Shares of Klaviyo Inc. were cheered in their Wall Street debut, as the digital-marketing software-as-a-service company's stock opened 22.5% above its initial public offering price, following warm receptions for two other high-profile IPOs in the past week.
Shares of Klaviyo $(KVYO)$ have pulled back since their open, and closed 9.2% above the IPO price on Wednesday.
The offering arrives after concerns about the economy froze the IPO market through last year. The public debut for Klaviyo will give investors more insight into the state of businesses' marketing budgets after a pullback in digital-ad spending. And it will offer a clearer look at an industry that is trying to help online retailers more precisely target customers amid deeper privacy concerns, stricter regulations and a torrent of consumer data -- much of it their own -- and spam.
"Every marketer, if they could, would want to be able to reach out to each and every person individually and speak to them like they know them -- treat everyone like we're having a conversation right here, right now," Amanda Whalen, Klaviyo's chief financial officer, told MarketWatch on Wednesday.
"But that's hard," she continued. "It's hard because it's hard to get all of your data in one place, and it's hard to make sense of it all."
She said that the company, which turned a profit during the first half of this year, was going public now due to the confidence it had in the business overall. On Tuesday, shares of grocery-delivery app Instacart $(CART)$, known officially as Maplebear Inc., opened 40% above the IPO price before paring gains to close the first day up 12.3%. And last Thursday, shares of semiconductor-design company Arm Holdings PLC $(ARM)$ opened 10% above the IPO price, then extended gains to close up 24.7%.
But Alex Wellins, co-founder of the Blueshirt Group, an IPO advisory and investor-relations firm, said Klaviyo's debut could do more to set the tone for tech companies thinking about going public.
"Arm is an extraordinarily large company," he said. "Instacart has been well known by investors for a long time. Klaviyo, arguably, is more of a typical software company that has grown primarily organically, and it fits a more normal software and SaaS profile," he said, referring to software-as-a-service platforms.
"So we believe this will be instructive for investors," he continued. "Assuming it gets a strong reception, we believe it'll be instructive for other software and SaaS businesses that are considering going public."
Klaviyo sold 19.2 million shares in its IPO, which priced at $30 a share, above the expected range. The company raised $345.2 million in the IPO, as it sold 11.51 million shares, while selling shareholders sold 7.69 million shares.
Klaviyo's marketing technology helps its customers, many of them small to medium-size businesses, craft online marketing campaigns, often via automated emails and texts that land in customers' inboxes. The company runs a database that works in tandem with a marketing application that puts shoppers' data of all kinds -- things like current preferences and where they're buying things now, potentially for thousands of customers and even more data points -- into one place, allowing those businesses to react in something closer to real time.
"You're receiving emails through Klaviyo all the time," D.A. Davidson analyst Gil Luria told MarketWatch last week. "It just doesn't say Klaviyo anywhere."
But he noted at that time that the greater emphasis on privacy in the U.S. and Europe -- by users as well as regulators -- and recent moves by large companies like Apple Inc. $(AAPL)$ have made it more difficult for social-media companies to collect user data and sell it. That's also made it harder for merchants to get a good return on third-party data. More recently, those businesses have tried to harness the first-party data they already have, after having relied largely on the big tech platforms in the past for customers and for insights into customer behavior.
Klaviyo competes with the likes of MailChimp, Braze Inc. $(BRZE)$, Adobe Inc. $(ADBE)$ and Salesforce Inc. $(CRM)$. Klaviyo has a partnership with Shopify Inc. (SHOP), under which it is the recommended platform for all Shopify Plus merchants. Shopify has also invested $100 million in the company.
As of the end of last year, Klaviyo was getting around 77.5% of its annualized recurring revenue -- a gauge of the value of paid subscriptions -- from customers who also use Shopify's platform, which Luria last week said left it exposed to any potential difficulties at Shopify. And he said that Braze, which has targeted deeper-pocketed customers, was trying to position itself to siphon away Klaviyo's customers once they get bigger.
Whalen, however, said that those customers don't want to spend their time in development. And she said that as the holiday shopping season approaches, the stakes would rise as more people do their shopping online.
"During the holiday period, there's so much communication happening with consumers that it increases the importance of being really personalized and targeted in your messaging," she said.
