Company Summary

If you’re familiar with Mailchimp, you understand what Klaviyo does. Much in the same vein as the popular email marketing service, Klaviyo provides a comprehensive marketing automation platform for businesses. The company describes its mission as empowering creators and brands to own their destiny through data-driven marketing.

While Mailchimp was founded in 2001, Klaviyo is a more contemporary player, having been established in 2012 by Andrew Bialecki and Ed Hallen. The founders noticed a gap in the market: companies had vast amounts of customer data but lacked the tools to effectively use it for personalized marketing. To address this, they built Klaviyo, a platform that unifies customer data and channels, enabling businesses to create highly targeted marketing campaigns.

Despite its relative youth, Klaviyo has amassed an impressive customer base, serving over 146,000 companies worldwide, including notable brands like Unilever, Living Proof, and Huckberry. This success is partly due to Klaviyo's focus on e-commerce and its ability to integrate seamlessly with platforms like Shopify and Magento. Klaviyo's growth has also resonated with investors. The company has raised significant funding from prominent venture capital firms, including Summit Partners and Accel, helping it expand its global footprint with offices in Boston, London, and Sydney.

Klaviyo’s leadership team, led by co-founder and CEO Andrew Bialecki, continues to drive innovation in the marketing automation space. The company’s vision is to provide the tools and playbooks for any creator to have more control and ownership, ensuring that the best products and creations can and should win.In summary, Klaviyo stands out as a pioneering force in e-marketing, offering a unified platform that leverages customer data to drive personalized and profitable marketing campaigns.

Brief

• Klaviyo provides a unified customer platform that combines data infrastructure, analytics, and marketing automation.

• The company's total addressable market is estimated at $62 billion in 2023, growing to $98 billion by 2026.

• Klaviyo is listed on the New York Stock Exchange under the ticker symbol "KVYO" and is listed at $23.27 (July 10th, 2024)

• The company has over 130,000 paying customers across more than 80 countries.

• Klaviyo's revenue grew from $585.1 million in 2022 to $427.7 million for the six months ended June 30, 2023.

• The company achieved profitability in 2022 with a net income of $15.2 million.

• Klaviyo's net dollar-based retention rate was 120% for the quarter ended June 30, 2023.

Management team

As you'd expect, Klaviyo's management team is a blend of seasoned entrepreneurs, industry veterans, and the requisite sprinkling of ex-consultants. The man at the helm, Andrew Bialecki, co-founded the company in 2012, bringing his experience from Applied Predictive Technologies and Accenture to the table. Like many successful tech founders, Bialecki identified a gap in the market and built a solution to fill it.

Andrew Bialecki, Co-Founder and CEO

Andrew co-founded Klaviyo in 2012. He previously worked at Applied Predictive Technologies and Accenture. Andrew's vision for data-driven marketing has been the driving force behind Klaviyo's growth.

Ed Hallen, Co-Founder and Chief Product Officer

Co-founded Klaviyo with Andrew. Previously worked at Applied Predictive Technologies. Also an alumnus of Applied Predictive Technologies, Ed brings a deep understanding of data analytics to the product side.

Amanda Whalen, Chief Financial Officer

Joined Klaviyo in 2022. Former CFO at Walmart International and held various roles at Walmart for over 18 years. Amanda's retail background adds a unique perspective to Klaviyo's e-commerce focus.

Landon Edmond, Chief Legal Officer

Joined Klaviyo in 2021. Previously General Counsel at Rapid7 and held legal roles at Bain Capital. Landon's experience in both tech and private equity adds a strategic legal dimension to Klaviyo's operations.

Investors

Klaviyo's journey from a bootstrapped startup to a multi-billion dollar company preparing for IPO is quite remarkable. The company has raised over $775 million in total funding across several rounds. Here's a more detailed breakdown of their funding journey and key investors:

1. Summit Partners:

   1. Led Klaviyo's $150 million Series B round in April 2019

   2. Participated in the $200 million Series C round in 2020

   3. Total investment: Approximately $250 million

2. Accel:

   1. Participated in the $200 million Series C round in 2020

   2. A prominent venture capital firm with investments in Facebook, Slack, and Dropbox

3. Accomplice:

   1. Led Klaviyo's SAFE financing in 2015

   2. An early-stage venture capital firm based in Boston

4. OpenView Venture Partners:

   1. While not mentioned in the most recent funding rounds, they were early investors in Klaviyo

   2. Focuses on expansion-stage software companies

5. Sands Capital Ventures:

   1. Led the $320 million Series D round in 2021

   2. This round valued Klaviyo at $9.15 billion pre-money

6. Astral Capital:

   1. Led a funding round in 2016

7. Shopify:

   1. Made a $100 million strategic investment in 2022

   2. This partnership also included product integrations

8. Other investors in the Series D round:

   1. Counterpoint Global (Morgan Stanley)

   2. Whale Rock Capital Management

   3. ClearBridge Investments

   4. Lone Pine Capital

   5. Owl Rock Capital

   6. Glynn Capital

   7. Keith Block (former co-CEO of Salesforce)

Klaviyo's funding journey involves early-stage, growth-stage, and strategic investors. The company's ability to attract top-tier investors and raise significant capital while maintaining profitability and founder ownership is amazing in the tech startup landscape.

Business model

Klaviyo operates on a subscription-based model, offering tiered pricing based on the number of contacts and monthly email/SMS sends. The company generates revenue primarily through:

1. Subscription fees for access to its platform.

2. Usage-based fees for additional email and SMS sends beyond the subscription tier.

Klaviyo's go-to-market strategy includes:

• A product-led growth model with a free tier to attract new users.

• A direct sales force for larger enterprise customers.

• Partnerships with e-commerce platforms and agencies.

The company's focus on customer data and personalization has resonated particularly well with e-commerce businesses, which make up a significant portion of its customer base

Partnerships

Klaviyo has developed a robust partner ecosystem that enhances its customer offerings and helps them reach a broader audience. The ecosystem includes:

1. Commerce Platforms:

   1. Major partners include Shopify, BigCommerce, Magento, WooCommerce, and others

   2. These integrations allow Klaviyo to aggregate and analyze customer data in real-time. Shopify is a particularly important partner, with 77.5% of Klaviyo's total ARR coming from customers who also use Shopify

2. Other Technology Partnerships:

   1. Over 300 pre-built integrations with platforms like Google, Meta, Zendesk, Gorgias, LoyaltyLion, Okendo, and Yotpo

   2. These integrations cover areas such as payments, order management, support tickets, subscriptions, shipping, surveys, and more

3. Marketing Agencies and Systems Integrators:

   1. Over 5,000 unique marketing agency and consulting partners referred leads to Klaviyo in 2022

   2. These partners help customers run effective campaigns using Klaviyo and provide strategic guidance

4. Developers:

   1. Klaviyo provides developer-friendly features including flexible data architecture, API documentation, SDKs, and developer tools

   2. Offers a community forum for collaboration and monthly newsletters

Shopify risk

Klaviyo's success is significantly reliant on its integration with third-party platforms, particularly Shopify, which accounts for 77.5% of its Annual Recurring Revenue (ARR). Any disruption in this integration, such as removal from Shopify's app store, could harm customer experience and delay data synchronization. The partnership with Shopify, which promotes Klaviyo and refers new customers, is crucial for its business. However, if the agreement with Shopify, expiring in 2029, is not renewed or is renegotiated on unfavourable terms, or if perceived competition strains the relationship, Klaviyo could lose customers and face operational complexities. Such disruptions could materially and adversely impact Klaviyo's business, financial condition, and operating results.

Financial Highlights

• Revenue increased from $320.8 million in 2021 to $585.1 million in 2022, representing 82% year-over-year growth.

• Gross margin improved from 73% in 2021 to 76% in 2022.

• The company turned profitable in 2022 with a net income of $15.2 million, compared to a net loss of $44.8 million in 2021.

• Klaviyo's cash and cash equivalents stood at $439.8 million as of June 30, 2023.

Competition

Klaviyo faces competition from various sources, including:

• Large technology companies like Adobe, Salesforce, and Oracle.

• Email service providers such as Mailchimp and Constant Contact.

• Customer data platforms like Segment and mParticle.

• E-commerce platforms with built-in marketing tools like Shopify.

Klaviyo differentiates itself through its unified platform approach, deep e-commerce integrations, and focus on data-driven personalization.

For additional insights into the competitive landscape, here are some key strengths and weaknesses of Klaviyo's competitors:

• Adobe: Strengths include a comprehensive suite of marketing tools and strong brand recognition. Weaknesses include complexity and high cost.

• Salesforce: Strengths include powerful CRM integration and scalability. Weaknesses include a steep learning curve and high implementation costs.

• Oracle: Strengths include robust data management capabilities and enterprise-grade solutions. Weaknesses include being less user-friendly and expensive.

• Mailchimp: Strengths include ease of use and affordability for small businesses. Weaknesses include limited advanced features and less sophisticated automation.

• Constant Contact: Strengths include simplicity and good customer support. Weaknesses include fewer advanced features and limited customization.

• Segment: Strengths include strong data infrastructure and flexibility. Weaknesses include being more suited for technical users and higher costs.

• mParticle: Strengths include excellent data integration and real-time capabilities. Weaknesses include complexity and higher pricing tiers.

In conclusion

Klaviyo is a big player in the email marketing and customer data platform space, offering a compelling alternative to industry giant Mailchimp at a fraction of its market share. While the company has yet to achieve the same level of brand recognition as some of its more established competitors, its focus on e-commerce integration and data-driven personalization appears to be a winning strategy.

With revenue growing 82% year-over-year from 2021 to 2022, and a customer base exceeding 130,000 across 80