Advertising in 2019 is cacophonous, annoying — and sometimes creepy.
But that’s largely because of you. Your attention has gotten fragmented. Are you watching Netflix, scrolling through Instagram, or speed-reading an e-mail about a flash sale? It’s tough to figure out what gets your attention and lures you to the checkout page of an e-commerce site.
That’s the messy situation Andrew Bialecki and Ed Hallen wanted to address in 2012, when they started a company called Klaviyo. (The name is an adaptation of the Spanish word “clavija,” which means peg or pin.) Bialecki had left a Cambridge startup called Performable after it was bought by HubSpot; Hallen was earning an MBA at MIT’s Sloan School of Management. They began laying the groundwork for the company and writing the initial software code in empty conference rooms at Sloan.
As Bialecki explains it, there was a divide between two kinds of tools: analytics tools that help you understand what people are doing on a website, such as what products they are considering, and messaging tools that send them a marketing e-mail.
“That seemed kind of silly,” Bialecki said.
The pair wanted to create a tool that could bring together analytics and messaging, so companies could create customized communications for different customers. For instance, one customer might need more information about a product before buying, and another who had bought in the past might be on the verge of a second purchase.
Bialecki built the tool, and Hallen focused on finding customers. Their first was Blank Label, a Boston seller of bespoke men’s clothing, in 2012. Today, Bialecki said, Klaviyo has 20,000 paying customers, including major players such as Unilever and smaller ones like Brooklinen, which sells bedding.
(Hallen decided to move to Colorado with his wife last year, and while he remains a board member, he isn’t involved with the company on a daily basis.)
Part of what helped accelerate the company’s growth was that there was a concrete and quick return on investment for Klaviyo’s clients if its software persuaded their customers to make purchases.
“He made the ROI story so simple,” said Elias Torres, who hired Bialecki at Performable and later invested in Klaviyo. “So the product just sells itself.”
Bialecki views Klaviyo as software that can help companies have marketing-related conversations on a massive scale, but treat different types of customers differently — and from there to branch out beyond e-commerce sales.
“We’re going to try to do that across a wide variety of fields. If it works to maximize sales, couldn’t it apply just as well for teachers who want to have conversations with students to maximize their learnings, or a doctor who wants to maximize health with a really big group of patients? This loop is the same anywhere; each of us as individuals can only remember so many things in our head.”
Smart software, Bialecki said, could potentially expand that infinitely.
In April, Klaviyo collected $150 million in capital from Summit Partners, a Boston private equity firm. The company had raised about $6 million prior to that, and only after it had become cash-flow positive and hit revenue targets that allowed the founders to set their own terms.
The bulk of the $150 million went to purchasing stock from founders, early investors, and some longtime employees, said Klaviyo board member Jon Karlen, the founder of Acadian Software. That sort of transaction, which companies such as Wayfair and HubSpot have done, can help eliminate some of the itchiness founders sometimes have to sell a company to the first bidder who pulls out a checkbook.
Another part of the $150 million, Bialecki said, will go toward “product development and expansion in the next year or two.” Klaviyo has 275 employees and plans to hire another 75 before year’s end. Later in September it will hold its second annual customer conference in Boston; Bialecki said they expect about 600 attendees, roughly double last year’s number.
Klaviyo is part of a growing cluster of local companies that focus on new technologies for marketing, or martech. Others include:
■ Adhark, which uses artificial intelligence to evaluate which images will be most appealing to consumers in ad campaigns or on websites.
■ Grapevine, which helps marketers find social media personalities, or “influencers,” to build awareness of their products.
■ User Interviews, which makes it easy to get feedback on a new product or design from actual human beings.
■ Zaius, which helps marketers collect data about customers and deliver more targeted messages.
“Boston breeds a lot of pharmaceutical and biotech startups, because the ecosystem is there,” said TJ Mahony, a partner at Klaviyo investor Accomplice VC.
Martech companies like Constant Contact (founded in 1995) and HubSpot (founded in 2006) began to “seed the DNA,” Mahony said, of a crop of more-intelligent, more-automated marketing tools being built in Boston, by alumni of those two companies and others.
Klaviyo, Mahony said, may be “the hottest company in Boston no one has heard about.” But that could soon change. Torres, Bialecki’s former boss, said Bialecki is “obsessed about building a pillar company in Boston. He’s going to put up a big building here in Boston with the company’s name on it.”