In May, Klarna announced that it would cut ten percent of its jobs.
(Photo: picture alliance / ZUMAPRESS.com)
Frankfurt Klarna is no longer Europe’s most valuable unlisted start-up. The Swedish payment service provider raised 800 million dollars in a financing round, as the company announced on Monday. However, the valuation fell by 85 percent to 6.7 billion dollars (about 6.6 billion euros). In the last round of financing in June last year, Klarna was valued at $45.6 billion.
This means that the payment service provider is also feeling the effects of the current market environment of inflation, higher interest rates and the war in Ukraine, which has been putting tech companies under strong pressure worldwide for months. During the corona pandemic, the entire payment industry still benefited from the fact that online trade was booming and growth picked up.
“Some payment companies were highly overvalued, which was also reflected in high takeover prices. The growth that existed during the corona crisis cannot be continued in this way,” said Sebastian Maus, payment expert and partner at the consulting firm Roland Berger at the end of May.
In fact, Klarna suffered a loss of about $245 million in the first quarter of this year, even as more and more transactions go through the payment service provider. For the whole of last year, the loss was about $688 million.
Top jobs of the day
Find the best jobs now and
be notified by email.
Despite everything, the Klarna boss speaks of success
Klarna boss and co-founder Sebastian Siemiatkowski still rated the financing round as a success on Monday. It is a testament to the strength of Klarna’s business that investors have recognized the payment service provider’s strong position during the sharpest decline in global stock markets in over 50 years, he said.
Both new investors such as the sovereign wealth fund Mubadala Investment Company from Abu Dhabi and existing investors such as the US venture capitalist Sequoia are participating in the financing round.
“Klarna’s rating is solely due to the fact that investors suddenly vote differently than in recent years,” said Michael Moritz, partner at Sequoia.
Klarna is one of the best-known so-called BNPL companies. In technical jargon, “Buy now, pay later” (BNPL) stands for paying in installments and on account when shopping online. In addition, Klarna wants to make shopping on the Internet as convenient as possible for consumers, for example with an extra shopping app.
At the end of May, the Swedish payment service provider announced that it would cut every tenth position. Specifically, 700 of a total of 7,000 jobs at Klarna will be eliminated. Klarna cited the more difficult economic environment as the reason for this. “When we made our business plans for 2022 last fall, the world looked very different than it does today,” Siemiatkowski explained at the time.
Klarna should have completely redefined the term “downrounds”. “Downrounds” refer to financing rounds in which the valuation of startups decreases. Concern about such rounds of financing is particularly growing this year due to the market environment. Now Klarna’s rating has collapsed to a whole new level.
The new most valuable non-listed startup in Europe is the payment company Checkout.com. In January this year, the British raised a billion US dollars and increased their valuation from 15 to 40 billion dollars.
More: Big growth – and high losses: Klarna payment service quintupled its shortfall