender pays the full fee, in the US the fee is split between sender and recipient.
A lot of people are on plans which let them receive unlimited texts in the USA, which means the provider is absorbing the cost, but it still is much cheaper to send.
Used these guys before for a project and they were great. They were also one of the first that "just did" inbound SMS with webhooks in a convenient way. Sometimes a complete call stack is overkill. Also, their UI is good for marketing, no need to write code.
where (in the world) is your data stored physically? The FAQ only says that
> The MessageBird platform is build to be secure from the ground up, through all application layers. We have put in place best practices from several industry standards to help reduce and mitigate risks. MessageBird’s communication platform is hosted at secure data centers that comply with leading security policies and frameworks, including ISO 27001 and NEN 7510.
Similar question/issue has prevented us from using Twilio in the past.
I see a lot of "Congrats" type sentiments in this thread. Maybe I should just say congrats too, but I can't help but wonder: Isn't it a terrible idea to raise $60M as a series A?
That means you'll either need to be bought for ~$100M just to break even, or IPO, which seems very rare nowadays.
Could anyone help me understand what the calculus looks like for these decisions? It's a series A too, not even a series B or C. I get that the founding team genuinely believes in the vision of the company, but you can still believe in the vision without removing your ability to exit.
I presume that their traction suggests they could get to IPO and/or a stellar exit within a short time frame. If you have the magic formula for growth, taking down a huge round makes a ton of sense.
If you take any amount of VC money the expectation is that you're going for >$1bn exit.
Also remember that the Series of the investment doesn't necessarily reflect the stage of the company but rather the number of rounds of investment it's had. In this case MessageBird expect to hit $100m of revenue this year.
They're saying they expect to generate $100M revenue this year. I think that places them a bit further off the $1B _exit_ than 8x, although if they raised further funding potentially that could be done at an amount that suggests a $1B value.
I wouldn't want to be competing against AWS Pinpoint, and the problems Twilio have suggests this is a technically difficult space. Seems like quite a big bet from the VCs involved.
Revenue to market cap multiples in technology on the public market are often in the 6x range even at slower growth rates than private companies. So if they're doing $100M they could easily be worth over $1B now.
On the bad side: Often times VCs demand board seats in a large round and put in terms in the contract so they can block acquisitions. The ballpark is that VCs would like to get back ~5x valuation. I don't know what the valuation in this Series-A was but I assume it was north of 200m, meaning they would need to exit as a unicorn.
On the good side: It's not unusual for founders to demand a secondary sale to take some money off the table when VCs come in, especially in successful startups that raise lots. This is the counter "de-risk" move that the founders can (and probably should) pull so everybody can swing for the fences and the founders aren't the ones holding the bag if things go wrong.
Don't dwell on the letter of the round. Some companies raise 10M in Series E because they don't require as much capital. Others raise more in Series A because they do.
Telecom is a capital intensive industry, which is why startups need to raise such large amounts of money. This is also why Twilio needed so much money (>$200mm) though they did take it in later rounds.
Venture and Growth Investors are only looking for $1 billion plus exits, so the $100M breakeven doesn't bother them. Instead, they ask, "What's a new telecom company going to be valued at?" and "What are the chances this can get there?" and "What will our ownership be then?". They multiply the three #s, and then do some discounting.
These companies aren't really telecom companies though. Twilio owns no physical switches or telecom equipment, or at least they didn't when I worked there and I would be very surprised if they do now. There is no physical capital required to implement the business model of Twilio or MessageBird.
Note that there are still good reasons to take on large amounts of venture capital despite not needing to spend it on traditional telecom equipment.
My guess is that the VCs are betting on this being another Twilio, which did go public. And it seems like the founders are okay with hedging their bet by taking so much money so early.
Perhaps a genuine (and still rare) example of 1999 style startup bubble investing.
I think they already had revenue and they were profitable before taking the money https://www.inc.com/profile/messagebird. Maybe their growth in terms of revenue and profits, really got investors excited. However they do have to payout telecoms so that revenue may not mean too much.
I am curious why they decided to join YC? Was it a ego thing. What proof do they have that their service is better than Twilio?
You are not wrong, if you raise $60M then you have set certain constraints on your future. That said, as a primarily bootstrapped company with good traction and a reasonably world wide 'touch' if they aren't operationally cash flow positive yet I would be surprised. They have hit an interesting sweet spot between transactions (always a useful volume business) and an aged infrastructure (SMS). It was a space I would have expected Twilo might compete in.
So in this case it could simply be the cash they need to either prep for an IPO or to solidify their lead so that if they are taken out it is expensive (and thus a good return to the Series A investors).
We've been using MessageBird to send transactional SMS's for over a year now. It was much cheaper than our previous provider and their support is first class. Congrats to them.
Anyone have experience with their VoIP? Currently using Tokbox but been having some troubles. We integrate it across web, iOS, and Android for a kid's learn-to-code with live teachers product.
Isn't this kind of something that might be phased out in the next few years. I'd imagine there would be some kind of web tool doing authentication like this at some point just because of how obsolete sms seems these days. Correct me if I am wrong though.
The products offered are not simply for SMS-based authentication. That is merely one use-case out of many that you can build on a platform like MessageBird or Twilio.
Wondering why the VCs are so keen on companies that seem to be re-doing something that's been done many times (almost commodity in the case of this company) and has essentially no proprietary technology and no network effect?
It may be but probably not that soon since there are a lot of countries not on smartphones, some industries have multiple dominant players, and users may not want to deal with an app from each player, e.g., car dealers, etc.
I see Whatsapp support on their website but I find this very strange, Whatsapp doesn't have an official API, only some hidden endpoints for their clients that can be changed at any time.
https://www.messagebird.com/en/chat-api
These guys seem to be able to connect across video and messaging platforms. In the age where everyone is trying to be WeChat and connect billions, the pipes underneath that would be a downright bargain at $1B.
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[ 4.2 ms ] story [ 212 ms ] threadI've never heard of this company but looks like the same space as Twilio. Given how entrenched something like this could be in the API stack of an application, I can see the value in having a large war chest to drive development and adoption. Kudos!
- For companies doing a lot of messages or calls, pricing becomes a big issue in terms of scaling. Better pricing means they can do more to achieve even greater results, without too big of a restraint of financial overhead compared to competitors.
- For smaller companies doing smaller amounts of traffic, pricing isn't the biggest issue, all though it does become one when scaling.
An alternative benefit, which is applied to all types of companies, is the fact that MessageBird is better for security and quality: having more direct connections and working closely with telco's makes it possible to have complete end-to-end control over the traffic. This is crucial when choosing a partner to do 2FA with or other types of sensitive, security related messaging and calling, but also guarantees an overal better quality of service.
That said, I've looked at MessageBird a bunch of times but I still don't get it. What makes them different from all the other SMS gateways out there? It's the same product everywhere: you invoke some REST API, an SMS is sent to a number and you get billed.
It's 2017 and the incumbent (Twilio) can't explain why I get delays in inbound SMSs.
They blame it all the time on carriers, but if they can work directly with carriers to improve QOS while having Twilio-like ease of use they might have a winner.
There are other providers that promise better QOS than Twilio, but they're very enterprisey (meaning long sales cycle, no ease of testing, etc).
The result is fairly untraceable failures.
Source: former telecom PM.
I.e., if you ever worked with Twilio you will learn about "30008 Unknown error" - Twilio support tries but because "Carrier Network" problems these problems cannot be fixed.
In short, reliable delivery of SMS messages internationally is still not solved.
So how does MessageBird solve this...?
Provider based on price depends on how heavily you use US vs World, and if it's SMS (and/or MMS needed) or Voice or both and what volume you are operating at. For pure SMS with a balanced mix of domestic and international, I would probably suggest AWS Pinpoint at this point. Their international rates compared to Twilio are fantastic for all the locations I spot checked.
A lot of people are on plans which let them receive unlimited texts in the USA, which means the provider is absorbing the cost, but it still is much cheaper to send.
where (in the world) is your data stored physically? The FAQ only says that
> The MessageBird platform is build to be secure from the ground up, through all application layers. We have put in place best practices from several industry standards to help reduce and mitigate risks. MessageBird’s communication platform is hosted at secure data centers that comply with leading security policies and frameworks, including ISO 27001 and NEN 7510.
Similar question/issue has prevented us from using Twilio in the past.
That means you'll either need to be bought for ~$100M just to break even, or IPO, which seems very rare nowadays.
Could anyone help me understand what the calculus looks like for these decisions? It's a series A too, not even a series B or C. I get that the founding team genuinely believes in the vision of the company, but you can still believe in the vision without removing your ability to exit.
Also remember that the Series of the investment doesn't necessarily reflect the stage of the company but rather the number of rounds of investment it's had. In this case MessageBird expect to hit $100m of revenue this year.
The fact that they’re there this quickly is absolutely mind boggling.
I wouldn't want to be competing against AWS Pinpoint, and the problems Twilio have suggests this is a technically difficult space. Seems like quite a big bet from the VCs involved.
Care to expand on this? When I visited their site to find out what they offer, I immediately said to myself.. "So this is just a Twilio competitor".
On the good side: It's not unusual for founders to demand a secondary sale to take some money off the table when VCs come in, especially in successful startups that raise lots. This is the counter "de-risk" move that the founders can (and probably should) pull so everybody can swing for the fences and the founders aren't the ones holding the bag if things go wrong.
Telecom is a capital intensive industry, which is why startups need to raise such large amounts of money. This is also why Twilio needed so much money (>$200mm) though they did take it in later rounds.
Venture and Growth Investors are only looking for $1 billion plus exits, so the $100M breakeven doesn't bother them. Instead, they ask, "What's a new telecom company going to be valued at?" and "What are the chances this can get there?" and "What will our ownership be then?". They multiply the three #s, and then do some discounting.
These companies aren't really telecom companies though. Twilio owns no physical switches or telecom equipment, or at least they didn't when I worked there and I would be very surprised if they do now. There is no physical capital required to implement the business model of Twilio or MessageBird.
Note that there are still good reasons to take on large amounts of venture capital despite not needing to spend it on traditional telecom equipment.
Perhaps a genuine (and still rare) example of 1999 style startup bubble investing.
I am curious why they decided to join YC? Was it a ego thing. What proof do they have that their service is better than Twilio?
So in this case it could simply be the cash they need to either prep for an IPO or to solidify their lead so that if they are taken out it is expensive (and thus a good return to the Series A investors).