The initial public offering (IPO) market is showing signs of renewed strength with the upcoming New York Stock Exchange listing of marketing automation firm Klaviyo. After nearly 18 months of subdued IPO activity due to market volatility, companies like Klaviyo, Arm Holdings, and Instacart represent a cautiously optimistic shift.
Klaviyo IPO Price Tops Range, Valuation Hits $9.2 Billion
On September 20, 2023, Boston-based Klaviyo is set to begin trading on the NYSE after pricing its IPO above the projected range. The company sold 18 million shares at $27 per share, raising $576 million in total proceeds. The offering gives Klaviyo a valuation of $9.2 billion, well above initial estimates of $8 billion.
Several large institutional investors have committed to purchasing up to $100 million each in Klaviyo shares, including BlackRock and AllianceBernstein. This early interest accounts for a sizable portion of the IPO proceeds and demonstrates confidence in Klaviyo’s long-term growth potential.
Founded in 2012 by Andrew Bialecki and Ed Hallen, Klaviyo provides marketing automation and analytics software tailored for e-commerce companies. Its platform enables brands to track customer data and send targeted, personalized marketing campaigns via email and SMS. Klaviyo serves over 100,000 businesses in more than 175 countries.
Smooth Debuts for Arm and Instacart Set Positive Precedent
Klaviyo is the third major company to test the IPO market after a prolonged lull. The successful listings of semiconductor firm Arm Holdings on the Nasdaq and grocery delivery service Instacart on the NYSE have built positive momentum.
Arm priced its offering at $40 per share, opened at $52.50 on its first day of trading on September 13, and closed at $48. That closing price represented a 20% increase over the IPO price.
Two days later on September 15, Instacart sold shares at $39, opened at $46, and closed at $43.50. While Instacart pared back some early gains, its shares still ended the first day up nearly 12% from the IPO price.
Though both companies gave back a portion of their big first-day pops in subsequent trading, Arm and Instacart shares remain comfortably above their offer prices. Their debuts suggest IPO investors’ risk appetite is returning after left reeling by the failed 2021 IPO of WeWork.
Klaviyo’s upwardly revised pricing indicates confidence it too can deliver a successful debut, bucking the recent IPO slump. With strong financials and demand from prominent institutional backers, Klaviyo is positioned to validate the recent IPO momentum.
Klaviyo’s Growth Fueled by E-Commerce Boom
Several factors make Klaviyo ripe for a warm public market reception, beginning with its role in the booming e-commerce industry. With online shopping displacing brick-and-mortar retail, marketing automation platforms like Klaviyo have become indispensable for brands.
U.S. e-commerce sales grew by 32.4% in 2020 as the pandemic accelerated digital adoption. Sales are projected to rise further to $1.2 trillion in 2025, representing nearly a fifth of all retail spending according to Insider Intelligence. This rapid shift underscores the need for data-driven marketing solutions to engage online consumers.
Klaviyo capitalized on the remote shopping surge. Revenues jumped from $105 million in 2019 to $200 million in 2020, then surged to $386 million in 2021. Its customer base grew 50% year-over-year in 2021 as brands sought effective ways to reach consumers without physical stores.
With e-commerce growth expected to continue outpacing overall retail, Klaviyo is situated to capture additional market share. Its platform empowers brands to identify high-value customers, personalize messaging, and quantify marketing ROI—critical advantages in a crowded digital marketplace.
Klaviyo Counts Marquee Customers and Competitive Moat
Klaviyo’s impressive client roster encompasses direct-to-consumer (DTC) upstarts, established enterprises like Unilever and ThermoFisher, and non-profit organizations. Customers include high-growth DTC companies like Oura, MoonPod, FIGS, and Native.
These brands rely on Klaviyo to segment audiences, automate workflows, and analyze performance data. Klaviyo’s dashboards and integration with e-commerce platforms like Shopify streamline real-time decision making and optimization.
The platform’s ease of use and automation enables marketing teams to scale campaigns and engage customers without extensive technical know-how. For fast-growth DTC brands facing stiff online competition, the ability to quickly test and refine approaches is a major advantage.
While competitors like Mailchimp offer lower priced options, Klaviyo is widely regarded as the highest quality marketing automation solution tailored for e-commerce. Its specificity has fostered strong loyalty among customers, creating a competitive moat for continued growth.
Profitability and High Margins Support Premium Valuation
Unlike many high-profile technology IPOs in recent years, Klaviyo boasts a path to profitability thanks to recurring subscription revenues and high margins.
The company recorded $15 million in net income for 2021, compared to a $12.5 million loss in 2020. Revenues carry high gross margins around 80%, while net margins exceeded 22% in the last year.
Klaviyo adopted a “land and expand” strategy that entices customers with free trials and introductory packages. As businesses integrate Klaviyo and become reliant on its data, they commonly upgrade to more expensive monthly plans unlocking additional capabilities.
With efficient customer acquisition, Klaviyo reported a ratio of lifetime value to customer acquisition cost of over 10:1. This allows the company to spend aggressively to attract new brands while maintaining profitability.
Klaviyo’s predictable revenue streams and profitability enabled it to command a premium IPO valuation exceeding 20 times 2021 sales. This contrasts with unprofitable technology firms whose high valuations faced downward pressure as interest rates rose.
New Features and Platform Build-Out Support Growth
While already the leader in its niche, Klaviyo is expanding its platform to widen its market opportunity. Since launching as primarily an email marketing provider, Klaviyo now integrates SMS messaging, web personalization, flows, and analytics.
Upcoming releases will add capabilities like behavioral targeting, testing, and additional e-commerce integrations. Geographic expansion is also accelerating, with Klaviyo opening offices across Europe and Asia to provide localized support.
On the personnel side, Klaviyo continues to scale its engineering and data science teams. It aims to remain at the forefront of marketing technology innovation through investments in AI, machine learning, and data analytics.
To support this growth, Klaviyo plans to direct a portion of IPO proceeds toward research and development. With e-commerce still in its infancy, the addressable market for Klaviyo’s technology is enormous. Its platform enhancements pave the way for greater market penetration.
Bullish Indicators Suggest Strong Investor Interest
Early readings bode well for stable trading and continued interest following Klaviyo’s NYSE debut. The company priced its offering at $27 per share, above the projected range of $24 to $26.
This upward revision reveals stronger than expected demand during the pre-IPO roadshow among institutional investors. Retail allocation was also oversubscribed, suggesting similarly high demand from individual investors.
Moreover, Klaviyo chose a modest offering size relative to its valuation, with existing investors retaining nearly 80% ownership. This leaves room for a higher share price without dangerous overvaluation.
Finally, backers like BlackRock and AllianceBernstein represent stable long-term shareholders. Their purchases of up to $100 million in shares each could counterbalance any early selling pressure and reinforce Klaviyo’s premium pricing.
Key Takeaways From Klaviyo’s Impending IPO
Klaviyo hits the public market as a profitable, high-growth SaaS firm ready to capitalize on booming e-commerce. Its IPO comes on the heels of successful debuts by Arm and Instacart, affirming renewed investor appetite for new offerings.
Yet Klaviyo differs from those two firms and many recent IPOs by its focus on a specialized vertical—performance marketing automation for direct-to-consumer brands. This creates a wide competitive moat to support premium valuation.
With e-commerce still in its infancy, Klaviyo provides mission-critical data infrastructure with a vast addressable market. Its platform innovation and geographic expansion pave the way for sustained growth and market share gains.
Assuming Klaviyo delivers the hoped-for pop on its first trading day, it would further validate the IPO window is open. And with strong financials and backers, Klaviyo looks poised to be a durable public company rather than a flash in the pan.
Its debut will be closely watched by the pent-up pipeline of private companies considering public listings after a long wait. Another smooth outing could accelerate those plans, marking a full IPO market rebound.
Jackie Haynes is a journalist and news reporter with extensive experience in covering a wide range of stories. She has a keen eye for detail and is able to uncover the most important and interesting aspects of a story. Jackie has a deep understanding of the news industry and is committed to providing accurate and unbiased reporting. She is also a skilled interviewer and is able to extract valuable information from her subjects. With her sharp writing skills and ability to make complex issues easily understandable, Jackie has become a trusted voice in the news media.