Jun 26, 2024 · 1h 9m · news
Andrew Bialecki: Is Klaviyo the Most Under-Priced Public Company? | E1170 · 20VC with Harry Stebbings
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In this episode of 20VC, Klaviyo co-founder and CEO Andrew Bialecki shares the company's evolution from bootstrapped origins to its IPO, detailing their unique capital strategy, approach to customer segmentation, and strategic partnership with Shopify. He also discusses the transition to public market operations and his vision for automated, AI-driven software.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 20.7% of the talking time here. How this is scored →
Harry as informed peer 4.8 Guest teaching 4.3 Guest disagreement 1.8 Harry pushing back 3.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 30:05 Guest rejects MailChimp narrative
Andrew firmly reframes Harry's premise that MailChimp's departure from Shopify was Klaviyo's step-change catalyst, clarifying that strong tailwinds were already driving growth.
Hardest push from Harry ▶ 55:58 Host rejects pseudo-recurring claimHarry pushes back forcefully when Andrew claims consumer purchases behave like pseudo-recurring revenue, contrasting e-commerce transaction volatility against ServiceNow's 3-year contracts and citing Peloton.
Biggest teaching moment ▶ 18:05 Accelerator rejection revelationAndrew educates the VC host on early startup friction by revealing that despite having real users and revenue, Klaviyo was rejected by every single $20k seed accelerator program they applied to.
Harry holds his own ▶ 44:35 Host drills on 39% growth valuation gapHarry demonstrates sharp public market analysis by citing Klaviyo's 39% growth rate and challenging why the market penalizes them with multiple compression compared to lower-performing SaaS peers.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Childhood Freedom and Developing Curiosity | 4 | 2 | 1 | 1 | Harry opens with a question about formative childhood experiences and cites research regarding Norway tree-climbing regulations and childhood resilience. Andrew agrees and reflects on his childhood independence and rotating obsessions. | |
| The Original Vision for Klaviyo as a Brain | 4 | 4 | 1 | 2 | Harry cites the Collison brothers on founder obsessions and mentions prep research on Klaviyo's original database pivot. Andrew educates Harry on the original vision of building a digital brain and working backwards to marketing databases. | |
| Choosing Marketing and Empowering Product Builders | 5 | 4 | 3 | 6 | Harry challenges SMB-focused software models using classic VC arguments around high churn, low ACVs, and poor unit economics. Andrew reframes product as scalable marketing that lowers acquisition costs through built-in attribution. | |
| The Choice to Focus on SMBs Over Enterprise | 6 | 4 | 2 | 4 | Harry cites Klaviyo's quarterly metrics showing 80% growth in $50k+ ACV customers to ask how they balance enterprise vs SMB. Andrew details their approach of treating them as two distinct customer types on one tech stack. | |
| Product Marketing and the Strategy of a Single Brand | 5 | 4 | 2 | 5 | Harry asks about single-brand marketing and directly challenges Andrew on customer pushback regarding price increases. Andrew candidly shares lessons learned about establishing transparent long-term pricing trust. | |
| The Decisive Choice to Bootstrap Klaviyo | 3 | 5 | 2 | 3 | Harry asks why Klaviyo chose to bootstrap when venture funding was standard. Andrew reveals that despite having real users, they were rejected by all three $20k seed programs they applied to, prompting them to self-fund. | |
| What Early Capital Could Have Accelerated | 6 | 4 | 2 | 4 | Harry questions traditional VC assumptions by citing UiPath's slow early path alongside standard $10M ARR benchmarks. Andrew explains why taking time to get product-market fit compounds better than forcing early sales growth. | |
| Raising the Seed Round and Avoiding Fundraising Perfection | 4 | 5 | 1 | 2 | Andrew details their first $1.5M seed round on a SAFE cap and admits to naive mistakes like letting investors delay sending cash for months. Harry listens to the mechanics of their transition from bootstrapping. | |
| Scaling and the Transition to Larger Rounds | 4 | 4 | 1 | 2 | Andrew explains scaling to $50M-$60M ARR before raising a $100M round and details their early adoption of company-wide tender offers. Harry asks for actionable founder advice on employee liquidity. | |
| Partnerships and the Shopify Ecosystem | 6 | 5 | 3 | 5 | Harry presses an insider claim that MailChimp's removal from Shopify was Klaviyo's primary growth catalyst. Andrew politely rejects the step-change framing, clarifying that tailwinds already existed and MailChimp was merely an awareness bump. | |
| The Shopify Strategic Investment | 6 | 4 | 2 | 4 | Harry references Tobi Lütke's public regret regarding Stripe to ask how Shopify's strategic investment in Klaviyo came about. Andrew outlines how product, go-to-market, and financial alignment created a win-win partnership. | |
| Alignment and Transparency in Partnerships | 4 | 4 | 2 | 4 | Andrew discusses preventing partner misalignments through radical transparency on core competencies. Harry shifts to ask why Klaviyo chose to IPO during a depressed public market. | |
| Building the Buy Book and the IPO Experience | 4 | 4 | 1 | 2 | Andrew explains institutional roadshows and compares the IPO day to a wedding—lots of pomp that goes by quickly followed by a prompt return to work. Harry enjoys the humorous comparison. | |
| Being a Public Company CEO and Underoptimized Strengths | 4 | 5 | 1 | 4 | Harry asks what internal functions were successful in spite of suboptimal execution pre-IPO. Andrew uses a sprinter with bad form analogy to show how strong core product demand can mask unoptimized operations. | |
| Responding to Stock Market Valuation and Multiple Compression | 7 | 5 | 3 | 7 | Harry challenges Andrew bluntly on Klaviyo's valuation, asking why a company growing at 39% faces multiple compression compared to weaker peers. Andrew disclaims predicting stock market pricing and focuses on long-term free cash flow growth. | |
| AI Integration: Selling the Work vs. Selling the Tool | 7 | 5 | 3 | 5 | Harry introduces Sarah Tavel's thesis on selling work versus selling tools and cites debates with Jason Lemkin on AI monetization. Andrew expresses skepticism regarding adoption speed and shares his 3-part physics-inspired framework for AI. | |
| E-commerce Loyalty and the Cash Cycle | 7 | 5 | 3 | 7 | Harry challenges Andrew's claim that consumer e-commerce transactions behave as 'pseudo-recurring', citing contract differences between ServiceNow and Peloton. Andrew explains consumption dynamics and managing short cash payback cycles. | |
| Quickfire Round: Mind Shifts, Board Additions, and Storytelling | 3 | 4 | 1 | 2 | In a quickfire segment, Andrew discusses expanding into SMS, respecting Microsoft's platform strategy, and experiencing a 20% MRR hit when their largest customer left in year two. | |
| Quickfire Round: Shopify, Personal Brands, and Finding Balance | 3 | 4 | 1 | 2 | Andrew touches on why Shopify succeeded, personal founder branding, wealth perspective, and listening to history podcasts to wind down at night. Harry closes out an agreeable interview. |
Statements from this episode (33)
Bialecki: AI Surrogates Will Soon Conduct Podcast Conversations for People
“I do think we're not far off from, you know, you and I could have this conversation and it's actually neither of us that are here present. It's just, but it's us, right? It's, you know, whatever's going on in our brains kind of hooked up.”
Bialecki: Great products fail without clear use cases and value presentation
“The product could be amazing, but if you don't have a use case or can't show somebody how it's valuable, like, you can, people, ah, okay, well, they'll just turn you off.”
Klaviyo uses identical underlying technology for SMB and enterprise customers
“The funny part is the technology isn't, you know, for us, I mean, it obviously just kind of scales, It's not really all that different. The product and technology, it's really just matching up with what are the things that matter most to those folks.”
Bialecki: The best customer conversation opener is showing you are one of them
“I've always looked at, like, when you walk in a room to a customer, if you can ask them questions that show that you know who they are, that you're one of them, that's like the best, that's the best way to, you know, open up the conversation.”
Klaviyo previously experimented with a separate enterprise brand called Klaviyo One
“Where we ended up, we actually experimented with this a couple of years ago. We had this concept of, well, Klaviyo as a brand would be for our, you know for, you know, entrepreneurs, founders, you know businesses that we're scaling up. And then we'd have a sep…”
Bialecki: Single-Brand Strategy Beats Maintaining Multiple Sub-Brands for SaaS
“It's easier to just have one brand for everybody. And then to your point of product marketing, you just have to make sure, you know, whether it's digital experiences or even the, you know, the events and the things that we do for customers that you know, bifur…”
Bialecki: Klaviyo Waited 10 Years Before Making Its First Price Change
“We did our first price increase, like, basically since we, or first price change you know what was it? I guess last year and that was, like, the first one in, like, 10 years.”
Bialecki: High-Margin Software Startups Should Be Profitable From Day One
“I think software it's high margin. You know, if we're really good at building, if we get close to customers, you ought to be able to build a profitable business, you know, from the start.”
Klaviyo Was Rejected by Every $20K Accelerator Grant Program It Applied To
“We'd applied to all these venture firms Had these kind of, you know, we'll give you 20,000 dollars and it's like, you know, no strings attached, no equity you know, for the summer. And so we applied to a bunch of these when we were about six months in, and at …”
Bialecki: Entrepreneurs should limit capital raised because constraints drive creativity
“Don't take more capital than you need because the constraint You know, breeds a lot of creativity.”
Bialecki: Separating engineering and customer support early reduces startup efficiency
“If you sort of, if you go too fast and you say bifurcate those roles, and let's say that engineers never talk to customers and all of a sudden you lose all that magic and it probably makes you less efficient.”
Bialecki: Early capital would have accelerated Klaviyo's product engineering team
“We probably would have grew our product engineering team faster. I mean, it was, I kind of enjoyed Writing, you know, writing a lot of the code, building, you know, building and designing features, you know, in the early days. But I think there was a point at …”
Klaviyo Took 36 Months to Reach $1M in ARR
“For us, we started on January first of 20 12. In year one, we got to a couple thousand dollars in MRR. So say maybe 20,000 dollars in ARR. In year two, we got to a quarter of a million dollars in ARR, which was a huge jump, but we were still, you know, I think…”
UiPath Took Nine Years to Reach $480K in ARR
“I'm friends with Daniel at UiPath and I had him on the show, and I mean, he was not, I mean, slower than you, so don't mind, he was nine years to 480 K in ARR.”
Bialecki: Premature sales scaling in SaaS prevents long-term success
“I think the most challenging part of, say, a software business, SaaS business, is if you rush too fast to try to force revenue growth, sales growth, but the product market fit isn't there, There's a lot of companies that have tried that, and you just, you neve…”
Klaviyo Raised a $1.5 Million Seed Round Around $1M ARR
“We raised a million and a half dollars and we weren't super, you know formulaic about it.”
Klaviyo Seed Round Was Raised at a 20x ARR Valuation
“So, you know, I remember asking, I was like, hey, look, I know 10 X is the normal thing. Can we do 20 X? And again, we wasn't really scientific and yeah, I mean, this seed investor we were working with just said, yeah, sure. That sounds good.”
Klaviyo Scaled to $50M–$60M ARR Before Raising Post-Seed Funding
“We went like a bunch of years where we probably scaled to about, I think it was around 50,000,060 million in ARR before we raised our next rounds.”
Klaviyo used balance sheet cash for employee secondary tender offers
“I think that was our series B. I think we did ran a couple of others. Some were coordinated around like about fundraisings and some, I think were just, we had cash on the balance sheet.”
Bialecki: Founders should not worry secondary liquidity will demotivate employees
“I guess my advice is don't, I would, I don't overthink the, oh my gosh, will people be demotivated? I think it's actually, it's a good, it's a positive thing.”
Bialecki: Mailchimp's Exit From Shopify Was Not a Step-Change for Klaviyo
“I think that event, you know, we ran some analytics on this, I think, you know, a while, while ago, and there was definitely there was a bump, but I think people were surprised at how much there was kind of already these big, huge tailwinds and that, you know,…”
Klaviyo expands its Shopify partnership template into new industry verticals
“And we've actually started to take that to, you know, other verticals and other industries and use a little bit of the template.”
Bialecki: Partnerships fail when companies are not upfront about product overlap
“I think partnerships can go sideways when folks just aren't upfront with each other. What are you going to be great at? And it's actually okay if there's like a little bit of overlap, but the more you can kind of clarify that, the better.”
Bialecki: Going public gives larger enterprise customers confidence in long-term stability
“As we were working with larger businesses, larger customers we knew there was some value in folks knowing that like, Hey, we were in it for the long run.”
Bialecki: A Well-Executed IPO Roadshow Should Feel Anticlimactic
“I make the analogy that like so one, everybody talks about a road show, but the reality is, is you meet everybody, you know, three or four times leading up to that. So it's more like you're seeing people that you already know. So in some sense, the road show s…”
Bialecki: Klaviyo Raised Series A, B, and C Rounds From Single Investors
“When we did our series A, B, C, it was all one investor. By the time you get to the roadshow, you're kind of back to like these party rounds where there's going to be lots of people you're raising from.”
Bialecki: Great products sell themselves, masking underlying company inefficiencies
“I think great products really do, you know, they will sell themselves. Customers will come to them. So it can hide a lot of things that you could be better at.”
Bialecki: Future software will run autonomously without human operators
“I think so much of soft, the software of the future, it's gonna be able to, you know, play itself. We think about software that is actually, you use it better because you don't have to be the user.”
Bialecki: Klaviyo has at least 10x expansion potential remaining
“So when we think about, you know, all the people that we can help plus the other applications, plus the fact we can make them better at using each of those applications, That trifecta, I think there's, you know, at least a 10 X, probably a lot more in there.”
Bialecki: Software will sell direct outputs over tools within 10-20 years
“I think that's generally the right direction. I'm maybe a little skeptical of how fast, you know, we get there. But I do think if you fast forward, you know, 1020 years, I think there's a lot of processes where, yeah, hey, I just need the output.”
Bialecki: Cash Payback Cycle Is a Better Metric Than LTV to CAC
“I've never been as big of a fan of LTV to CAC as a measure. Cause I feel like it'd be too long term. You can have high upfront costs that sort of, it takes you a really long time to earn back. You know, when we were bootstrapping, we always thought about the c…”
Bialecki: Marketing media no longer follows a strict power law
“I used to unabashedly think that, hey, when it comes to marketing, there's only a couple of there's only a couple of mediums media types that matter. I've definitely changed how I think about that now. I mean, we added SMS as part of our product set, and now w…”
Bialecki: Founder personal brands are overemphasized and do not drive success
“I don't think it's very important. I think it's often overemphasized by founders in terms of being successful. A lot of customers, that's not what matters to them. What matters to them is, you know, can you deliver a great experience and a great product?”