Today we will be diving into Twilio. Twilio was founded just over a decade ago by Jeff Lawson, with the vision of enabling developers to access the world's communication infrastructure through APIs. Twilio has over 200,000 customers and powered nearly 1 trillion interactions last year through SMS, voice, video, email, and more.    In this business breakdown, we'll cover Twilio's unique approach to distribution, how lower gross margins versus peers can actually be a moat, and why Twilio's revenue model aligns incentives with its customers. We closed with the bull and bear case for Twilio over the next five years and what investors and operators can take away from studying Twilio more closely.    To help me break down Twilio, I'm joined by Ro Nagpal, a senior investment professional at the Holocene advisors.   For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- Business Breakdowns is a property of Colossus, Inc. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss   Show Notes [00:02:53] - [First question] - What is Twilio? [00:03:36] - How the world received text updates before Twilio [00:04:14] - The scale of Twilio today [00:05:02] - How expensive designing infrastructure of this magnitude can be [00:05:34] - How to use Twilio and gain access to its functionality [00:06:33] - The insight that led to developing the company [00:08:37] - Other aspects of Twilio’s services beyond SMS [00:09:50] - Unit economics of the business [00:12:01] - Case studies of likely and unlikely customers to use Twilio [00:15:17] - Original use cases and how they’ve evolved since [00:16:12] - Developer insights and what innovation it’s led to [00:19:19] - Twilio becoming a pioneer in the user software API space [00:22:15] - How big the TAM can be and why it’s bigger than people may think it is [00:23:38] - Why the API data and growth rate of Twilio separates it from its competitors [00:26:02] - How having a lower gross margin actually works to their benefit [00:27:28] - Who their competitors are and why Twilio beats them out [00:29:11] - Strategic acquisitions they’ve made like SendGrid, Segment, and Syniverse [00:31:18] - Unifying themes in their M&A strategy [00:32:08] - Fees associated with using iMessage and WhatsApp [00:32:43] - Improving margins as SMS becomes less pivotal in their operations  [00:33:21] - Things about Jeff Lawson that makes Twilio so special [00:35:25] - What’s their bear case is [00:36:19] - Lessons for builders and investors  

Today, we will be diving into Costco. Costco is a favorite business story and model for many operators and investors. It was founded in 1983 in Seattle, and it has grown into a juggernaut with over $169 billion in sales and almost 60 million members globally. To me, Costco is the best example of doing one thing for customers and getting better at it constantly for decades.   To help me break down Costco, I talked to both Zack Fuss and Chris Bloomstran. Zack is an investor at Continental Grain, a 200-year old family-owned business that is focused on investing and operating businesses throughout the food and agriculture ecosystem with assets across the US, Latin America, and Asia. Chris is President and Chief Investment Officer of Semper Augustus Investments Group and a long-time shareholder in Costco.   In this Breakdown, we'll start with Zack by diving into the Costco business model, examining the relentless focus on efficiency that separates Costco from its peers, and exploring the secrets behind its private label brand, Kirkland. I'll then talk to Chris about Costco's growing international opportunities and the lessons that operators and investors can take away from studying the business and founder Jim Sinegal. I hope you enjoy this Breakdown of Costco.   For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- Business Breakdowns is a property of Colossus, Inc. For more episodes of Business Breakdowns, visit joincolossus.com/episodes.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss   Show Notes [00:03:03] - [first question] - The fundamental equation that makes Costco work [00:04:02] - Dynamics of a shared scale economy business [00:06:45] - Jim Senegal’s devotion to perfecting one model for decades [00:10:10] - Examples of how far Costco is willing to go to provide value for its members [00:12:27] - Analysis of a private label strategy, and why Kirkland is such a success [00:15:35] - Key differences that separate Costco from their competitors [00:18:19] - An open-source retailing relationship with suppliers [00:21:10] - How they maximize sales per square foot over time [00:25:45] - Thoughts on leverage in unit-concept stores and why Costco doesn’t use leverage to accelerate growth  [00:28:02] - Lessons that can be learned and applied to other businesses    [00:30:47] - How Costco approaches international expansion [00:33:54] - Why Jim Sinegal is such an exemplary CEO