Klaviyo

/ Startups / By
Andrew Bialecki and Ed Hallen in July 2012. Image Credit: Klaviyo via TechCrunch

Founders: Andrew Bialecki & Ed Hallen
Founding: 2012
Mission: Empower creators to own their destiny
Employees: 1,700 & 40% Local
Workplace: Hybrid
Stage & Capital Raised: Series D & $454.8M primary capital raised
Investors: Accel, Accomplice, Shopify, & Summit Partners
Select Customers: Compass Coffee, Glossier, Spanx, Honeylove, SABA
Glassdoor Rating: 4.2
Valuation (estimated): $8B – $12B & IPO bound
^ this is a useless number. There is no tangible valuation until the business…goes public. Don’t forget it!

Everything you’re about to read is for informational purposes only, you should not construe any such information or other material as investment or financial advice. And past performance is not a guarantee or predictor of future results.

Klaviyo is a marketing automation platform that helps companies drive revenue through e-mail, SMS, Mobile push, and more. Klaviyo founders Andrew Bialecki & Ed Hallen met at Applied Predictive Technologies outside of D.C. Next, Andrew moved back to Boston where he joined Performable, David Cancel’s startup that was later acquired by HubSpot.

In 2012, Ed & Andrew reunited to start Klaviyo. Named after “clavija”, a Spanish word for mountaineering pins, they aspired to help businesses climb mountains. And Klaviyo has climbed quite the mountain.

Bard tells me, via Crunchbase, that 50,000 companies raised a Series A over the last 10 years (2013 – 2022). In that same cohort there have been 1,087 technology IPOs. That math says roughly 2% of institutionally funded venture backed companies go public. Quibble with my cohorting all you want, it could be better, but the fact remains that building a public company is incredibly difficult. It is rarified air and an incredible accomplishment.

Bootstrapping the company to start, not quite sure of the ascent they were on, the Klaviyo team waited three years before raising their first round of seed capital from Accomplice. Boston’s biggest software debut since Toast’s 2021 IPO, Klaviyo represents the best of the city’s startup ecosystem. So let’s toast (no pun intended) to some of their accomplishments:

  • 130,000+ customers / 1,458 customers @ $50k+ ARR*
  • $585.1M ARR*
  • 56.5% revenue growth*
  • 119% NRR (dollar based net revenue retention)*
  • Top 10 customers represent 1.4% of ARR*
  • Klaviyo defines $37B of KAV “Klaviyo added value” driven for their customers in 2022
  • Raised $454.8M of primary capital since inception, of which only $15M has been utilized for business operations

*last 12 months ending 6/30/23

That deserves a slow clap right there. And my favorite Klaviyo S-1 chart right here:

Is that an on ramp to the moon?!? 

Here are some interesting insights from their S-1 and other content around the Internet I’ve seen over the past few days that provide more than a few reasons to be excited about Boston’s next publicly traded software anchor company:

Klaviyo primarily serves retail and eCommerce customers today, representing more than 95% of their customer base. They estimate those customers represent an addressable market of $16B+. Focus is good! But there’s more opportunity out there. By expanding horizontally to new verticals, they estimate there is $34B of total addressable market for their existing platform.

Organic demand from additional verticals come from education, events and entertainment, restaurants, travel, and B2B companies. The Klaviyo team is intentionally exploring new ways to serve these verticals and expand their platform reach.

Klaviyo has traditionally served SMBs customers but, as their customers have scaled and some become larger enterprises, there has been more enterprise level interest. Their 1,458 enterprise customers generating over $50k of ARR have grown 94% y/y.

On the go to market side of things, they are a PLG leader who attracts the majority of their customers through inbound channels such as word of mouth, agency partnerships, and their 300+ platform integrations. Their reputation has helped drive a CAC payback period of only 14 months for the recent 6/30/23 quarter. In the past few years they’ve paired these inbound motions with dedicated revenue teams targeting the SMB & Enterprise segments.

Klaviyo plans to significantly expand internationally. Their first international office only opened in 2019 (London) and only 30.7% of revenue is outside the Americas in the six months ended 6/30/23. Their first APAC office, Sydney, just opened in 2022.

Shopify is a huge Klaviyo partner and the existing terms of their agreement run until 2029. 77.5% of 2022 ARR came from customers who also used Shopify’s platform and 10.6% of new ARR came directly from the Shopify app store. They are integrated with all of the major third party eCommerce platforms too and their platform depends upon successful integrations & partnerships with Shopify, WooCommerce, Magento, Wix, SquareSpace, and others. Also, at the time of IPO, Shopify owns 11.2% of Klaviyo shares. Their main competitors (as stated in the S-1 filing) are Adobe, Salesforce, Mailchimp, and Braze. 

Klaviyo’s recently launched Customer Data Platform (CDP) will allow customers to manage and deploy their data in Klaviyo more effectively. It’s built on the same infrastructure as their marketing application, which powered over 311 billion emails and 2.8 billion text messages in the last 12 months. Their CDP helps customers store, manage, and analyze customer data at scale with user friendly tools, advanced reporting & predictive analytics built for businesses of all sizes.

Dual class voting structure has Andrew Bialecki (38.1%) & Ed Hallen (13.9%) owning 52% of outstanding super voting shares at IPO so the Founders will hold voting control of Klaviyo’s strategic direction. Current outstanding employee RSUs will vest as super voting Series B shares (10:1) and all future grants will be Series A shares (1 voting share).

Articles cited:

Operators to Know (Locally):

My investigative powers continue to need work so apologies to the Klaviyo team I know I missed many up & coming operators internally

Key Roles To Be Hired:

If I were interviewing here are some questions I’d ask:

  • What are the biggest challenges as you transform into a public company?
  • What are the key initiatives for 2024 as a public company?
  • What are the most important roles you’ll be looking to add in 2023 // teams that need the most help?
  • What is the long term vision for the company over the coming decade?

We’re optimizing for readability here so to learn more about Klaviyo you’ll have to read the S-1. Go to the source! I’m excited to watch this team bring more growth teams in commerce and beyond into the Internet age. It’s an exciting decade ahead for this new Boston anchor company and we all applaud your accomplishments. See you around town!

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