The path to Klaviyo’s growth is firmly grounded in its bootstrapped beginnings. Co-founders Andrew Bialecki and Ed Hallen shared an entrepreneurial drive and a desire to build a durable growth business – one that could help other entrepreneurs succeed. They founded Klaviyo in 2012 and bootstrapped the business for three years, writing every line of code, connecting with customers on a daily basis and constantly experimenting to ensure product-market fit. This relentless focus on customer and product helped Klaviyo hone-in on its north star metric: sales their customers created with Klaviyo, what the pair called “owned revenue.” Summit’s partnership with Klaviyo began in early 2019, and the company has since scaled to serve more than 60,000 businesses worldwide, delivering more than 100% customer growth in 2020 and helping to drive billions of dollars in owned revenue for brands large and small.
Leveling the Playing Field in e-Commerce
Helping growing companies grow faster
“We started Klaviyo to accelerate a trend we saw developing in e-commerce. As customer relationships shifted from the physical world to online, brands had a chance to build direct relationships with consumers instead of selling through larger retailers or marketplaces – neither of which gave them access to consumer data or the end customers. Distribution and customer communication were vulnerable to the rise and fall of third-party channels and constantly changing rules and algorithms. With Klaviyo, we wanted to level the playing field, giving brands of all sizes a way to own their data and customer relationships and grow through direct relationships and personalized experiences they controlled. By focusing on what we call owned channels – email and SMS – brands have an opportunity to grow on their own terms and build stronger, more authentic relationships with customers directly and at scale.”
Find Your North Star
Defining and reinforcing your organizational purpose
“From our earliest days – even when we were a team of five or ten – we would talk about the kind of company we wanted to build, and it always came back to customer firstness, technology and culture. Being “customer first” is about doing what’s best for the customer, not what’s easiest for the business. We asked ourselves, ‘What matters to our customers? What’s their north star?’ What is a metric we can stare at, focus on, year after year – something that’s never going to change? We knew it had to be clear and it had to be quantifiable.
Businesses only care about one thing – growth. They may put the profits from that growth towards other objectives, but first they have to grow. So, we decided to measure and focus on the revenue customers created using Klaviyo – and make that our north star. We put a lot of effort into measuring revenue attributable to our product accurately – and we started every weekly all-hands with a readout of how much revenue customers created in the past week. When we started talking about what we were enabling as owned marketing, it was natural to label our metric as owned revenue. It’s revenue the business generated by owning their data and customers. They didn’t depend on another retailer or marketplace to help them. Owned revenue is the only revenue metric we look at. We celebrate owned revenue milestones and trust that if our customers are successful, we will be too. For instance, 2020 was a great year, our customers more than tripled owned revenue.”
All Customers Are Human
Embracing the consumerization of the enterprise experience
“The most successful consumer brands are focused on delivering personal and authentic experiences to their customers through technology. We’re seeing the same trend with businesses selling to other businesses. This is the consumerization of the customer experience. This was inevitable, but it’s accelerated now that our home and workplace have merged. It’s harder to accept unintuitive products or having to call someone to buy something when we have all these apps for our personal lives that are easy-to-use and on-demand. The user of the product or software is just as important as the person buying it. Customers are just people. Klaviyo is known as software for B2C businesses. I think we’ll find most B2B businesses shift to acting like B2C businesses because it’s what their customers want. So by saying we’re for B2C, we really believe we’re building for everyone.”
How and when to consider an equity partner
“It took us three years to build out product and get to profitability. We didn’t need investors and having that control was really important to us. But I remember thinking, ‘Now that we’re not focused on survival, what do we do?’ We had this core belief about always making the most of a situation. We were fortunate to be able to start a company and now it’s doing really well. The obvious choice for us was to double down and dream bigger. And to do that, we felt it’d help to have some folks who’d seen this movie before and could help us make fewer mistakes. We were also used to looking at our bank account and seeing it flatline because we’d invest every dollar back into the business. We had a lot of ideas we wanted to try out, so the extra capital was a way to build those ideas sooner.”
“In thinking about who to work with, we knew we were in a privileged position. Just as we were with the Klaviyos we hired, we could be very selective. I wanted to work with folks who shared our beliefs in customer firstness, leading with product and investing in culture. And, I wanted people I could call to act as a sounding board for our ideas. We’ve been lucky to find those folks, and it’s made scaling Klaviyo easier and more fun.”
Klaviyo helps more than 60,000 businesses worldwide own their growth, making it easy for brands large and small to use their own data to build stronger, more authentic relationships with customers directly and at scale. In 2020, Klaviyo raised $200 million in series C funding to accelerate continued rapid growth and further fuel expansion of its team of more than 500 employees.
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Stories from the Climb
At Summit, it’s the stories that inspire us – the problems being solved and the different paths each team takes to grow a business. Stories from the Climb is a series dedicated to celebrating and sharing the challenges of building a growth company. For more Stories and other Summit perspectives, please visit our Growth Company Resource Center.
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