- Klaviyo went public on Wednesday after raising $576 million in its IPO. Shares opened at $36.75 apiece.
- The IPO is a long-awaited step for the marketing-tech company, which was founded in 2012.
Klaviyo started as a way for merchants to sell more by stepping up their email marketing. That idea bloomed into a remarkably efficient tech behemoth that is profitable and fast growing, but it didn't happen overnight.
Eleven years after its founding, Klaviyo is now a publicly traded company. It priced shares at $30 per share in its initial public offering, raising $576 million in proceeds. It debuted on Wall Street with a pop, opening 23% above its initial price, at $36.75 per share. The opening price values Klaviyo at $11.3 billion, up from its last private valuation of $9.5 billion in 2021.
Andrew Bialecki, the cofounder and chief executive of Klaviyo, spoke to Insider from the well-appointed Secretary's Room at the New York Stock Exchange Building, on Wednesday morning.
When asked about his company's role in breaking the logjam of initial public offerings, Bialecki demurred.
"I can't say we have built the perfect company, but we try to be a role model for other companies," he said.
After a long dry spell, the stock market is once again drawing from the well of initial public offerings, with a $660 million debut from Instacart on Tuesday. It followed a successful stock flotation from the chip designer Arm, whose shares surged 25% in their first day of trading.
Many are counting on Klaviyo to whet investor appetite for software-as-a-service businesses going public. The last major company to do so was HashiCorp, a purveyor of cloud infrastructure tools which raised $1.2 billion in its December 2021 debut.
The venture capitalist Tomasz Tunguz called Klaviyo "an ideal specimen for one of the first software IPOs in the fall." "The first real SaaS IPO in 2 years will also be one of the best ones," wrote Jason Lemkin, a software-focused investor. Jeff Bussgang, a general partner at Flybridge Capital Partners in Boston, told The Boston Globe in an interview, "I'm seeing green shoots — it's definitely back on the agenda for boards."
Built different
Bialecki borderline-bootstrapped the company he started in 2012. It grew to a $1 million revenue run rate before hiring any employees or raising a cent of venture capital.
Even after it started selling equity, with a $1.5 million seed round of funding in 2015, Bialecki and his cofounder, Ed Hallen, raised as little cash as they needed and spent it scrupulously, Insider has reported. (One of the company's biggest flexes in its filing with the Securities and Exchange Commission was its cash efficiency: Of the $454.8 million in funding it's raised to date, it's spent only $15 million.)
That self-reliant streak allowed the founders to secure capital on their terms, without diluting themselves six ways to Sunday. Before the IPO, Bialecki owned 38.1% of equity, while Hallen had a 13.9% stake. According to data gathered by Jason Lemkin, those figures put the founders in the top echelon of founders of software and cloud startups with the largest pre-offering ownership stakes.
Bialecki told Insider he tried to run a "disciplined company," one of two ingredients to its success.
"For us, it was all about two things. One, pick some megatrend that you think is really durable. I think every consumer business — whether it's a store we visit in person or a store we visit on the internet, a website or mobile app — every single one of those businesses wants to get closer to their customers. They want to know them better, they want to build great relationships. They know that's going to keep those customers. It's going to be what powers their business to grow. I mean, honestly, that's a very durable trend," Bialecki said.
"So if you pick trends like that and then you just, best you can, be a disciplined company. That's been our strategy for how we've done it."
Bootstrapping had afforded the founders complete control, but it also gated how quickly it grew.
Jon Karlen, a Boston venture capitalist who wrote one of the first checks in Klaviyo, recalls early conversations with the founders when the company was "growing like mad." From 2016 to 2017, it tripled annual revenue to eight figures, according to a report in BostInno.
Klaviyo could have stepped on the gas by hiring more people and shipping more product, Karlen said, but its chief executive stalled in one key way. "He had a rule that four out of every five employees had to be engineers, because it was meant to be a product-led company," Karlen told Insider.
"He got to build the company that he wanted to run as opposed to the company that the investment world would have pushed on him, which is just gobs and gobs of growth," Karlen said.
Today the company employs about 1,500 people globally. Roughly half of its staff work at the Boston headquarters, which according to the Boston Globe, makes Klaviyo one of the largest single employers in Massachusetts.
Bialecki says a culture of ownership extends to employees. Everyone who joins Klaviyo becomes an owner through equity. And the company expects employees to own tasks that might be outside the scope of their role, for the benefit of the company. For instance, all employees take a coding class so they understand how their software works. No one is above answering customer support tickets.
"The biggest thing we talk about is you have to be willing to embrace constraints. And I've seen unbelievable creativity from folks across Klaviyo when you say, 'Hey, look, I need you to figure out this problem, but by the way, you don't get a team of 20 to figure it out. You need to figure it out,'" Bialecki said. "And it goes back to this ownership piece. I actually think people love that. They feel empowered."
The story of Klaviyo shows there's no single right way to build a tech company. It doesn't demand startups prioritize growth over profitability or have a 415 area code.
"There's a false choice here between being high growth and doing things efficiently," Bialecki told Insider. "It's not easy. And I can't say we're perfect, but it's possible."
Are you a Klaviyo insider with insight to share? Contact Boston-based reporter Melia Russell at mrussell@insider.com or by text or encrypted messaging app Signal at 603-913-3085.