Klarna Raises $639M at $45.6B Valuation - Fintech News

Klarna Secures $639 Million, Reaching $45.6 Billion Valuation

Just over three months following its previous funding event, European financial technology leader Klarna has announced a new investment of $639 million. This results in a substantial post-money valuation of $45.6 billion for the company.

Speculation regarding additional funding at a valuation exceeding $40 billion had circulated in recent weeks. However, the Swedish buy now, pay later innovator and emerging bank refrained from commenting until this moment.

Investment Details and Growth

SoftBank’s Vision Fund 2 spearheaded the latest funding round, with contributions also coming from current investors including Adit Ventures, Honeycomb Asset Management, and WestCap Group.

This new valuation signifies a 47.3% increase compared to Klarna’s $31 billion post-money valuation from early March, when it secured $1 billion. It also represents a 330% jump from its $10.6 billion valuation during last September’s $650 million raise.

Prior investors encompass Sequoia Capital, SilverLake, Dragoneer, and Ant Group, among others.

The recent financing solidifies Klarna’s standing as the most highly valued private fintech company in Europe.

Expansion Plans and U.S. Market Momentum

In an exclusive discussion with TechCrunch, Klarna’s CEO and founder, Sebastian Siemiatkowski, stated the company has experienced significant expansion in the United States. A portion of the new capital will be allocated to further growth both domestically and internationally.

Over the past year, the fintech has witnessed “massive momentum” within the U.S. market, now serving over 18 million American consumers. This is an increase from 10 million at the close of last year’s third quarter, representing a 118% year-over-year growth.

Klarna currently collaborates with 24 of the top 100 U.S. retailers, a figure the company claims is “greater than any of its competitors.”

Globally, Klarna operates in 20 markets, boasts more than 90 million active users, and processes over 2 million transactions daily on its platform.

Financial Performance

The company’s strong performance is reflected in its financial results. In the first quarter, Klarna recorded a transaction volume of $18.1 billion, compared to $9.9 billion in the same period of the previous year.

For the entirety of 2020, the platform processed $53 billion in volume. For comparison, Affirm projected $8.04 billion in volume for fiscal year 2021, while Afterpay anticipated $16 billion.

March 2021 marked a record month for global shopping volume, with $6.9 billion in purchases completed through Klarna.

Klarna surpassed $1 billion in revenue in 2020. While profitable for its initial 14 years, the company has operated at a loss for the past two years, a deliberate strategy according to Siemiatkowski.

“We’ve scaled up massively with investments in growth and technology, but operating at a loss is unusual for us,” he explained to TechCrunch. “We will return to profitability shortly.”

Global Reach and Future Strategy

This year alone, Klarna has entered six new markets, including New Zealand and France, with a recent launch in the latter. Further expansion into additional markets is planned.

The company employs approximately 4,000 individuals, with several hundred based in the U.S. in cities like New York and Los Angeles. Additional offices are located in Stockholm, London, Manchester, Berlin, Madrid, and Amsterdam.

Klarna partners with over 250,000 retailers worldwide, including major brands like Macy’s, Ikea, Nike, and Saks. Its buy now, pay later option is also directly accessible to consumers through its shopping application.

Consumers can utilize the Klarna app for immediate or deferred payments, manage expenses, and view available credit. Features include initiating refunds, tracking deliveries, and receiving price-drop alerts.

“Our shopping browser enables users to utilize Klarna universally,” Siemiatkowski stated. “No other provider offers this capability, as they are typically restricted to integrations with merchants.”

The company intends to allocate its new capital towards acquisitions, particularly “acqui-hires,” according to Siemiatkowski. Crunchbase indicates nine acquisitions to date, most recently acquiring Los Gatos-based content creation services provider Toplooks.ai.

“We are the market leader in this space and seek new partners to support us,” Siemiatkowski told TechCrunch. “This enhances our prospects for continued success. We now have increased financial resources to invest further in the long term.”

IPO and Sustainability

Klarna has frequently been the subject of speculation regarding a potential public listing via a direct listing. Siemiatkowski indicated the company already operates with many characteristics of a public entity, offering stock to all employees and publishing financial reports. This suggests the company is not currently prioritizing an IPO.

“We provide quarterly reports to national authorities and function as a fully regulated bank, fulfilling the expectations of public companies regarding risk control and compliance,” he explained to TechCrunch. “We are approaching a point where an IPO would be a natural progression, but we are not actively preparing for one at this time.”

In conjunction with its last funding round, Klarna launched the GiveOne initiative to support planetary health. With this latest round, the company is again dedicating 1% of the equity raised to environmental causes.

Investors express strong confidence in the company’s trajectory and market position. Yanni Pipilis, managing partner for SoftBank Investment Advisers, emphasized Klarna’s growth is “rooted in a profound understanding of evolving consumer purchasing behaviors,” a trend SoftBank anticipates will continue to accelerate.

Eric Munson, founder and CIO of Adit Ventures, stated his firm believes “the best is yet to come as Klarna expands its addressable market through global expansion.”

Siemiatkowski envisions Klarna’s ultimate goal as challenging the $1 trillion-plus credit card industry.

“We are witnessing all the indicators of genuine competition emerging in this sector this decade,” he stated. “This presents an opportunity to fundamentally disrupt the retail banking landscape.”