What we learned from Klaviyo's IPO
In September of 2023, Klaviyo went public. At the time we read through their prospectus, which had a lot of great learnings for SaaS companies. Below we share them again.
What they do. Klaviyo allows companies to bring their first-party data together and use it to create and deliver highly personalized consumer experiences across digital channels. “This enables business to send the right message at the right time across email, SMS, and push notifications, more accurately measure and predict performance, and deploy the specific actions and campaigns that drive the highest impact.” They have 130,000 customers and have assembled 6.9bln consumer profiles at their customers. Personalized email is the core product.
Text messaging still very much matters. “We have seen notable success in the expansion of our platform with our SMS offering, which launched in 2021. The number of customers that use our SMS offering represented 14.8% of our customers as of June 30, 2023”
To unify data, you need integrations, and in our view not enough attention is given to how important integrations are to every business. “we offer over 300 pre-built integrations and open APIs to bring additional profile and event information into Klaviyo.”
Pricing is volume and product based; volume is Klaviyo’s key value metric. “Our subscription plans are tiered based on the number of active consumer profiles stored on our platform combined with the number of emails and SMS messages sent. As our customers’ businesses grow, they utilize more consumer profiles and send more emails and SMS messages, which naturally increases their usage of our platform. Our revenue also expands when our customers add additional channels, such as SMS, or when their other brands, business units, and geographies start using the platform.”
All employees own equity. “Everyone at Klaviyo are owners, both in a literal sense of owning equity in our company and also in how we operate.”
Customer retention is strong and improving; 100%+ takes you to the holy land in our view. “Our NRR was 111%, 115%, 119%, 121%, 121%, 120%, 119%, 119%, 119%, and 119% as of March 31, 2021, June 30, 2021, September 30, 2021, December 31, 2021, March 31, 2022, June 30, 2022, September 30, 2022, December 31, 2022, March 31, 2023, and June 30, 2023, respectively.”
Inbound and self service drive the business, as this is a smaller ACV product. “we attract the majority of our new customers through inbound channels, such as word-of-mouth, agency partnerships, and platform integrations. Many of our customers come through our self-service channel by simply signing up for our platform without the need for a salesperson’s involvement.”
Nice growth, and just turned profitable. A trend to profitability is becoming a requirement for M&A or IPO. “We grew our revenue 62.7% year-over-year, from $290.6 million in 2021 to $472.7 million in 2022. Our net losses for 2021 and 2022 were $79.4 million and $49.2 million, respectively. In 2021 and 2022, our operating cash flow was $(22.7) million and $(23.6) million.” However, in the past 6 months Klaviyo turned a profit!
They play in a large market, but doesn’t everyone. Klaviyo focuses on retail. “Our estimated serviceable addressable market opportunity within this vertical is over $16 billion.”
Moving from SMB to mid-market and enterprise as a way to grow. “As of June 30, 2023, we had 1,458 customers generating over $50,000 of ARR, representing growth of 94% year-over-year. Going forward, we expect to continue to grow our mid-market and enterprise presence as we further invest in our outbound sales team and add new product capabilities.”
To be this big, you’ve got to sell internationally. “We have seen great success in these international markets, as sales outside of Americas represented 29.3% of our revenue in the year ended December 31, 2022 and 30.7% of our revenue in the six months ended June 30, 2023.”
Even successful companies like Klaviyo did cuts, so don’t be shy about it. They have 1548 employees today. But “in March 2023 we announced a reduction-in-force affecting approximately 8% of our global workforce.”
The CEO is a co-founder; our data shows 67% of CEO’s are the founder in SaaS. He makes only $78k annually and owns 38% of the business.
The business has not been cash efficient, but the trend to profitability is what matters for exit. Lifetime, they have generated only $0.19 of revenue for every dollar of investment, but they did recently turn profitable.
Thank you for reading. Sammy is the Managing Partner and Co-Founder of Blossom Street Ventures. Visit us at blossomstreetventures.com for more blogs and SaaS metrics.
