What's going on?

Twilio is a tech company whose software is used by the likes of WhatsApp and Uber � and on Thursday, its shares started trading in the public markets for the first time – a.k.a. it completed its initial public offering (IPO). The stock jumped 88% on its first day of trading!!

What does this mean?

Twilio does things like power the technology that connects your phone to your Uber driver (within the Uber app). But the market is more focused on what Twilio�s IPO could mean for other tech companies thinking of going public. There has been a big dearth of tech IPOs in recent years as funding from private investors has been easily available (which reduces companies� incentive to go public) and because the stocks of tech companies that have gone public have performed relatively poorly (e.g. Box and Lending Club).

Why should I care?

For the stock: Twilio�s revenues are growing quickly � but it relies on a small number of customers. Last year, Whatsapp accounted for 17% of Twilio�s revenue. Uber is also a big customer. Twilio would suffer materially if those firms were to develop their own technology in-house. Those that are positive on Twilio say its technology is difficult to mimic and already embedded in their customers apps. In short, the defensiveness of its business is a big question for some investors (though apparently not the ones buying the stock on Thursday!).

The bigger picture: Will this open the floodgates for more tech IPOs? In theory, Twilio�s big success will help increase future demand for the shares of other tech companies that go public � and that will encourage those companies to go public�(because they can secure an attractive valuation). But Twilio is a relatively small company and so might not be the bellwether that some investors think it will be. Also, it�s only one day of performance – if its stock falls back in the coming months it could deter future tech IPOs.