Klaviyo should ignite SaaS IPOs
On August 25th, Klaviyo filed an S1 which is a prospectus companies issue prior to IPO. We read through it, and we believe Klaviyo is likely to restart the market for software IPO’s, so long as they look like Klaviyo (nice growth and slightly profitable). Below are some of the key learnings from their prospectus.
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 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.
The SMS offering is important, and new. “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. “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. “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. “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. “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. “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!
Large market. 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 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. 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. He makes only $78k annually and owns 38% of the business.
The business has not been efficient. Lifetime, they have generated only $0.19 of revenue for every dollar of investment, but they did recently turn profitable. The ultimate valuation here is going to be a downround, but that’s ok. Take your medicine and move on.
Sammy is the Managing Partner and Co-Founder of Blossom Street Ventures. Visit us at blossomstreetventures.com and email directly at sammy@blossomstreetventures.com. We invest in companies with run rate revenue of $3mm to $30mm, with year over year growth of 30%+. We lead or follow in growth rounds and special situations like inside rounds, small rounds, rushed rounds, corralling investors with our term sheet, cap table clean up, and extensions. We can commit in 3 weeks and our check is $1mm to $4mm. Also visit https://blossomstreetventures.com/metrics/ for always up-to-date SaaS metrics.
