Synergy In Action: Klaviyo's IPO Triumph With Shopify's Backing

Boston-based marketing automation company Klaviyo Inc. KVYO was one of the first high-profile companies to go public last month, setting the trend for multiple initial public offerings (IPOs).  

Backed by Canadian e-commerce giant Shopify Inc. SHOP, Klaviyo has remained resilient despite the murky IPO revival backdrop. Klaviyo stock has dropped by 3% since its market debut, compared to the grocery delivery platform Instacart's 24.4% decline so far. 

"Klaviyo is a shining example of the outsized impact Shopify's app and partner ecosystem can have on the next generation of commerce solutions for independent brands," Shopify President Harley Finkelstein said. "Klaviyo has become invaluable to hundreds of thousands of merchants to help them better understand their customers and engage them in highly personalized ways across so many touchpoints. Klaviyo's success has been astounding, and we're excited to take this next step in our already robust partnership to make it even easier for Shopify merchants to grow their businesses."

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Successful IPO 

Klaviyo listed its shares at an IPO pricing range of $27-$29, but the stock opened at a premium on the first trading day at $32.06. The marketing automation startup targeted a fully diluted valuation of approximately $9 billion, slightly lower than its $9.5 billion valuation in 2021. 

While initially focusing on serving online businesses in the e-commerce sector, Klaviyo has witnessed increasing demand from companies in various other industries, including restaurants, travel, events and entertainment. The startup's total customer base exceeded 130,000 as of June 30. 

According to its prospectus, Klaviyo has achieved substantial revenue growth, with a 51% increase in the latest quarter bringing its revenue to $164.6 million. For the 12 months ended June 30, Klaviyo's revenue rose 56.5% year over year to $585.1 million, with a dollar-based net revenue retention rate of 119%. 

The company has transitioned to profitability, reporting a net income of $10.9 million — a significant turnaround from the $11.7 million loss reported in the previous year.

Founded in 2012, Klaviyo rose to the ranks of a unicorn with a pre-IPO valuation of $9 billion. Nonetheless, retail investors who missed out on Klaviyo pre-IPO can invest in similar promising marketing automation startups like AppMail for just $500. 

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Backed by Shopify 

Shopify stands out as one of Klaviyo's most significant supporters and key business partners. The e-commerce software provider holds approximately 11% of Klaviyo's shares and made a substantial $100 million investment last year in August. 

At the end of 2022, Klaviyo reported that roughly 78% of its annualized recurring revenue, which represents the value of its active paid subscriptions, originated from customers who are also Shopify users.

"We love working with the market-leading platforms," Klaviyo CEO Andrew Bialecki said, "When we decided in the early days we were going to focus on retail businesses, consumer businesses first, we said who are the best platforms out there, the most innovative. Obviously, Shopify was at the top of that list."

As a result of the partnership agreement, Klaviyo assumed the role of the preferred email solution provider for Shopify Plus and gained early access to upcoming Shopify development features, facilitating the rapid advancement of essential technologies aimed at assisting merchants in adapting to recent changes in online marketing. 

Given Klaviyo's already established presence in the Shopify App Store, this partnership is expected to significantly improve prospects for merchants to enhance customer relationships within a constantly evolving marketing landscape.

"Our goal has always been to understand our customers — and their biggest challenges — and build the most loved product that solves those challenges," Bialecki said. "Partnerships with leading platforms like Shopify that share our values and mission are crucial to how we help solve those challenges creators and brands face. We're excited about what this continued partnership represents for our customers."

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