According to anonymous sources familiar with the company, the Swedish payments company Klarna Bank AB is close to agreeing to a deal to raise new capital from existing investors led by Sequoia Capital at a valuation of roughly $6 billion. The buy-now-pay-later (BNPL) platform that was once Europe’s most valued startup would see a startling decrease in valuation if the fundraising round, which has not yet been finished, is successful. In a statement sent through email, Klarna stated, “As always, we do not comment on fundraising or valuation speculation.”
In 2021, Klarna raised more than $600 million from a team of investors led by SoftBank’s Vision Fund II. According to Klarna, other investors like Adit Ventures, Honeycomb Asset Management, and WestCap Group also contributed to the funding round. This gave it a valuation of $46 billion, surpassing some of the largest banks in the region. With this investment, backed by SoftBank’s Vision Fund 2, Klarna became officially recognized as the top unicorn in Europe and the second-largest fintech startup by valuation behind Stripe.
Sebastian Siemiatkowski, Klarna’s founder and CEO, said in a statement after the funding round last year, “Consumers continue to reject interest-and fee-laden revolving credit and are moving toward debit while simultaneously seeking retail experiences that better meet their needs. More transparent and convenient alternatives align with evolving global consumer preferences and drive worldwide growth.”
The difficulties Klarna is currently having acquiring money coincide with a steep decline in investor interest in fast-growing tech ventures burning through tens of millions of dollars in cash and have not yet made a profit. Wall Street Journal reported that the agreement is still being finalized. However, if successful, it will mark a major change of fortune for Klarna, which was enjoying huge success when it secured $639 million in a round-headed deal by SoftBank’s Vision Fund 2 at a valuation of $45.6 billion last year.
In recent months, valuations have plummeted, and some major tech stocks have taken a hit. Major BNPL participants and Klarna rivals like Affirm Holdings Inc (NYSE:AFRM) have lost more than 80% of their worth just this year.
One of the most high-profile tech platforms in the world, Klarna, had been highly anticipated to go public this year. Sebastian Siemiatkowski, the chief executive of Klarna, stated in an interview in May that the company was in discussions with investors to raise additional funds and had no intentions to go public this year. However, the market for IPOs has drastically declined after a record-breaking 2021 because of market uncertainty following Russia’s invasion of Ukraine and a broader sell-off in tech shares.
To compete with companies like publicly traded Affirm, Klarna started making a powerful push into the U.S. market. Early in June, Klarna revealed that its “U.S. customer base has expanded by over 65%, reaching over 25 million users” over the last year. The buy now, pay later (BNPL) market has recently suffered, but the enormous decline in Klarna’s price makes the term “down round” have a whole new meaning.
How Does Klarna Work?
Klarna Bank AB, commonly Known as “Klarna,” is a Swedish fintech business that offers online financial services such as direct payments, payments for online stores, and post-purchase payments. Over 4,000 individuals work for the company, most based in the Stockholm and Berlin offices. As of 2011, Klarna handled over 40% of all e-commerce sales in Sweden. The company processed nearly US$80 billion in internet sales in 2021.
The primary service offered by Klarna is payment processing for the online retail sector, which includes handling client payments and shop claims. It has earned a reputation as a “Buy now, pay later” (BNPL) service provider by offering customers credit on their purchases during the checkout process.
Featured Image: DepositPhotos © baranq
