The Exchanges

Q Pre going public. What were you successful in spite of?

A Oh man, there's so many things that were under optimized. We did a lot of things, right. But, um, I mean, across the board, like we weren't super rigorous on maybe how we Built software. I mean, it was obviously scalable and secure and all this kind of stuff, but in terms of building, you know, I don't know, long-term product visions or, you know, a lot of the way we, I don't know, some of the ways that some of our marketing programs were, we were just figuring it out at the time. I think great products really do, you know, they will, they will sell themselves. Customers will come to them. So it, it can, it can hide a lot of things that you could be better at. Uh, I think what's been great though, the analogy I always use is, it's like, imagine you're like a sprinter, and imagine somebody, you know, is running the hundred meter dash, and they run it, and they have terrible form, but their time's pretty good. Or imagine that they run it, and their time's good, but their form is great. Like, you'd rather be the person that has kind of, okay, their, their arm is kind of hanging out to the side, and they could actually probably go faster, and I always felt like that was, you know, uh, I mean, we're constantly working on that stuff, but that's stuff that we've, You know, we had these opportunities that were right there, and I think as we, you know, in the run-up to becoming a public…

AI assessment note: “we weren't super rigorous on maybe how we Built software”

Q When you think about the future and you think about expanding the free cash flow and you think about expanding on the efficiency and becoming better and better, what are you most excited for? Like, if we put forward the, like, how does it tan acts from here? How does it tan acts from here, Andrew?

A Oh, there's so much. I mean, there's two basic dimensions for us. One is, um, I think every consumer business should be running, building, growing on top of Klaviyo. We have this picture that we show from time to time that, you know, if you, um, feel night when, um, There's this great line in his book where he talks about seeing somebody wearing a pair of, you know, Reeboks or something, and he just gets upset. And so we talk about that a lot, that, like, we kind of just get upset when we see other people using software that's not ours, um, you know, not because of ego so much, but just because we think we built such a great product, and it's only going to get better. So I think there's, there's millions of businesses around the world, not just inside of retail e-commerce, all of, like, the consumer economy that would benefit from Klaviyo. And then on top of that, man, the pro what we're helping them solve today, uh, you know, with marketing and messaging and storing data and understanding it is great, but there's so much more that we can do. We think about that in two dimensions. There's so many other interfaces between a business and consumer, uh, that we can help where we can make that a better, richer experience. And then also, you know, when it comes to machine learning or, you know, artificial intelligence, uh, I think so much of soft, the software of the future, it's gon…

AI assessment note: “Oh, there's so much. I mean, there's two basic dimensions for us.”

Q I was thinking about how to make this show as different as possible. I think there's a lot of things in our early years which shape who we are today. What do you think was the most impactful thing in your early years that shaped you most that you maybe haven't shared before?

A I'll say two things. One is I remember I grew up on a, you know, kind of in the suburbs and on a kind of a small street, and it's interesting. I think a lot about my parents both worked and I was allowed to just roam around the neighborhood and You know, I remember there were no cell phones, so it was just kind of be home at five or six and you just had like total freedom. I remember my parents both work went to, you know, school, uh, or went to work early. So we just walked, you know, by the time we were six or seven, we just walked ourselves to school and would just hang out before the bell rang. So I think that kind of independence and just go, go explore things and figure things out, um, was awesome. And it's actually interesting. I wonder if that's something that we're gonna be able to carry forward to, you know, our kids, or if that's like, you know, allowed anymore.

AI assessment note: “that kind of independence and just go, go explore things and figure things out”

Q in, you know, prior years. Like, Klaviyo's brand, generally, I think is, like, dramatically underestimated and less known, and then you speak to this segment that you are just adored. But there was one thing that customers didn't love, which was pricing increases, and I just wanted to hear your thoughts on what were some lessons from that, and how you think about how to do it the right way?

A Oh man, so, uh, pricing is a hard, uh, topic. It's funny, we always thought about we're gonna build, you know, we're gonna build great products, we're gonna deliver awesome experience, and pricing, I mean, for the first Five, six years ago. We're like, ah, it'll just kind of figure itself out. I think our tenants on pricing are a couple is we, we, one, we try to align as much as possible pricing to the, you know, the value that we drive. That's why we, you know, we established this metric Klaviyo attributed value, like kind of revenue you get from the, you know, the marketing and messaging you do with Klaviyo and try to make it really clear to folks like that. There's really good return on investment. Um, so that's one. I think, like, getting those pricing axes right. And then over time, you know, as we've added more features, more functionality, and we've increased that, you know, that revenue, um, you know, we've just really, we did our first price increase, like, basically since we, or first price change, uh, you know, uh, what was it? I guess last year, um, and that was, like, the first one in, like, 10 years. So I think what we learned from that was, Gosh, you have to kind of, you have to establish this trust with customers of like, well, here's how pricing is going to work and how to think about that over the long run. And, uh, it was great. I had a lot of conversations w…

AI assessment note: “what we learned from that was... you have to establish this trust with customers”

Q Do you think Klaviyo would have been successful if you had raised a five on 25 seed round? And would you have done things differently?

A I would like to think we wouldn't have done things differently, but I'll tell you the, I, I, this is my rec, uh, advice to a lot of entrepreneurs is don't take more capital than you need because the constraint You know, breeds a lot of creativity. You know, my routine in the early days was I'd wake up, I'd log into our, you know, our help desk, our support software. I'd answer customer questions for an hour or two or sometimes a couple of hours if, you know, there was some, some real issue, and then I would get to coding. I always felt like that was a great pattern because if there was some painful problem with our product, some feature that was missing or some, some bug, I mean, that was obviously the first thing I was going to fix that day because it meant the next day I wouldn't have to spend all my time answering questions about it. And that viral loop of customers to code to back and forth was awesome. So there's things like that, that you just learn how to do that. I worry if, you know, if you, 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. So yeah, I don't know. I'd like to think that we would have done it the same way. And we did once we, Actually raised some venture capital at that point. We were just like, lo…

AI assessment note: “I would like to think we wouldn't have done things differently”

Q You mentioned the final one before we do a quick fight. I love this. You mentioned the deflationary element there, kind of, with the productivity gains. Klaviyo outperformed HubSpot last quarter. I guess my question to you is like, is the economy less bad than people think? You know, are people missing something about the economy when you look at How consumers are actually buying, behaving, transacting?

A From what we've seen from our, uh, view of the consumer is, I think people are being more, uh, Thoughtful about how they spend, but interestingly, and we, we shared this stat last, you know, last year, we're finding that more and more consumers are building deeper relationships and more loyal relationships with the businesses and organizations and brands that they love. So there's this interesting thing going on where, well, consumers may be more thoughtful about spending overall, they're tending to concentrate it in a, you know, in a handful of companies that they really love. And I think that's, I think that's interesting. I think that's, that's, it's a little bit, an interesting lens on the economy is that if you're a business, it's really about how do you, uh, deliver great experiences to the customers that you have? And once you acquire somebody, how do you make sure you, you know, also go deep with them? I've always thought it's interesting, you know, in the world of, uh, retail and e-commerce, it's still, even, even for digital, Uh, for e-commerce online, there's still a very traditional retail mindset of, well, I drive traffic. It's not foot traffic. It's web traffic. I convert some fraction of it. And that's, that's the basic funnel of my business. I think increasingly a lot of, a lot of those businesses are recognizing, well, that's actually, it actually can look almo…

AI assessment note: “consumers may be more thoughtful about spending overall, they're tending to concentrate it”

Q Can you talk to me about building the buy book in the process? You've got to go out and you've got to sell to institutions. We mentioned selling and marketing earlier and storytelling. It's a different story you need to tell when you're building that buy book on going public. How was that process? And what did you learn?

A I make the analogy that like, uh, 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, it's more like you're seeing people that you already know. So in some sense, the road show should feel You know, if I think done well, um, it's a little anticlimactic, hopefully. That's one part is you're meeting folks, but then along the way, I've always subscribed to like, you, you will get the investors that you deserve. Um, and so if you are clear about what you want to do, uh, with your business and, uh, you know, for us, that's, we're going to be long-term oriented. We're focused on high growth, but doing it efficiently. We're going to be products led. We're going to get close to customers. We have these ambitions around, you know, being the brain for business and all these other things, all these other applications we want to build. I think if you're clear about what you're, what you're gonna focus on, both in the short and long run, um, you'll find folks that, uh, you know, line up with that, and that's actually the best thing, because what you, you know, I felt this with our private investors and public investors, you want everybody to know where you're aiming and there are no surprises. So anyways, that, I think that's how we thought about building up the book, and then, yeah, it's interestin…

AI assessment note: “if you are clear about what you want to do... you'll find folks that line up”

Q How important is it for founders to have personal brands?

A I think it's something you can decide if you want or not. Um, it's never been a big priority for, you know, myself or my co-founder Ed. I think where it's most interesting is if you feel, we really believe in paying it forward. I've worked with so many great people that have been mentors to me. I often think of personal brand as you can share what you've learned, and then people can decide what they like or don't like, and they can borrow from that. Um, so I think if you, if your goal is to, you know, pay it forward to others, that's a great reason to have it. And then there's probably certainly a halo effect of, you know, folks will say, oh, that's great. Well, I'd love to spend more time with that person. And, you know, hey, maybe we'll join forces, but I don't think it's, 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?

AI assessment note: “I don't think it's very important. I think it's often overemphasized”

Q there's no way you could afford the cost base, but I'm just going again. I am a venture investor for a living and challenging our assumptions where it's like, Hey, the best really hit ten million ARR in 18 months. That's kind of the core benchmark of what really great is. And I just look back at some of the best businesses and I'm like, fuck, are we wrong completely?

A If you know what you want to build and you've got a good plan, the capital is really helpful. You can go faster. But we've, you know, we probably could have gone faster if we had invested more. But I think there's some real magic in taking your time to get the product market fit right, really, you know, build up that customer love we talked about, because that really does compound and snowball. 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 never really get it great. I mean, there's a couple that figure that out, but that's why I think a lot of these companies that, you know, end up, you know, building really, really enduring and build great, you know, community and product market fit, it's because they took some time to get it right, and then really believed in the laws of compounding that, yeah, hey, if I can really solve this well for one person, that's okay. I mean, there are thousands or millions of other customers, in our case, businesses out there, That don't look all that different, and yeah, then we can take it to them.

AI assessment note: “there's some real magic in taking your time to get the product market fit right”

Q like blossoming partnership, amazing growth. You have the ability to go public. And I mean, thank fuck for entrepreneurs like you, Andrew, because as a venture investor, I was sitting there going, God, who's going to go out in this market? And then respectfully is like, I will. I'm like, great. Why did you decide to go public when you did when, you know, seemingly it was a bad market?

A You know, we try to take a very long view. Uh, you know, I used to tell, uh, you know, our folks at Klaviyo, uh, and even external investors, I was like, because people ask all the time, when will you go public? I said, look, you know, I know we'll get to 20, 30, You know, we'll have grown, we'll built a great business, great products. We'll delight a lot of customers. I know we'll be a public company, but I probably won't really remember what year it was. So it'll be, it'll be, you know, so it won't be, it's not gonna be a long time, but it's gonna be somewhere in this, like, you know, early 20 twenties. So we kind of, we did that and we're like, well, we know it's gonna be at some point. And I've always had this belief that if you, if you know something's coming and it's gonna be a bunch of work, like you might as well just, you might as well just do it. Um, So a big part of it was we were just ready. We knew we, uh, we knew we were in good shape as a business and, uh, and we did feel like there were, you know, we were, as we were working with, uh, larger businesses, larger customers, um, we knew there was some value in folks knowing that like, Hey, we were in it for the long run. And, uh, I think that's actually kind of played out. Like I've talked to a lot of folks now and they said, Hey, look, it's great to know, you know, that you guys are, I mean, you really are, uh, you…

AI assessment note: “A big part of it was we were just ready.”

Q Andrew, what did you learn about that cash cycle? Cause I find it really hard to, to try and understand as an investor because it's highly variable and year one is very different to year three when you have a brand in an ecosystem and maybe the cash cycle's What were your big lessons from that cash cycle and how it changed over time?

A For us, it was always about just understanding it and then trying to do what we can to minimize it. Um, you know, so I'll give you one example where, uh, that was really helpful to us. You know, when we, uh, started working with a lot of marketing agencies and one of the things we found is, uh, just from a business perspective, it was actually You know, not only could we help them grow their business in terms of offering services on top of Klaviyo, but when they'd refer business to us, that was a great model, uh, where we could, uh, we could pay them for referring business, but we shared in like, you know, the, the, but the cash cycle was very fast. Cause it wasn't, you know, the same thing where you, you know, you pay a sales rep and you pay them all up front and you just have to amortize that out. In this case, we could sort of pay them as, you know, as a customer grew with us over a set period of time. So there are all these things where we would look at what, um, you know, what were strategies, you know, for marketing or sales or some of these partner plays that would allow us to minimize that. And that's part of, you know, when we thought about the capital required to grow Klaviyo is if we could, if we could keep that low, then we wouldn't, we could grow really quickly and wouldn't have these big capital needs in order to fuel that growth.

AI assessment note: “it was always about just understanding it and then trying to do what we can to minimize it.”

Q prep beforehand. I heard that the Klaviyo business was not, uh, always what it is today, and what I mean by that is I heard it was a database for analytics, and it's kind of taken a couple of iterations to get where we are. How do you think about the importance of like early vision, sticking to that vision, and what you start with not being what you are?

A When we started, uh, I, I will, We, my co-founder and I, we wanted to build something that wasn't just kind of a feature or a small app. We wanted to dream big. And so I think we kind of had this north star of, well, gosh, wouldn't it be really cool if you could take a person, you know, like the essence of you or me and take, you know, kind of our, our surrogate. Now we talk about AI. It's like your agent. And what if you can hook that up to the internet? So, you know, instead of just, you know, the internet being, you know, these fiber optic network, you know, where we can pass around images or text or video. What if it's like you could pass around Me. 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, in our brains kind of, uh, hooked up. Um, so we knew that that's what we wanted to build. And then it was a little bit of a work backwards. You know, my co-founder Ed is very pragmatic on like, okay, Andrew, but like what's valuable to somebody today, right here, right now, it kind of pulls me out of the clouds. And, um, Yeah. And so, I mean, we started out and we said, okay, well, you know, if you're gonna, you know, gonna connect somebody to the internet, then you probably had better build some, something that repres…

AI assessment note: “we kind of had this north star... then it was a little bit of a work backwards”

Q I love that. What was the second element you mentioned there?

A It's funny, um, I was, I was really big into sports as a kid, um, but I also had this, you know, dream when I was five or six that I wanted to be a meteorologist, uh, So I remember I went to this, uh, this spelling bee with, you know, um, uh, you know, probably like the high school or something like that. And I was really nervous because I wanted to meet the guy that was moderating it. And he was the, the weatherman for the local news, you know, for the local TV news station. And, uh, and as I remember, he wrote a note for me that was like, uh, you know, Hey, I hope your future is bright or sunny or something, something funny like that. But I think the thing was, I just, I remember every few years I had like a new passion. You know, so one was, you know, it was like, ah, I'm really into weather, and it was tracking hurricanes and stuff like that. And then, uh, I remember, uh, you know, I can't remember what movie it was, it came out, I think it was Outbreak, and there was like, it became, oh, I'm really big into viruses and virology and biology, right? And then Jurassic Park came out, and now it's like, oh, okay, it's all about, you know, dinosaurs. So I think this idea of just kind of bouncing around and letting your mind wander, um, I mean, that's definitely something that I've always enjoyed, but just having a lot of these passions and kind of going deep for a year or two, a…

AI assessment note: “this idea of just kind of bouncing around and letting your mind wander”

Q You mentioned the final one before we do a quick fight. I love this. You mentioned the deflationary element there, kind of, with the productivity gains. Klaviyo outperformed HubSpot last quarter. I guess my question to you is like, is the economy less bad than people think? You know, are people missing something about the economy when you look at How consumers are actually buying, behaving, transacting?

A From what we've seen from our, uh, view of the consumer is, I think people are being more, uh, Thoughtful about how they spend, but interestingly, and we, we shared this stat last, you know, last year, we're finding that more and more consumers are building deeper relationships and more loyal relationships with the businesses and organizations and brands that they love. So there's this interesting thing going on where, well, consumers may be more thoughtful about spending overall, they're tending to concentrate it in a, you know, in a handful of companies that they really love. And I think that's, I think that's interesting. I think that's, that's, it's a little bit, an interesting lens on the economy is that if you're a business, it's really about how do you, uh, deliver great experiences to the customers that you have? And once you acquire somebody, how do you make sure you, you know, also go deep with them? I've always thought it's interesting, you know, in the world of, uh, retail and e-commerce, it's still, even, even for digital, Uh, for e-commerce online, there's still a very traditional retail mindset of, well, I drive traffic. It's not foot traffic. It's web traffic. I convert some fraction of it. And that's, that's the basic funnel of my business. I think increasingly a lot of, a lot of those businesses are recognizing, well, that's actually, it actually can look almo…

AI assessment note: “people are being more thoughtful about how they spend”

Q I love that. What was the second element you mentioned there?

A It's funny, um, I was, I was really big into sports as a kid, um, but I also had this, you know, dream when I was five or six that I wanted to be a meteorologist, uh, So I remember I went to this, uh, this spelling bee with, you know, um, uh, you know, probably like the high school or something like that. And I was really nervous because I wanted to meet the guy that was moderating it. And he was the, the weatherman for the local news, you know, for the local TV news station. And, uh, and as I remember, he wrote a note for me that was like, uh, you know, Hey, I hope your future is bright or sunny or something, something funny like that. But I think the thing was, I just, I remember every few years I had like a new passion. You know, so one was, you know, it was like, ah, I'm really into weather, and it was tracking hurricanes and stuff like that. And then, uh, I remember, uh, you know, I can't remember what movie it was, it came out, I think it was Outbreak, and there was like, it became, oh, I'm really big into viruses and virology and biology, right? And then Jurassic Park came out, and now it's like, oh, okay, it's all about, you know, dinosaurs. So I think this idea of just kind of bouncing around and letting your mind wander, um, I mean, that's definitely something that I've always enjoyed, but just having a lot of these passions and kind of going deep for a year or two, a…

AI assessment note: “this idea of just kind of bouncing around and letting your mind wander”

Q it too, and I'm going, I don't get it either. And, and I guess my question is like, how do you respond to that? There are not many freaking companies growing at 39% with your revenue. And with your numbers, can you help me a naive person understand why you are priced the way you are and why you see multiple compression when maybe others don't that have worse businesses?

A I don't know the answer to the stock market. Um, probably in a different line of work if I did. Um, I, we've always looked at it, market cap, share price, all this kind of stuff will take care of itself. Companies fundamentally get valued on, you know, either revenue growth and then ultimately, you know, um, free cashflow or, um, profitability. And if you just keep growing those things, then you're in good shape. And I think we think about, well, what, what makes us believe that that will be true long into the future. I think there are Products that are core to a business, and it's either because for a particular function or for an area, they're kind of a tent pole, um, or it's because, hey, you know, you're, you're core to, you know, how a business drives growth, how, you know, for our customers, how they drive revenue. What I've always been excited about for us is we're like right in the middle of both. Uh, when you're storing all the data for a business, you know, when you're kind of the center of how they think about marketing, And then if you can tie that back to actual results, like customers are gonna be pretty happy with that. And then ultimately over time, like that's gonna lead to more customers, you know, revenue growth. And if we do that, I think ultimately like you build up a track record that, you know, folks, um, externally can see and, uh, everything kind of tak…

AI assessment note: “I don't know the answer to the stock market. Um, probably in a different line”