Stockholm-based fintech giant Klarna announced on Monday that it has raised $800M (approximately €798.54M) in funding at a post-money valuation of $6.7B (approximately €6.68B).
This valuation is down nearly 85 per cent from the $45.6B (approximately €45.51B) price tag the retail bank, payments, and shopping service provider attracted in June, 2021, but in line with the decline in the valuation of its peers
In a statement, Klarna blames its falling valuation on “the worst set of circumstances to afflict stock markets since World War II: high inflation, rising interest rates, growing recessionary fears, the effects of the first pandemic since 1918, difficulties in conducting business due to supply chain disruptions, rising gas prices, and, particularly in Europe, the disruptions brought on by the conflict in Ukraine.”
Investors in this round
Despite the challenges, Klarna received strong backing from its existing investors, including Sequoia, the founders, Bestseller, Silver Lake, and Commonwealth Bank of Australia.
Michael Moritz, Partner at Sequoia, says, “The shift in Klarna’s valuation is entirely due to investors suddenly voting in the opposite manner to the way they voted for the past few years. The irony is that Klarna’s business, its position in various markets and its popularity with consumers and merchants are all stronger than at any time since Sequoia first invested in 2010. Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve.”
New investors, including Mubadala Investment Company, the $284B sovereign fund of the UAE, and the Canada Pension Plan Investment Board (CPP Investments) which manages over $539B AUM, also participated in this round.
Following the primary round completion, Klarna now hopes to allow all of its more than 1000 smaller shareholders to participate on a pro-rata basis in a process that will continue for the coming few weeks.
Capital utilisation
Klarna says that the proceeds from this round will primarily be used to expand its market position in the US.
CEO of Klarna, Sebastian Siemiatkowski, says, “It’s a testament to the strength of Klarna’s business that, during the steepest drop in global stock markets in over fifty years, investors recognised our strong position and continued progress in revolutionising the retail banking industry. Now more than ever businesses need a strong consumer base, a superior product, and a sustainable business model.”
Klarna’s growth in the past
Klarna claims that its business has transformed into a global leader and innovator in the payments and retail banking industry since 2018, allowing it to create a “solid” foundation as a more challenging times approach. Some of the company’s highlights include:
- With close to 30 million customers, 60 per cent brand awareness, and 30 of the top 100 US retailers – more than Affirm and Afterpay combined – Klarna has transformed from nothing to the market leader in the US. Volumes more than tripled YoY from 2020 to 2021.
- The company launched its services in 11 new markets during this time period. Among them are France, Italy, Spain, Canada and Australia. Currently, it covers over 45 markets.
- With 150 million users worldwide, Klarna is used 2 million times each day, and has more than 60 million app downloads, making it larger than Amex globally.
- Volume has grown in the UK by close to 8X since 2018, reaching 18 million consumers from just 4 million in 2018 – representing a 333 per cent increase, with 22,000 retail partners.
- The company’s established European markets are making $1B in gross profit. This is in parallel to putting $100M back into the pockets of consumers by cutting fees over the last 12 months.
Sebastian Siemiatkowski says, “Klarna is the only fintech in the world that has been profitable for its first 14 years of existence. In 2017, Klarna recorded a 12 per cent EBT margin. In the last few years, however, we have made significant investments as we took the opportunity to transform Klarna into a global player. With the recent shift in investor sentiment we also now shift our focus and look forward to returning to a modus operandi of growth and profitability. The foundation for a global leader has been set.”
Brief about Klarna
Founded in 2005 by Niklas Adalberth, Sebastian Siemiatkowski, and Victor Jacobsson, Klarna is an e-commerce payment solutions platform for merchants and shoppers. The platform gives customers the freedom to choose how and when to pay. The company has over 400,000 global retail partners, including H&M, Saks, Sephora, Macys, IKEA, Expedia Group, Samsung, ASOS, Peloton, Ralph Lauren, Abercrombie & Fitch, Nike, and Shein.
