Surviving startups looking ahead
Klaviyo’s IPO could be the first of many
Local tech startups have suffered through tighter funding conditions the past two years, leading to layoffs and office closings. But there are signs the market may be turning more positive.
For companies that made it through the rough times, the stock market is presenting an opportunity to go public. In late August, Boston marketing-tech firm Klaviyo filed for an initial public offering alongside British chip designer Arm and delivery service Instacart in California. If successful, Klaviyo would mark the first major tech IPO in Boston in more than two years, and others could follow. Last week, climate-tech firm Freight Farms and quantum-computing startup Zapata AI said they each plan to go public by merging with a special purpose acquisition company, or SPAC, in the next year.
Klaviyo’s filing disclosed not only that the 11-year-old company is posting strong growth — revenue grew 54 percent to $321 million in the first half of the year — but also that it reached a key milestone valued by Wall Street: profitability. The company had net income of $15 million in the first half versus a loss of $25 million in the same period a year earlier.
While many tech companies have gotten squeezed by the dominance of giants like Apple and Google, Klaviyo is a beneficiary. Apple and Google have cracked down on the collection and sale of data about what consumers are doing on their smartphones. The crackdown means that e-commerce companies need to rely on data they collect about their own customers, perhaps with some AI help, which just happens to be the service Klaviyo offers.
“As more consumers have chosen not to share their data, marketing channels that are based on third-party data, such as social media platforms, have become less reliable and efficient,” the company noted in its IPO filing. “Our
customer data store was designed to consolidate customers’ first-party data at scale, synchronizing and unifying data.”
At the other end of the spectrum, where profitability is harder to find, Bloomberg reported that Boston e-commerce startup Perch, which bought a host of small Amazon sellers, is suffering from a slowdown in online sales growth and a heavy debt load. Senior lender Victory Park Capital and lender Apollo Global Management are seeking to sell Perch but have had trouble rounding up a buyer willing to take on $400 million in debt, Bloomberg reported. Perch did not respond to a request for comment.
The strategy of buying smaller Amazon sellers and adding some advertising and marketing tech improvements once seemed more promising. Local firms Thrasio and Perch both reached unicorn status in recent years, with private valuations exceeding $1 billion.
The hunt for profitability is also on for startups that are already public. Restaurant-tech firm Toast is moving slowly in that direction: Its loss from operations in the first half of the year was $173 million, down from a loss of $200 million in the first half of 2022. Excluding a bevy of costs such as interest, taxes, and stock-based compensation, Toast lost only $3 million in the first half and said it would become profitable on that basis in the second half of this year.
One move that might have helped — a new 99-cent fee added to all transactions over $10 — didn’t fly with Toast’s restaurant clients. Still, the company’s bottom line should benefit from moving into cheaper subleased space near the Seaport next year.
Chief executive Chris Comparato won’t be around to lead the office move, however. Toast announced last week that cofounder and current chief operating officer Aman Narang will take over as CEO on Jan. 1. Comparato, who has headed the company since 2015, will remain on the board.