Klaviyo: The $1B+ ARR Powerhouse Built on Top of Shopify
Klaviyo has quietly built one of the most impressive SaaS platforms for e-commerce with ~$1B ARR growing at 35% annually, 112% NRR, and impressive 14% free cash flow margins. What makes Klaviyo unique isn’t just its scale – it’s the fervent customer love, bordering on obsession. Customers will “grab you on the street by your neck” to tell you how much they love the product, despite marketing automation being a decidedly non-new category.
We were lucky at the last SaaStr Annual founder CEO Andrew Bialecki came to share the secrets to how they built this phenomenal growth engine and the unexpected learnings along the way.
And come see 300+ sessions like this at 2025 SaaStr Annual, May 13-15 in SF Bay!! We’ll have the CEOs and CXOs of Snowflake, HubSpot, Rubrik, ServiceTitan, Box, Canva, Calendly, Descript, Perplexity, OpenAI, and so many more … sharing their secrets to scaling!!
4 Unexpected Learnings from Klaviyo’s Journey
- Marketing IS sales in B2C: Unlike B2B where sales teams drive revenue, in consumer businesses, marketing owns revenue responsibility entirely. This fundamental insight shaped Klaviyo’s product design and value proposition.
- Showing dollars, not metrics: Klaviyo deliberately hid open and click rates, instead showing customers exactly how much revenue each campaign generated. This created massive customer value where marketers became internal heroes.
- Building connectors in-house unlocked massive advantages: Rather than treating data connectors as “intern work,” Klaviyo recognized them as strategic assets that provided critical context for measurement and reporting.
- Ecosystem partnerships began with super fans: Instead of negotiating commercial terms with platforms like Shopify, Klaviyo first focused on creating 10-20 raving customer fans, then showed these testimonials to the platform. This created a pull-through effect where customer support teams were already recommending Klaviyo.
Framing Klaviyo’s Success
When Jason Lemkin (CEO of SaaStr) invested in Gorgias in 2018, a company at $10K MRR, he kept hearing the same thing from everyone in e-commerce: “Klaviyo, Klaviyo, Klaviyo.” This customer love served as a powerful growth engine even before Klaviyo had a mature sales and marketing motion.
Understanding Klaviyo’s Core Offering
At its core, Klaviyo offers marketing automation and customer data software for B2C businesses. But its true innovation was solving a fundamental problem: B2C companies lacked the human touch of sales and customer service representatives that B2B companies enjoy. Everything had to be automated.
Andrew explains: “If you go buy a pair of Nikes, nobody’s calling you to find out how you like them. Everything has to get automated.” Klaviyo recognized that businesses had rich first-party customer data but no software to effectively leverage it.
Pre-Klaviyo, the workflow was painful: export customer segments to spreadsheets, manually update newsletter tools, and maybe, if time allowed, send segmented campaigns. Customers were drowning in data but couldn’t activate it effectively.
Early Challenges and Innovations
Klaviyo’s early 10x feature was simple but revolutionary: automated segmentation that condensed weeks of work into minutes. Andrew describes the reaction: “People were like, ‘I have this idea – I have all these customers who bought jeans but never shirts.’ We were like, ‘Yeah, that’s a 5-second thing.’ They were like, ‘Oh my God, it used to take me weeks!'”
The platform’s second killer feature was ROI measurement. Rather than showing traditional email metrics, Klaviyo displayed actual revenue generated. “People were like, ‘Whoa, that campaign made $50,000!’ Suddenly they were way more interested.” This shifted the conversation from open rates to actual business impact.
The Shopify Partnership
Klaviyo’s relationship with Shopify proved transformative. It began when Andrew’s friend, who sold quilts through a “new platform called Shopify,” needed better customer marketing tools. The Klaviyo team built a connector, found 5-10 more Shopify brands, and approached the Shopify team with evidence of customer success.
Unlike many platforms that ask “what’s in it for us?”, Shopify embraced Klaviyo’s integration. Andrew credits them: “They were like, ‘No, we really want people to build around us.’ When they saw what we built, they said, ‘Oh that’s awesome, how can we help promote it?'”
This partnership approach became a template for Klaviyo’s expansion strategy with other platforms. They would build integrations, find happy customers, and let the platform see the clear value before asking for co-marketing support.
Building a Partner Ecosystem
Klaviyo now has an expansive partner ecosystem but doesn’t monetize it – a deliberate strategy to drive expansion. “We are in expand mode,” Andrew explains. He shares how a partner recently built a Klaviyo integration for streaming TV advertisements, creating a complementary solution that expands Klaviyo’s value proposition.
The team considers their ecosystem a major competitive advantage: “If someone asks about TV advertising, we don’t have anything for that, but now we do [through partners].” This creates a powerful flywheel where partners drive awareness and new use cases.
Key Features and Customer Impact
Andrew attributes Klaviyo’s extraordinary customer love to two core features:
First, making the impossible easy: “If you have an idea for a customer experience on your walk to work, by lunch, it’s done.” This speed-to-value transformed marketers’ workflows.
Second, gamification through revenue metrics: “We made this decision about a year or two in to not show any more open or click rates. All we’re going to show you is the dollars.” This created immediate alignment with business goals and made marketing teams heroes within their organizations.
Dashboard Design for Success
The Klaviyo dashboard was intentionally designed to be “screenshot-friendly” for internal presentations. “We know at the end of the week, you’re going to show this to somebody, and we want that to be a win for you,” Andrew explains. This understanding of how marketers demonstrate value internally drove product design decisions.
Navigating Ecosystem Challenges
When MailChimp (a larger competitor that eventually sold for $12B) was banned from the Shopify ecosystem, Klaviyo had to mobilize quickly. “In those weeks, we got a lot of folks that came and said, ‘I need to move like now.'” This highlighted the importance of maintaining strong, mutually beneficial platform relationships.
Andrew’s key takeaway: “When you’re working with partners, there’s got to be something in it for both sides.” This philosophy guided Klaviyo’s approach to all platform relationships.
Klaviyo’s Strategic Growth
As Klaviyo has crossed $1B in ARR, they’re expanding in three strategic directions:
- International expansion: Recognizing that consumer spending is global, not just North American
- Enterprise customers: Moving upmarket from their SMB roots
- Beyond commerce: Extending into additional verticals and use cases
What’s fascinating is how deliberate Klaviyo has been about these expansions. They didn’t rush to go international or enterprise in the early days, instead building deep product-market fit in their core offering first.
Expanding Product Offerings
Andrew describes Klaviyo’s original vision as more expansive than just email marketing: “We had very broad ambitions when we started. We said we’re going to be the place where you store everything about your customers, and anywhere you want to use that data, we’re going to facilitate that.”
He uses an Amazon analogy: “Amazon built this logistics network, this retail website, and they started with books. Books was never the end goal – it was just a great place to start.” Similarly, Klaviyo started with email marketing but always with a more comprehensive vision.
The company is now expanding from this core, with opportunities in website personalization, mobile app experiences, and customer service – all powered by Klaviyo’s customer data platform.
Market Leadership and Penetration
What’s remarkable about Klaviyo is their market penetration within their core Shopify ecosystem, where they have over 50% market share – far beyond the typical 10-20% ceiling that most SaaS platforms hit.
Andrew challenges the conventional wisdom: “If you’re the market leader and you’re topping out at 20% share, that’s not really much of a market leadership position. If you have truly built the best product, and maybe there’s some network effects, you should be able to top out way higher – could be 50%, could be even much larger.”
This penetration has created a virtuous cycle where Klaviyo becomes the default choice – similar to dynamics more often seen in consumer software.
IPO Insights and Future Outlook
Klaviyo went public in September 2023, ending a 20-month drought of SaaS IPOs following HashiCorp. While Andrew doesn’t see being public as dramatically different from being private, he appreciates “the rigor of every few months having to show how you’re doing.”
For companies considering the public markets, Andrew believes the bar remains focused on sustainability, durable growth, and a path to positive free cash flow. While growth rates matter, he emphasizes: “Equally important is the durability of that growth… Even if you’re a 25-30% grower, but have a very durable model that can last four or five years, people really pay attention to that compounding.”
He’s optimistic about the current environment for building: “Right now is another awesome time to be building – there are just fewer people who want to do it. It’s comparatively harder, which means it’s actually less competitive.”
4 Top Mistakes Andrew Made Along the Way
- Thinking developers were necessary at first: Klaviyo initially built APIs assuming customers would have developers to implement them, quickly realizing most e-commerce businesses have no developers at all.
- Initially targeting the wrong customers: Klaviyo launched on Hacker News trying to sell to startups before discovering e-commerce was their true market fit.
- Underestimating the importance of platform partnerships: While Klaviyo succeeded with Shopify, they could have leaned into platform partnerships even earlier as a core go-to-market strategy.
- Waiting too long to go upmarket: Though Klaviyo is now seeing 64% growth in enterprise customers, they could have accelerated this motion earlier with their proven product-market fit.
