The Exchanges

Q I totally agree with you. How much were you adding revenue when you raised your first money?

A It's probably a little bit right around when we hit one million in ARR, and the reason we did it was, uh, we were self-funding, bootstrapping. Uh, we were hiring folks, and you know, Ed and I, we used to look every, every week at our bank account, and we'd literally just pull it up. You know, it's a little bit like looking at your checking account, but it was just for a business. And there was this big sawtooth pattern of, you know, we kind of bump up, you know, day by day over the course of the month, and it would drop to almost zero when we paid our server bills and, you know, ran payroll. And so this big sawtooth pattern. And so we would literally forecast out when we could hire the next person based on how much we thought the business would grow, like in the next month. So we, we tell people, it's like, Hey, look, we'd really like to work together, but I actually need you to wait like six weeks because we just, we may not have the cash to fund this. That seemed like a really bad idea. So that's when we said, you know, it'd be really nice if we had a seed round at the time was maybe, you know, a million, maybe two million if it was bigger. And we said, you know, if we raise the seed rounds, boy, then we wouldn't have to worry about this problem anymore. And, uh, yeah, that's, that's, that's the reason that we ended up raising it.

AI assessment note: “It's probably a little bit right around when we hit one million in ARR”

Q How quickly did you get to a million in ARR?

A 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 that was around the time where we felt like, okay, we could maybe hire, you know, uh, one or two people. And then it was until the end of year three that we got to a million dollars. So that was 36 months where I think for 80% of it was just two of us. And then I think we then had the first couple, uh, you know, a couple of folks joined, joined with us.

AI assessment note: “it was until the end of year three that we got to a million dollars”

Q I totally agree with you. How much were you adding revenue when you raised your first money?

A It's probably a little bit right around when we hit one million in ARR, and the reason we did it was, uh, we were self-funding, bootstrapping. Uh, we were hiring folks, and you know, Ed and I, we used to look every, every week at our bank account, and we'd literally just pull it up. You know, it's a little bit like looking at your checking account, but it was just for a business. And there was this big sawtooth pattern of, you know, we kind of bump up, you know, day by day over the course of the month, and it would drop to almost zero when we paid our server bills and, you know, ran payroll. And so this big sawtooth pattern. And so we would literally forecast out when we could hire the next person based on how much we thought the business would grow, like in the next month. So we, we tell people, it's like, Hey, look, we'd really like to work together, but I actually need you to wait like six weeks because we just, we may not have the cash to fund this. That seemed like a really bad idea. So that's when we said, you know, it'd be really nice if we had a seed round at the time was maybe, you know, a million, maybe two million if it was bigger. And we said, you know, if we raise the seed rounds, boy, then we wouldn't have to worry about this problem anymore. And, uh, yeah, that's, that's, that's the reason that we ended up raising it.

AI assessment note: “right around when we hit one million in ARR”

Q I almost think it's much easier to think about it in those siloed different mindsets. But then when you think about, uh, you know, a billboard, for example, where you've got to put one on it or, you know, an advert online, whether it's, you know, a Google ad or an Instagram ad or whatever it is, you've got to choose with each destination. How do you think about that?

A 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, um, for, you know, entrepreneurs, founders, you know, uh, businesses that we're scaling up. And then we'd have a separate brand for our large enterprise businesses. Um, and we call that other brand Klaviyo one. And the concept was, well, Hey, we're gonna have, we have this, you know, we have this great database. We have all these like applications, like be everything you need in one spot. Uh, but when we realized I got some advice that it's like, you know, that's actually kind of confusing. 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, you know, bifurcate those. So you've got a path for everybody. I think a lot of people are willing to, you know, they'll visit, say your website. And as long as they can find their home quickly, like the thing, the place that speaks to them, uh, then you're in good shape.

AI assessment note: “It's easier to just have one brand for everybody.”

Q the way you do. Good. Love that. That's tweetable. Um, there's a very kind of interesting element of the business, which is like with this incredible love, great product, uh, amazing customer base, you took the very strange decision not to raise venture money, which really makes my job completely obsolete. Um, why did you decide to bootstrap when the rest of your generation of entrepreneurs decided to fundraise instead?

A Well, there's two answers to that. There's the one that sounds great, which is, uh, you know, in my family, a bunch of my aunts and uncles and, um, you know, my grandparents, uh, they were all, they were entrepreneurs. They ran small businesses, and I always felt like, well, they, from day one, You know, they had to make money. They had to be profitable. Ed was similar. And so for us, there was the streak of, you know, 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. Uh, and obviously that gives you, you know, some more flexibility, some more control. So that was, that's kind of the lofty answer. The other answer was, uh, we were, when we were building Clavio, uh, we'd applied to all these venture firms Had these kind of, you know, we'll give you, uh, 20,000 dollars and it's like, you know, no strings attached, no equity, uh, you know, for the summer. And so we applied to a bunch of these when we were about six months in, and at the time we had real users and customers were like, oh, we'll be a layup. We applied to two or three of these and not one accepted us. So I remember going to Ed and saying, hey man, if we can't get the, you know, 20,000 dollar, you know, check, why do we believe that we're gonna be able to raise, you know, a half a m…

AI assessment note: “Well, there's two answers to that. There's the one that sounds great”

Q How quickly did you get to a million in ARR?

A 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 that was around the time where we felt like, okay, we could maybe hire, you know, uh, one or two people. And then it was until the end of year three that we got to a million dollars. So that was 36 months where I think for 80% of it was just two of us. And then I think we then had the first couple, uh, you know, a couple of folks joined, joined with us.

AI assessment note: “until the end of year three that we got to a million dollars. So that was 36 months”

Q When I say near death experience with Klaviyo, what moment comes most viscerally to mind?

A So we didn't have any real near death experiences, but I remember in year two, We had our biggest customer left us, and it was right around the holidays. I remember it was right around Thanksgiving. And, uh, you know, it was, it was pretty crushing in the moment. You know, it was the kind of thing that's why co-founders are good. You kind of rally from it, and, uh, we eventually got them back. But I remember the time that was like a 20% hit to our, you know, 20,000 dollars a month MRR, and it felt huge. Uh, but I think you learn from that, like, You know, uh, if you just keep focusing on the right stuff, like eventually you get there.

AI assessment note: “we didn't have any real near death experiences, but I remember in year two”

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 um, do you agree with Sarah Tavel's perspective that we will see a future where you sell the work and not the tools? If you think about current technical tools, now Klaviyo being one of them, we sell tools that enable people to do the work. And she suggested over time, you will just sell the work and you will pay for the output. Do you agree with that perception?

A I think that's generally the right direction. Um, I'm maybe a little skeptical of how fast, you know, we get there. Uh, 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. And by the way, some of these we already do today. I mean, there's obviously parts of our personal lives or running a business where We can effectively automate that away, and yeah, we're happy to pay somebody to do it. When I think about machine learning and artificial intelligence broadly, it's kind of three core principles that we have. Uh, the first is, you know, being a physics, physics background, I think the, the laws, um, or the algorithms that govern how the world works are discoverable. You know, when I think about the way that we as humans use software, Or try to, you know, execute various processes. We can understand, we can, we actually define those. We can codify those. So we can understand those. The second part is, I think for a lot of things that we as humans do, if you look at our algorithms, once you've documented them, they're actually like really naive and inefficient. And that's not anybody's fault. It's just, you know, a lot of these things we don't practice that much, or maybe we've practiced a lot, but compared to what a machine could do, There's just a lot, you know, there's a lot of room for optimizat…

AI assessment note: “I think that's generally the right direction. Um, I'm maybe a little skeptical of how fast”

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 I almost think it's much easier to think about it in those siloed different mindsets. But then when you think about, uh, you know, a billboard, for example, where you've got to put one on it or, you know, an advert online, whether it's, you know, a Google ad or an Instagram ad or whatever it is, you've got to choose with each destination. How do you think about that?

A 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, um, for, you know, entrepreneurs, founders, you know, uh, businesses that we're scaling up. And then we'd have a separate brand for our large enterprise businesses. Um, and we call that other brand Klaviyo one. And the concept was, well, Hey, we're gonna have, we have this, you know, we have this great database. We have all these like applications, like be everything you need in one spot. Uh, but when we realized I got some advice that it's like, you know, that's actually kind of confusing. 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, you know, bifurcate those. So you've got a path for everybody. I think a lot of people are willing to, you know, they'll visit, say your website. And as long as they can find their home quickly, like the thing, the place that speaks to them, uh, then you're in good shape.

AI assessment note: “It's easier to just have one brand for everybody.”

Q When I say near death experience with Klaviyo, what moment comes most viscerally to mind?

A So we didn't have any real near death experiences, but I remember in year two, We had our biggest customer left us, and it was right around the holidays. I remember it was right around Thanksgiving. And, uh, you know, it was, it was pretty crushing in the moment. You know, it was the kind of thing that's why co-founders are good. You kind of rally from it, and, uh, we eventually got them back. But I remember the time that was like a 20% hit to our, you know, 20,000 dollars a month MRR, and it felt huge. Uh, but I think you learn from that, like, You know, uh, if you just keep focusing on the right stuff, like eventually you get there.

AI assessment note: “we didn't have any real near death experiences, but I remember in year two”

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 Yeah. Well, what was the size and price?

A I think it was a little over a hundred million is what we raised. Um, and you know, again, cause we were profitable. I think there was a mix of, um, you know, there was primary capital and there was secondary to existing investors. And I think we actually ran our first tender then I know that's gotten more popular, but like, I think we ran a tender for everybody too. But anyways, that was, uh, yeah, so that was around a hundred million. And I think we sized it based on what we thought You know, because at the time, the, the kind of wisdom was like, hey, it has to be around 20% of the company. So I think that's kind of how we backed into the size. And the price, man, I'll probably get this wrong, but I think it was, it was around, I think around 808 hundred million. Um, and it, you know, the logic was, I, we always had the same logic with fundraising. You know, it was kind of like, hey, look, if the, whatever the, the kind of going market multiple was, because we were profitable, we'll be like a little bit ahead of that. Um, But we never really tried to push the price, you know, that much. So I probably got some of those numbers a little bit off, but that was like kind of the rough word.

AI assessment note: “I think it was a little over a hundred million is what we raised.”

Q I totally see the alignments. You drive more value for their customers. Their customers love it and love being on Shopify with that. You get lower CACs. Are there any misalignments?

A Not really. Like I, like I said, this, one of the things, you know, it relates to this, you know, hey, we have to be, you know, the rope has to be tight. We're both working on, you know, kind of, you know, keeping it taut. Um, I think partnerships can go sideways when folks just aren't, uh, 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. And I think, you know, I mean, certainly with Shopify and, and others, I think we've just been very upfront. Um, and it bleeds over a little into our ecosystem. Like we try to, you know, we have a lot of, uh, you know, folks that integrate into Klaviyo now, and we try to do the same thing of just be very clear about, Hey, these are things that we're not interested in, uh, where we need help. Um, and these are the things that we think are core competencies. And I think if you can just get all that on the table, things go a lot better.

AI assessment note: “Not really. Like I, like I said, this, one of the things”

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: “I think if you're clear about what you're gonna focus on... you'll find folks”

Q One is a wealth creation moment being the IPO, and the other is a wealth destruction moment being a wedding, but I appreciate the alignment. But yes, absolutely, you're right. Um, can I ask you, how does your role change? Do you have to do different things when you're a public company CEO versus before, and how do you think about that transition?

A I don't think not a lot has changed for me. Um, I'll say the two things that I think have been, you know, real positives, um, you know, just on a, on a day to day, um, kind of operations basis. One, I think there's a lot of smart folks, uh, that have studied a lot of software companies that are public market investors that you just, you know, now they're again, they're on your cap table. So you get to, you spend time with them and, um, learn how they're thinking about things. I think that's, that's, that's interesting. The second is I, You know, as a, as a private company and especially a bootstrapped one, I think the great part about bootstrapping is you tend to do all these little habits that like really help make you successful, like the staying close to customers, you know, being scrappy, being frugal. I think some bootstrap companies, uh, maybe because they don't have, you know, they haven't raised as much capital. Sometimes they're not as rigorous on, you know, they're kind of successful in spite of some other things. You know, one of the things I've liked about being public is it, Just gives us an option of like, well, Hey, look, you know, there's this kind of quarterly check-in and that's a thing that happens. And actually that's a positive for, for businesses. Like you need to, you need to set some milestones and know where you're aiming.

AI assessment note: “I don't think not a lot has changed for me.”

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: “there's two basic dimensions for us. One is, um, I think every consumer business”

Q He said, not as much as you think. I'm like, well, how much? He goes, oh, you know, 405 hundred million. I'm like, oh, oh, that's a little bit more than I thought. Oh, ok, I'll go back to work tonight. Thank you so much, Igor. Um, ok, final one for you, Andrew. Uh, tell me, what question are you not asked that you think you should be asked more?

A It's how do you fall asleep at night, in which I, which I, by which I mean, like, How do you turn it You know, I've, I've asked this of a lot of my, um, uh, of other, you know, founders and mentors is when you get really excited about something, eventually you have to kind of put it on the table and go to bed. And I think that's, that's tough. Um, so it's a little bit of how do you, you know, compartmentalize where you can have an off switch, at least for me, my, well, the actual answer is probably listening to some audio books or podcasts at night, but I think finding these like. If you suggest you go to sleep listening to TwentyVC, I'm deeply offended. I think I actually struggle, I struggle with, ah, many podcasts because, you know, I, I always worry I'm gonna miss something really good and then I'm not gonna listen to it in the morning. But yeah, it's that or I've always been a big fan of, ah, you know, getting outside, ah, I do a lot of running, but whatever it is, exercising, into like something that kind of forces your brain into a totally different direction. Maybe to tie it all the way back, like this being curious about other things. Yeah. I mean, I'll often unwind or fall asleep to, you know, learning about topics that, uh, you just have nothing to do with, uh, you know, what I'm working on day to day. Like I've gotten very big into, um, I don't know, for whatever re…

AI assessment note: “It's how do you fall asleep at night”

Q Does Toby just call you up one day and say, hey, like, this is working, like, let's make this happen, and we want to put in, you know, a hundred million dollars?

A It was more gradual than that. I mean, we'd been working with, uh, you know, Toby, Harley, and the entire Shopify team, really on, like, the product side for a long time. And, uh, you know, then started to be a little bit on the, the marketing side. Um, and, you know, I always felt like if you've got this really good, you know, partnership, um, you know, if you can, if you can figure out like the product side, the kind of go to market side, and then the financial side, you can get all three of those things lined up. Like that's the best of all worlds. And, uh, you know, we knew they were adding a lot of value for us, um, in terms of just literally recommending Klaviyo to folks. You know, we felt like we built a great product, but like, hey, I mean, again, we know, people didn't know who we were yet, and they were saying, hey, look, you know, you know, this, you know, what works well, what integrates well with shopping? Hey, you should go check out Klaviyo. Um, so we felt like there's this kind of consummation, but it was always, it was, right, it was a very gradual thing, and it was, I think, you know, I think, I don't know, one day, sometime during COVID, and we just said like, you know, if we're both in this for the long run, Why don't we just make this more formal so that we all have, you know, skin in the game together. And as another example of where like, I think it was j…

AI assessment note: “It was more gradual than that.”

Q How much did you raise and what was the price?

A Uh, we raised a million and a half dollars and we weren't super, you know, Uh, formulaic about it. Uh, we made a couple of, like, kind of silly mistakes. Um, I started out with going back to, um, you know, folks that I'd worked for, CEOs, CTOs, and asking them, it's like, hey, we've kind of built this business. Would you be interested in writing us a, you know, uh, an angel check? And they said, yeah, of course. And then I asked them, okay, well, and also, do you know, like, who are the good seed stage VCs? Because it was all, we hadn't spent any time, you know, meeting these folks. And, uh, they said, sure. So I got introduced a couple of folks around Boston. Um, and, uh, and from there we thought like a million dollars sounded good. So we did a million dollars and there was like a little bit from, uh, these angel investors. Uh, and then when we were figuring out the price, uh, I was glad, you know, thankfully like safes had come into existence, you know, maybe a year or two ago. So I was like, okay, we'll just use this, you know, this kind of new format. Um, and then what I'd heard was, Hey, uh, You know, if you were raising a seed rounds, I don't know, like, you know, 10 X ARR was kind of a lot. If you had, you know, if you, uh, you know, if you had, if you had a little bit of traction, but we felt like because we were profitable, we're like, okay, well, we could double that…

AI assessment note: “we raised a million and a half dollars”

Q One is a wealth creation moment being the IPO, and the other is a wealth destruction moment being a wedding, but I appreciate the alignment. But yes, absolutely, you're right. Um, can I ask you, how does your role change? Do you have to do different things when you're a public company CEO versus before, and how do you think about that transition?

A I don't think not a lot has changed for me. Um, I'll say the two things that I think have been, you know, real positives, um, you know, just on a, on a day to day, um, kind of operations basis. One, I think there's a lot of smart folks, uh, that have studied a lot of software companies that are public market investors that you just, you know, now they're again, they're on your cap table. So you get to, you spend time with them and, um, learn how they're thinking about things. I think that's, that's, that's interesting. The second is I, You know, as a, as a private company and especially a bootstrapped one, I think the great part about bootstrapping is you tend to do all these little habits that like really help make you successful, like the staying close to customers, you know, being scrappy, being frugal. I think some bootstrap companies, uh, maybe because they don't have, you know, they haven't raised as much capital. Sometimes they're not as rigorous on, you know, they're kind of successful in spite of some other things. You know, one of the things I've liked about being public is it, Just gives us an option of like, well, Hey, look, you know, there's this kind of quarterly check-in and that's a thing that happens. And actually that's a positive for, for businesses. Like you need to, you need to set some milestones and know where you're aiming.

AI assessment note: “I don't think not a lot has changed for me.”

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 80%, and I was like, holy shit, that's, that's incredible, but how do you think about serving two masters? You know, HubSpot has always catered to the S&B, for example, and kind of very much stays with that as its home, but when you've got the 50 K ACVs growing as quickly as you do, And this incredible long tail. How do you serve two masters at the same time?

A We think that's a lot and we're not perfect at it yet. Um, but I think you just have to think about it as almost two different customers, two different businesses. I think because Ed and I had been entrepreneurs, we knew what it was like to be just starting out. We knew what that felt like, how your every dollar matters. And you almost, you almost like anything that you take some of my time, but it doesn't cost money like that. That sounds good. Like I'm willing to do it myself. Um, so, you know, so you're, you're really, it's, you know, so, you know, every, every bit of, uh, you know, value matters. But then on the, we've also worked with, like, big companies where we realized, oh my gosh, there's a process, and they've got these security requirements, and scalability and reliability matters, and the product's gonna take 12 months for them to execute, so they're trying to de-risk that, and they're just totally different. 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. I've always looked at, like, when you walk in a room to a customer, if you can, 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 wa…

AI assessment note: “you just have to think about it as almost two different customers, two different businesses”

Q How much did you raise and what was the price?

A Uh, we raised a million and a half dollars and we weren't super, you know, Uh, formulaic about it. Uh, we made a couple of, like, kind of silly mistakes. Um, I started out with going back to, um, you know, folks that I'd worked for, CEOs, CTOs, and asking them, it's like, hey, we've kind of built this business. Would you be interested in writing us a, you know, uh, an angel check? And they said, yeah, of course. And then I asked them, okay, well, and also, do you know, like, who are the good seed stage VCs? Because it was all, we hadn't spent any time, you know, meeting these folks. And, uh, they said, sure. So I got introduced a couple of folks around Boston. Um, and, uh, and from there we thought like a million dollars sounded good. So we did a million dollars and there was like a little bit from, uh, these angel investors. Uh, and then when we were figuring out the price, uh, I was glad, you know, thankfully like safes had come into existence, you know, maybe a year or two ago. So I was like, okay, we'll just use this, you know, this kind of new format. Um, and then what I'd heard was, Hey, uh, You know, if you were raising a seed rounds, I don't know, like, you know, 10 X ARR was kind of a lot. If you had, you know, if you, uh, you know, if you had, if you had a little bit of traction, but we felt like because we were profitable, we're like, okay, well, we could double that…

AI assessment note: “we raised a million and a half dollars”

Q Does Toby just call you up one day and say, hey, like, this is working, like, let's make this happen, and we want to put in, you know, a hundred million dollars?

A It was more gradual than that. I mean, we'd been working with, uh, you know, Toby, Harley, and the entire Shopify team, really on, like, the product side for a long time. And, uh, you know, then started to be a little bit on the, the marketing side. Um, and, you know, I always felt like if you've got this really good, you know, partnership, um, you know, if you can, if you can figure out like the product side, the kind of go to market side, and then the financial side, you can get all three of those things lined up. Like that's the best of all worlds. And, uh, you know, we knew they were adding a lot of value for us, um, in terms of just literally recommending Klaviyo to folks. You know, we felt like we built a great product, but like, hey, I mean, again, we know, people didn't know who we were yet, and they were saying, hey, look, you know, you know, this, you know, what works well, what integrates well with shopping? Hey, you should go check out Klaviyo. Um, so we felt like there's this kind of consummation, but it was always, it was, right, it was a very gradual thing, and it was, I think, you know, I think, I don't know, one day, sometime during COVID, and we just said like, you know, if we're both in this for the long run, Why don't we just make this more formal so that we all have, you know, skin in the game together. And as another example of where like, I think it was j…

AI assessment note: “It was more gradual than that. I mean, we'd been working with”

Q Can I ask you mentioned that kind of a mixture of primary and secondary, any big lessons for founders on the importance of secondary for founders to take for team members to take any advice that you think is important for them to know when they have that option at that disposal?

A We've always had the thesis that like if private companies, if there was more liquidity in the stock, we always felt like that was better. I mean, We weren't a public company, but if you just, the more often you could do that, if there was some cadence, that was, that was fine. That was, that was a very healthy thing. Um, so after we did that, I think that was our series B. I think we did ran a couple of others. Some were coordinated around like, um, uh, about fundraisings and some, I think were just, we had cash on the balance sheet. And, uh, I always feel like that was a great way that, you know, for folks that, you know, were really invested in Klaviyo, it's like, you know, for some of them, I mean, they grew up, you know, they grew up their careers at Klaviyo and they were, Sort of like equity was a big part of, you know, their wealth creation. And it felt like to get, let folks do that along the way. I mean, I heard all sorts of great stories of folks, you know, paying off student loans, right? Putting a down payment on a, on a mortgage. Um, so that was great. I, 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, it's a good, it's a positive thing. And then it actually set the way that when we went public, I think a lot of folks are like, well, yeah, now it just feels like When you're public, i…

AI assessment note: “my advice is don't, I would, I don't overthink the, oh my gosh, will people be demotivated?”

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

Q Were you passionate about marketing? We're often told, do what you love, let your passions guide you.

A One, yes, because I, I, yes, I am, because I think communication is, it's so important. I mean, storytelling, we all know when, you know, a story's told well, and, you know, it could be something small of, hey, I have this product, like, how do you pitch it? I mean, there's an art to that. The product could be amazing, but if you don't have a use case or can't, can't show somebody how it's valuable, like, you can, people, ah, okay, well, they'll just turn you off. One, we felt really passionate. It's like, there's so many people creating things, but sometimes you'll create great products, but it's hard to tell that story right, or get it to the right person at the right time. And we'd love to fix that. And that kind of leads to the second part, which was, we kind of wanted to get into marketing because, you know, I'm a product builder, you know, and I honestly, I, we want the best products to win. And I remember people telling me, you know, some of the companies I worked at, they're like, Andrew, you know, you can build the best product, but the best product doesn't always win. And in some sense, we built Klaviyo to say, like, well, gosh darn it, like, we're going to level the playing field. Let's build software such that everybody can be good at marketing, and now the best products can win. So there's a little bit of, hey, if we do this right, um, you know, uh, marketing as a,…

AI assessment note: “yes, I am, because I think communication is, it's so important.”