Beyond the Build: How Klaviyo Built Their Business

Welcome to Beyond the Build, our new developer interview series from Shopify! In this series, you’ll discover the real stories behind top developers and entrepreneurs in the Shopify ecosystem—a platform where developers and innovators build for over 1.7M merchants worldwide. Host Fatima Yusuf sits down with top Shopify app founders whose technologies have impacted tens of thousands of merchants to uncover what it takes to build, grow, and scale an app on Shopify.

In this episode, Fatima sits down with Andrew Bialecki, co-founder and CEO of ecommerce marketing platform Klaviyo. Klaviyo has over 600 employees, 60,000 customers, and recently raised $200 million in series C funding at a valuation of over $4 billion. Born and raised just outside of Boston, Andrew is proud to be building Klaviyo in his home. In this interview, he shares how they got there.

Watch the interview below, or read on for the transcript.

Digging into data: Where the idea of Klaviyo started

Fatima: Tell us a little bit about the origin story of Klaviyo. Where did it all begin? 

Andrew: Nine years ago, we started Klaviyo. My co-founder [Ed Hallen] and I had worked at a software company that did data analytics for big Fortune 500 retailers. One of the things we were introduced to while working there was all this first-party data about their customers from loyalty programs and purchases in store and online. Back then, that wasn't as popular as it is now. 

It was amazing to us that these were the biggest companies in the world, and they were looking at my co-founder and I, a bunch of 20-somethings, to help them figure out what kinds of customers they had. They wanted us to answer these basic customer questions like, “Who's bought from me how many times? What are people's different product affinities?” 

We built some software that we were charging six, seven figures for, to help them solve these problems. They were taking all this data analysis of who their customers were, and exporting it into these big spreadsheets. They would then pour it back into either their email or other parts of the customer experience such as loyalty programs. We were just really struck. Like, wow, businesses have all this data about their customers that they're not using to personalize experiences or marketing. Why can't any company do this?

"Like, wow, businesses have all this data about their customers that they're not using to personalize experiences or marketing. Why can't any company do this?"

So, in 2012, I had worked at a couple of startups, had a couple of side hustles. I felt this pain myself, building web apps and trying to connect with users who would sign up, and wanting to do that at scale. As soon as I decided to quit my job, I cornered my co-founder, who was at business school at the time, and said, “Hey, Ed, I don't think business school people do all that much. Do you have a bunch of free time? Do you want to try hacking out a business with me? If it doesn't work out, we can just go back to getting regular jobs.” 

So we started out with this idea of what would happen if you built one place to store all your customer data, and then you connected that to all the different customer touchpoints you had? That's obviously important for us, as we have all these human relationships with each other. Could you use that to personalize things? At the time, a lot of customer experiences just weren't very personal. When you think about brand advertising, it was just one size fits all.

One of the truisms we think about when it comes to consumers is that they don’t like to think. They like when you make good suggestions and when you know who they are. We figured if we could connect up all this data then we could connect it to marketing, starting with email.

Rather than businesses having to write these playbooks where their customer support reps or their sales team would deliver these experiences one by one, we allow businesses to just be the business they want to be, on an internet scale and a global scale. That's a little bit of where the idea came from. 

Shooting for the stars: Pivoting from physics to programming

Fatima: You mentioned earlier that you struggled getting into big tech right out of college. Tell us about that journey. 

Andrew: First of all, for anybody that's listening, I don't think you need a computer science degree or programming degree to get into technology or to be a software engineer. That's just not a requirement. Really what it takes is hard work and lots of practice. I was a physics major and I remember I was working on this one project, building a satellite telescope—like the Hubble space telescope, where you get to look into deep space, and I thought it was awesome.

I remember talking to my advisor. She said, “Yeah, if you keep at it and get PhD work on this project, in 10 years this thing will launch. And that's if the government funding doesn't get pulled.” I was like, “Oh boy, I don't know if I can wait 10 years.” 

"I don't think you need a computer science degree or programming degree to get into technology or to be a software engineer. That's just not a requirement. Really what it takes is hard work and lots of practice."

I realized part way through college, that hey, maybe there's something else. So, I got into software. I was lucky enough to do an internship at Microsoft with very little programming background. At the end of school, I applied to the usual suspects back in the 2000s, so Google, Facebook.

I didn't didn't even get any interviews. There wasn’t even a call back—they just put my resume in a pile. So from that point on, I had this chip on my shoulder. I was like, “I think I could be good at this.” 

That summer after I graduated, I hustled myself into a job at this small software company. I decided I was going to become a really awesome programmer, so I built a little Facebook clone for some of my friends back in 2007, when social networks were hot, and asked my friends to hack it. And they broke all my PHP code. That was the start of using my nights, weekends, and day job trying to become a really great programmer.

Plugging into Shopify: Building a sustainable, scalable business

Fatima: You started with the data infrastructure of the business, then worked back to the product. At what point did you decide this should be built on Shopify? 

Andrew: I had some experience with building websites and little web apps where users would sign up and try all my software, but wouldn’t keep using it. So when we started Klaviyo, I thought, “I'm going to scratch my own itch. We're going to build Klaviyo to help other tech companies, other startups.” We started trying to show it to other startups and we had a little bit of traction there.

But a friend of mine had built a store on Shopify. He was a couple of years in. So I said to him, “Hey, I'm building the software that allows you to pool all your customers’ data in one place and use it to personalize.” At the time we hadn’t even figured out that email was the thing yet. I asked him if he would be interested in exploring this business idea. He said yes. 

Before I talked to him, I'd done my research on Shopify. At the time, you had the idea of building a developer-first ecosystem and having really strong API docs. I remember being really impressed by the fact that with Shopify, you could create an application and list it on the Shopify App Store with maybe a one-step review, but it was almost entirely self-serve.

At the time, we were trying to build integrations into lots of different platforms because there were lots of different interesting datasets. I remember Shopify standing out for one, the quality of the APIs, and two, the quality of the people that knew the API.

They were APIs built for developers, but also by developers. I remember we gave them a lot of feedback and asked questions and they were super fast to respond. So we built that first integration for my buddy. Then we were like, “Okay, Shopify is growing really fast. We should just list this on their store. Let's see what happens.” 

"The fastest way to grow is to invite others to tag along, to partner up and help build things that are highly complementary."

And it was great. One of the things that's important with the ecosystem is that if you're a platform like Shopify, you see all this opportunity for entrepreneurs, and you know you can't cover all of it in the time you want. So the fastest way to grow is to invite others to tag along, to partner up and help build things that are highly complementary. 

Sometimes it's not always clear what is helpful or not. But I remember the Shopify folks that were working in the app store were really helpful in giving us feedback and connecting us with Shopify merchants. I think they realized, “Okay, these folks are of a certain size where they're starting to do more customer segmentation, more personalization.” They were giving us feedback from what they were hearing from customers.

Obviously Shopify was on its growth swing throughout 2012, 2013, 2014, and we were fortunate to be able to join forces and ride part of that wave.

Fatima: Did you always know you wanted the product to be commerce focused, or were you exploring and testing its viability in different industries? 

Andrew: It's interesting. Part of combining data with the end customer experience, in this case let’s say marketing, is not only can you do personalization, but you actually get this chance to close the loop. So you can do more attribution. One of the things that we learned is when people buy software, they're always doing some sort of cost-benefit analysis. The easier you can make that for them, the better. 

Shopify is a really easy product, right? If this helps me sell on the internet, I can literally see the dollars coming in and I can see the value. We knew with Klaviyo we wanted to try and get as close to that as possible. 

"One of the things that we learned is when people buy software, they're always doing some sort of cost-benefit analysis. The easier you can make that for them, the better."

Not being a very salesy person, I don't really want to have to try to guess at how much people are willing to pay for my software. I want it to be so obvious. So, one of the things that we were after was, if we're helping people personalize, let's say emails or text messages, how do we know that that personalization works? We all think that personalization is a value add, but can we actually prove it to people?

Early on we felt we had to do that. One of the cool parts about retail was it was pretty easy to measure the conversions. With a software business, sometimes a user has to do a lot of things before they finally pay you. It can be a little bit harder to measure those. But with retail, the loops are much faster. That made it a little bit easier for people to wrap their head around what we were trying to build. It made it a good jumping off point.

Funding Klaviyo’s future to a $4 billion valuation

Fatima: Congratulations on your series C funding success and the recent valuation of over $4 billion. How has your approach to venture capital evolved over the years? 

Andrew: I'm a pretty shy personality, my partner is probably a little more extroverted, or at least we were back then. We were working out of some coworking space at MIT and there were all of these venture capital firms, because seed funding was hot, series A funding was hot.

They would come by and say, “Hey, are you interested in applying to our summer program?” These venture capital firms had these programs where if you were a startup, they'd give you some coworking space, which we needed because we didn't have money to afford rent, and even better than that, they would also give you a stipend for the summer. Basically free cash. At the time we had server bills and all this stuff, so a couple thousand bucks goes a long way.

We had applied to three or four of those programs and basically struck out on all of them. Some of them were written essays. Some of them were recorded videos of yourself. We actually have some of those that we showed to some employees and people were like, “You guys look so dopey.”

I was a little nervous, like, “Oh man, maybe we don't know how to raise money. Maybe we're going to go to folks and they're just gonna poke holes in our idea.” And we’re going to have to say, “Yeah, we have a couple of customers, but we're not all the way there yet.” It was hard to articulate our vision. So that was one part of it. 

"I always loved this idea of a multi-generational business. It was only 15 or 20 people, but it was lasting. It was a business that was real, that was profitable. It took care of its employees. And I always felt a lot of startups missed that."

On the other side was, I have a bunch of aunts and uncles that all work at this small business that's been in my mom's family for probably 50 or 60 years. I always loved this idea of a multi-generational business. It was only 15 or 20 people, but it was lasting. It was a business that was real, that was profitable. It took care of its employees. And I always felt a lot of startups missed that. If you go into business with the mentality to burn cash from day one, sometimes some of those startups just get acquired or fizzle out. They're never real businesses from a purely self-sustaining point of view. 

So we said, “You know what? We were fortunate enough to have saved up enough from the jobs we had before we started. Let's see if we can bootstrap this and let's really focus on understanding our customers. What are the problems they're trying to solve? Let's see if we can figure out how to build products that solve those.” 

It took us almost three years. Now it feels like this, I don't know, hazy blackout period where you forget what happened. My co-founder I look back on it very nostalgically, but there's a lot of work and you had to find ways to celebrate small victories.

The key to being able to bootstrap for us was—and it was probably the best decision I ever made—was cornering my co-founder Ed and saying, “Hey, will you partner up?” We knew what we had to do. We read enough of the startup books. There was enough literature and blog posts out there, but the mental part is a real grind. Whether you're doing it with a co-founder or you're doing it with a larger community, it’s so helpful because there's a lot of unknowns and you discover how to solve those problems. It's a lot of trial and error. 

"The mental part is a real grind. Whether you're doing it with a co-founder or you're doing it with a larger community, it’s so helpful."

We're thankful we got to do it because when we got to actually raise money, we were about three years into the business, 2014, 2015, and we were at that point where we actually hired five or six people. But we had this thing going on with our bank account that if you're bootstrapped, the revenue would climb over the course of the month and then you would get to the 31st and you'd run payroll and your other bills for the business and it would drop almost to zero. You had this big sawtooth pattern in your business. I remember talking to Ed, and saying, “Man, this stinks. If we find somebody awesome we want to hire, we have to wait a month or two until we have enough cash flow to hire them.”

Anyways, that was when we finally got introduced through a CTO I worked with in the past, to a few local Boston angel investors. I knew we would always be able to raise money, but obviously you can flip the script pretty dramatically. We'd talk about owning our own destiny at Klaviyo, helping entrepreneurs, but also as part of the way we want to operate. It made a big difference. The fact that we were bootstrapped and had run lean, it was in our culture. 

There's this funny thing that happens with venture capital. When you don't need the money, all of a sudden everybody's willing to write your cheque, and we've certainly seen that. All the investors we partnered up with, they're all great, but all of our conversations started with, “You haven’t answered any of my emails and finally you're responding.” You can play a little bit hard to get, and flip the tables, which I think helps.

Fatima: You could have continued to take that bootstrapped path where you made a super profitable, totally self-owned business. Did you think about continuing in that direction before you decided to raise money? 

Andrew: Good question. So there was this pivot point where you work so hard to get profitable and stable and once you get there, it's like you've arrived. But where did I arrive, exactly?

Your life changes, you go from being worried about whether you're going to get there to this mentality of, it's okay, now we're generating cash. What do we do with that? I remember we had a couple of long chats about, “Okay, so what do we want to do now?” 

“We’ve always tried to optimize to have the biggest impact we can and not worry so much about the risk profile.”

As an entrepreneur, I always thought, imagine being at a casino, we put all our chips in and we'd been lucky enough to get this far. You know what would be fun? Let's just put them all back in the middle and see what happens. I don't know if you ever felt the same way, but to me, that was the fun part. If you're in technology, I think we're really privileged to get to work there. So we've always tried to optimize to just try to have the biggest impact we can and let's not worry so much about the risk profile.

Creating a learning environment at Klaviyo for curious employees

Fatima: Klaviyo’s growth has been incredible. What are some of the biggest learning moments you’ve experienced along the way? 

Andrew: We've tried a lot of things and definitely learned a lot. There were some things that we kind of knew, but then really got to experience. The first is, it's all about learning and just leveling yourself up. Then, obviously you want to work with other people that are also focused on leveling themselves up. We have a saying at Klaviyo, that we look for people that are high slope. We don't care about the skills and experience you come in with. We look for people whose trajectory and ability to learn is really steep. 

"We have a saying at Klaviyo, that we look for people that are high slope. We don't care about the skills and experience you come in with. We look for people whose trajectory and ability to learn is really steep."

You might say, well, how do you determine if somebody is high slope? You just ask them about their past and you ask them for experiences. You say, “Hey. Tell me about something hard you've learned in the last year and what was it?” 

The funny thing is people that are high slope gush about it, because they're so interested and curious. That's made a huge difference. We look for individuals who try to build deep expertise in a bunch of different disciplines. Some folks talk about the intersectionality of knowing a bunch of different disciplines and that's the magic. 

One of the ways we talk about it is we don't want to have a huge team—the number of people that Klaviyo employs, we look at that as a vanity stat. That's not really interesting to us. In fact, we think it gets harder because if you think about it, if you work in a small team, there's fewer people you have to keep in the know and communicate well with. As teams grow, every time it doubles, we all know the number of connections grows quadratically. It gets harder and harder. 

One of the things we really focused on is how do we become an environment that's just really conducive to people leveling themselves up. Some of that was hiring, and then internally we've gone so far as to think of Klaviyo as a modern university. After you get out of school, people go into this thing where it's like, do I just learn my job and then do it for the next 50 years?

“Work should feel like you’re at college: you’re in school, you’re working on projects, you’re leveling up and you’re acquiring new skills.”

Work should feel like you're at college, you're in school, you're working on projects, you're leveling up and you're acquiring new skills. So how do we do that? That's been something we've invested in a lot, even to the point now where within HR, we have this actual Klaviyo university where we actually have a course catalog. You can pick from 10, 20 different courses that we think workers of the future are going to need. It has everything from written communication, to basic programming or software architecture concepts, to machine learning. So we worked hard on building a learning environment.

I could go on and on, but that's probably the biggest one for us. The people you keep and just make sure you're constantly investing back into their education.

Fatima: The curious mindset and ability to adapt to problems on the fly is definitely a key entrepreneurial trait, and something Shopify also looks for in our employees, too. In the early stages of my business, there was a time where we had to show some legitimacy. We pulled off this little pop-up shop with barely any money in the bank, got the attention of some important people and it all snowballed from there. You just figure it out as you go sometimes.

Andrew: Yeah, that's awesome. I used to go on a lot of future customer calls with our folks that are on our customer teams. I just love talking about where we were going so much so that I might sometimes overstep the line on what Klaviyo could do today, to the point where our customer team would have to pull me back and be like, “Oh, actually, well, hang on a second. We can't assert that we do that yet.” And I would be like, ”But we're going to get there really soon. And then I’d bring it back to our product team and say, “Hey, so I told somebody we had this, I think we need to figure out how to build this.”

Fatima: Right, because you’re so passionate, you’re 10 steps ahead. What are you most excited for, looking toward the future with Klaviyo? What’s your vision for the next 10 years? 

Andrew: There are a bunch of companies that are focused on, let's call it the “direct to X”—so direct to consumer, direct to human. One of the things that fascinated us when we started Klaviyo was this idea that the internet's this big network. It's a highway system, but it's a digital highway system. You and I can be here chatting in real time, even though we're not physically close to each other. Sending somebody a message, data, or information who could be on their side of the world. We can do that in milliseconds. There's obviously systems and networks that exist for people to exchange text, images, videos, money. Then there’s commerce, which is what Shopify is all about. 

What we thought about for Klavyio was, what would it be like if you could take a picture of yourself, but an authentic version of yourself, and connect it to the internet? What if you could be yourself, but at an internet scale? 

For us as people, we know how to be authentic, but we can only be in one place at one time, and we all have to shut off for eight or nine hours every night. What would it take if we could take who we are, our personality, and connect it to the internet so that as many people could experience it whenever they want. 

That was the thesis behind Klaviyo. What could you apply that to? Obviously it makes a lot of sense for businesses and retailers and merchants. If you're a consumer business, you have way more customers than you can ever actually talk to. So how do you get them to see the best side of yourself, on an internet scale? We thought about the topology, or how the internet is structured, and what struck us was, to the extent that personalization was possible, a lot of it was being governed by a handful of big internet companies.

Even though you and I can, in theory with the internet, send each other information or communicate directly with each other, the reality was a lot of us were just working through big platforms. If you think about the first era of the internet, it was all just building internet infrastructure, and it was hard. Building servers was hard. Building software was hard. Building great user experiences was hard. We feel the next age of the internet is going to be all about, rather than those tools being centralized in one place, wouldn’t it be awesome if those tools were just democratized?

There are a lot of platforms out there that let you publish yourself or run your business, but wouldn't it be cool if everybody could take the best parts of that technology and then just make it their own. That's what we're really excited about. We think about that as our mission. It’s to help creators, businesses, and individuals own their own destiny and be in control. When I think about Shopify, whether it's about making commerce better for everyone or arming the rebels, it’s all shades of the same theme. 

There's a handful of companies that are after this thesis that the internet really should be connecting everybody almost as individual nodes in a graph. So what happens when you do that and how powerful is that? I'm really excited to explore that because if you look at the last 25 years of the internet, we've seen or experienced a lot of things. It's crazy to think about. What if we gave everybody the sophistication of some of the biggest tech companies in the world today, but we made that available to anybody? Just think about how many entrepreneurs are going to be able to do incredible things with that, if they're empowered that way. 

"What if we gave everybody the sophistication of some of the biggest tech companies in the world today, but we made that available to anybody? Just think about how many entrepreneurs are going to be able to do incredible things with that, if they're empowered that way."

Andrew’s advice for new founders: Just start and ship quick

Fatima: What advice would you give to new founders who are trying to build their businesses in the Shopify ecosystem? 

Andrew: Some of this is just generic to entrepreneurship in general, but the first is, don't wait to get started. Just get going. I used quitting my job as a forcing function. I’d had all these side night and weekend projects, but I was like, I'm never going to be all in until I’m in. That's not to say that you have to go full time, but the sooner you take that idea that's been floating around in your head and you get to work on it, the better. Once you do that, you get the big endorphin rush that everybody gets is when they finally ship something, when they get that first user, maybe that first customer.

Obviously this applies to Shopify, but you want to pick technologies, tools, and platforms to work with that make it really easy to get going. The last thing you want to do is spend months wading through the waters just to ship something.

What's great about Shopify is the real focus on developer experience. In the early days, we spent a bunch of time with companies that didn't really think about APIs. They barely knew what they were. They were old school APIs doing maybe SOAP. They didn’t realize what REST was. Nowadays we think about GraphQL.

It's important to try to optimize for getting something shipped as fast as you can. The magic of that is you want to go somewhere where the development's gonna be really easy. And then I’d say go where people already are. That was a big part of our strategy. Finding customers is really hard. Anything you can do to make it easy to find the first one, two, five, 10, helps a ton. You want to be in a fast feedback loop. 

There are some people that care a lot about the speed of their product, the user experience. But whether it's the people that you hire or the people that you work with as a founder, you want to pick people that have the same values as you. Honestly it makes life more fun, so aim for those things.

"So yes, get started today. Don't waste time. After you listen to this will be a good time to get started. Then go where people are, and go with people that have similar ethos to you."

So yes, get started today. Don't waste time. After you listen to this will be a good time to get started. Then go where people are, and go with people that have similar ethos to you.

Whether it's the people that you hire, or people that you work with or found companies with, or companies that you partner up with, you want to pick people that have the same values as you. Honestly it makes life more fun, so aim for those things.