Underscore VC
In Silicon Valley, there's often a perceived dichotomy that startups must choose between chasing high growth or achieving profitability. But Klaviyo has shown that it’s possible to do both, the company's chief executive and founder, Andrew Bialecki, said.
"Businesses will pay you to solve real problems. You should be able to fund this stuff if you're good at building software," Bialecki said at the Underscore VC Core Summit, where Business Insider interviewed him in October.
Klaviyo uses artificial intelligence to help merchants sell more by stepping up their email and text marketing. In September 2023, the Boston-based company went public on the New York Stock Exchange, maneuvering through a logjam of initial public offerings for software startups.
Part of the investor buzz around Klaviyo's IPO was that it was an ideal model to go public. It had been able to scale and grow with very little cash burn, a rare feat even in software. One of Klaviyo's biggest flexes in its investor prospectus was that of the roughly $450 million in venture capital it had raised, it spent only $15 million.
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Bialecki said in the past 10 years, many entrepreneurs have fallen into a cycle that looked something like this: raise cash, build something, and then get acquired by a bigger company. Companies that focused instead on steady, organic growth were often labeled as lifestyle businesses, seen as lacking the ambition or potential for the exponential returns that venture capitalists crave. That didn't sit well with Bialecki.
"You look at Microsoft, Apple, IBM, and Intel, all these tech companies that came up in the 20th century. They all went public, and they were profitable — and they were growing really fast. Like, why is it that either-or?" Bialecki said.
Bialecki borderline-bootstrapped the company he started in 2012. It grew to a $1 million revenue run rate before hiring any employees or raising a cent of venture capital.
Even after it started selling equity, with a $1.5 million seed round of funding in 2015, Bialecki and his cofounder, Ed Hallen, raised as little cash as they needed and spent it scrupulously. They focused on getting the product right.
This self-reliant streak allowed the founders to secure capital on their terms without diluting themselves six ways to Sunday. Before the IPO, Bialecki owned a 38.1% equity stake, while Hallen had a 13.9% stake, putting them in the top echelon of founders of software and cloud startups with the largest pre-IPO ownership stakes.
Bialecki advises founders who want to follow a similar path to be disciplined and loud about it. For a company to pursue high growth and profitability, it needs to align with investors who share the founder's vision and values rather than pressure them into taking additional venture capital just to inflate valuations for their own gain.
"Be clear about what you stand for as a company, and you will get the investors that believe in that," Bialecki said.
