The PE firm making billions off the Klaviyo IPO only 4 years after investing

Klaviyo, a marketing and automation company, is one of three IPOs, including Arm Holdings and Instacart, that were expected to jumpstart the IPO market this past month. 

Klaviyo turned in a respectable performance, but its debut was far from a moon shot. After raising $345.2 million, Klaviyo’s stock rose 9.2% on Sept. 20. The shares have since remained above its $30 IPO price and closed Tuesday at $34.11, up about 14% from its offer price. Arm jumped 25% during its first day on Sept 14 but has since lost much of those gains. (The stock ended Tuesday at $53.52, up about 5% from its $51 IPO price.) Instacart, meanwhile, rose 12% during its debut on Sept. 19. Its stock ended Tuesday at $29.89, making Instacart the first of the trio to close below its IPO price, which was $30. 

Klaviyo’s success so far has made billionaires out of its founders: Andrew Bialecki, CEO, and Ed Hallen, chief product officer. Neither executive sold stock in the IPO. Bialecki’s stake is currently worth about $3.4 billion, while Hallen’s holding is valued at roughly $1.12 billion Monday.

But private equity firm Summit Partners did own a big chunk of Klaviyo, and sold a slice at the IPO. Summit is making more than seven times its money with its investment, according to Fortune’s calculations.

Founded in 1984, Summit is a Boston PE firm that currently manages more than $37 billion in capital. Summit is known for its growth equity investments and typically provides from $10 million to $500 million per company, according to the firm’s website. The firm invests across three sectors: technology, healthcare, and life sciences, as well as growth products and services. In 2021, Summit raised $8.35 billion for its eleventh U.S. growth equity fund. 

Private equity firms often use the IPO market, as well as mergers, to sell their stakes in companies. About 400 companies went public in 2021, a record year for new issues. More than one-fourth, or 106, of those IPOs had significant backing from private equity, according to Renaissance Capital, a provider of pre-IPO research that manages two IPO-focused ETFs (NYSE: IPO, IPOS). The poor performance of IPOs from 2021 is a major reason, along with interest rates and inflation, that new issues have largely been on pause since then. Just 13%, or 51, IPOs from 2021 are trading above their offer price, Renaissance said. Summit did back three IPOs from 2021: a.k.a. Brands, Solo Brands, and EngageSmart. All three are trading below their IPO prices. 

Summit’s first investment in Klaviyo occurred in April 2019 when it provided $150 million to the company. In late 2020, Summit put in another $100 million when it acquired 6,611,948 Klaviyo shares at $15.12413 each, according to a regulatory filing.  

The following year, from May to July of 2021, Summit invested again. It bought 22,464 Klaviyo shares at a price of roughly $33 each, spending $749,881. In all Summit invested nearly $251 million. The firm doesn’t appear to have received any dividends, according to the SEC filing. 

Summit offloaded about 4.9 million shares in the Klaviyo IPO, making about $147.5 million. The sale reduced Summit’s Series B stake to about 49.5 million or 21.5%. Summit’s remaining holding, comprising 49.5 million Series B shares, is valued at $1.69 billion (at $34.11 a share). Summit’s gains from Klaviyo come to about $1.83 billion ($1.69 billion plus the $147.5 million from the stock sale). This means Summit is making more than 7 times its money, even though most of its gains are still on paper.

Summit and Klaviyo declined to comment. 

See you tomorrow,

Luisa Beltran
Twitter: @LuisaRBeltran
Email: luisa.beltran@fortune.com
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Joe Abrams curated the deals section of today’s newsletter.

VENTURE DEALS

- Sierra Space, a Louisville, Colo.-based company building space transportation vehicles and habitats in space, raised $290 million in Series B funding. MUFG, Kanematsu Corporation, and Tokio Marine & Nichido Fire Insurance led the round and were joined by existing investors. 

- Kneron, a San Diego-based AI chip developer for self-driving cars, smart home products, and security products, raised $49 million in funding from Foxconn, Alltek, and others. 

- traceless materials, a Hamburg, Germany-based startup that turns agricultural leftovers into plastic alternatives, raised €36.6 million ($38.7 million) in Series A funding. UB Forest Industry Green Growth Fund and Blue Ocean Fund led the round and were joined by GLS Bank, Hamburg, Hamburger Sparkasse, Planet A Ventures, High-Tech Gründerfonds, and b.value.

- Cartwheel, a Cambridge, Mass.-based platform that offers telehealth services to students struggling with mental health issues, raised $20 million in Series A funding. Menlo Ventures led the round and was joined by Reach Capital and existing investors General Catalyst, BoxGroup, and Able Partners.

- Nx, a Gilbert, Ariz.-based coding platform providing tools to web and software developers, raised $16 million in Series A funding from Nexus Venture Partners and a16z.

- Evvy, a New York City and London, U.K.-based vaginal health testing and care provider, raised $14 million in Series A funding. Left Lane Capital led the round and was joined by General Catalyst, Labcorp Venture Fund, RH Capital, Ingeborg Investments, G9 Ventures, Virtue, and Amboy Street Ventures. 

- Revefi, a Seattle, Wash.-based platform for management and analysis of large data sets, raised $10.5 million in seed funding. Navin Chaddha led the round and was joined by GTMfund, Neythri Futures Fund, Ajeet Singh, and others.   

- Erudit, a Miami, Fla.-based AI-powered company designed to track employee engagement, raised $10 million in Series A funding from Conexo Ventures, Athos Capital, Ignia Partners, True Blue Partners, and Fondo Bolsa Social.  

- Vega, a London, U.K.-based platform for high-net-worth individuals to access their entire portfolio in one place, raised $8.3 million in seed funding. Motive Ventures led the round and was joined by Picus Capital, Citi Ventures, and others. 

- Cognition Corporation, a Lexington, Mass.-based data management and automation platform for the life sciences industries, raised $6 million in funding from Spring Lake Equity Partners and members of Cognition’s management team. 

- Digma, a Santa Clara, Calif.-based platform designed to monitor and analyze code for risks to help engineers work efficiently, raised $6 million in seed funding. at.inc/ and Sorenson Ventures led the round and were joined by Abstraction Capital, Inner Loop Capital, Hetz Ventures, and angel investors. 

- Pontoro, a Mountain View, Calif.-based company designing a platform that is intended to provide private investors with enhanced customization and liquidity, raised $4.6 million in additional seed funding. Ulu Ventures led the round and was joined by Illuminate Financial, Nevcaut Ventures, W11 Capital, and others.

- Meeno, a San Francisco-based AI-powered app that gives relationship advice to users, raised $3.9 million in seed funding. Sequoia Capital led the round and was joined by AI Fund and NEA.

- Avantis Labs, a New York City-based platform where institutional and retail investors can trade crypto and real-world assets on a decentralized exchange, raised $4 million in seed funding. Pantera Capital led the round and was joined by Founders Fund, Galaxy, Base Ecosystem Fund, and Modular Capital. 

- Crediverso, a Los Angeles, Calif.-based company providing free financial and educational tools to underserved communities, raised $3.5 million in pre-Series A funding from Torch Capital, Gaingels, Bessemer Venture Partners, and Act One Ventures.

- Savoy Life, a Tysons, Va.-based virtual healthcare platform for patients of long-term care, raised $3 million in pre-seed funding from Red Cell Partners. 

PRIVATE EQUITY

- Advantive acquired Proplanner, an Ames, Iowa.-based manufacturing consulting and solutions provider. Financial terms were not disclosed. 

- apexanalytix, backed by KKR, acquired Darkbeam, a London, U.K.-based cyber risk management provider. Financial terms were not disclosed. 

- Heartwood Partners acquired Somafina, a Cedartown, Ga.-based company that helps nutraceutical companies design and manufacture supplements and shipping materials. Financial terms were not disclosed. 

EXITS

- Arlington Capital Partners agreed to acquire Exostar, a Herndon, Va.-based platform designed to help companies securely and efficiently digitize, from Thoma Bravo. Financial terms were not disclosed. 

OTHER

- Alfasigma S.p.A agreed to acquire Intercept Pharmaceuticals, a Morristown, N.J.-based manufacturer of liver disease therapeutics, for $794 million. 

FUNDS + FUNDS OF FUNDS

- Paine Schwartz Partners, a New York City-based private equity firm, raised $1.7 billion for its sixth fund focused on sustainable food and agriculture companies.

PEOPLE

- First Round Capital, a San Francisco-based venture capital firm, hired Liz Wessel as partner. Formerly, she was with Y Combinator.

- 65 Equity Partners, a Singapore-based private equity firm, hired Pascal Heberling and Leon Brujis as partners. Formerly, Herberling was with BC Partners, and Burjis was with Palladium Equity Partners.