Klaviyo: marketing appetite for IPOs

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Klaviyo, the name hardly trips off the tongue. The software as a service (SaaS) business specialises in ecommerce marketing. But the Boston-based start-up’s initial public offering could be a better gauge of the appetite for new stock issues than highly touted ones from chip designer Arm and grocery delivery service Instacart. 

On Monday, Klaviyo raised the price range for its IPO to $27 to $29 per share, up from $25 to $27. At the top end, the IPO would raise $557mn and value Klaviyo at $8.7bn on a fully diluted basis.

That would sit just 8.5 per cent below the $9.5bn valuation Klaviyo achieved in its last funding round in July 2022, according to data from PitchBook. Both Instacart and Arm accepted far steeper haircuts.

Founded in 2012, Klaviyo stores and analyses customer data for ecommerce brands. It helps them send more targeted marketing messages. 

It has grown quickly, reporting revenue of $473mn last year, a 63 per cent increase from 2021. It swung into net profit of $15mn in the first half of this year after a larger loss last year. Assuming it continues this pace of growth, an $8.7bn valuation would put the company on a multiple of 290 times this year’s earnings and about 19 times revenue.

Salesforce, a more established, slower growing SaaS company, is on a multiple of 25 times earnings and 6 times revenue.

There are red flags. A dual class share structure will give co-founders Andrew Bialecki and Ed Hallen and other insiders majority control of the company’s voting rights. It is also very dependent on Shopify. About 78 per cent of annualised recurring revenue came from customers who use the Canadian ecommerce platform. That puts Klaviyo at risk if Shopify decides to launch its own marketing service or promote a rival company.

If Klaviyo can defend its bubble-era valuation despite this, it will be the clearest signal yet that investors have regained their appetite for risk.

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