Europe’s most valuable fintech startup just got a lot more valuable.
Klarna announced on Monday that it has raised $1 billion in new funding and earned a lofty valuation of $31 billion. The company, which set out to raise $500 million in the just-ended round, credited investor demand for the exceptional amount raised. Klarna CEO Sebastian Siemiatkowski also cited strong growth in the U.S. as a reason why investor dollars are flocking toward his company.
“What definitely has accelerated and changed is the success in the U.S. market,” Siemiatkowski said. “Investors are seeing Klarna getting ahead of its competitors. I think that has changed the perspective and changed the view on our valuation.”
According to Siemiatkowski, investors are seeing Klarna as the king of an e-commerce wave that is making Buy Now Pay Later a mainstream financing approach. The reverse layaway strategy of enabling consumers to receive goods and services now and pay for them in equal installments over time has made BNPL the hottest new thing in online shopping. Klarna, which was founded in 2005 and made its Finovate debut seven years later, has been a pioneer in “after delivery payment” and other forms of consumer financing for years. This week’s financing is, in part, a recognition of this fact and a bet that, amid rising competition, Klarna will come out on top.
Right now, both Siemiatkowski and Klarna’s backers seem equally eager to take on legacy consumer financing options as well as Klarna’s BNPL rivals. Pointing out how the buy now pay later approach is fairer insofar as it makes the same offer to all consumers, Siemiatkowski adds, “There’s a number of investors out there that agree with us. They see that this credit card industry is actually at its core flawed and needs some innovation.”
In addition to using the new capital for acquisitions, the company is more interested in synergies that will “help people save time and money” than it is in purchasing rivals. That said, Siemiatkowski does have a few novel uses for at least some of the company’s new funding: Klarna will donate approximately $10 million to organizations that are dedicated to fighting climate change.
More than 30 current and new investors participated in Klarna’s latest fundraising, including Silver Lake, Sequoia Capital, BlackRock, and HMI Capital. Other investors included Singaporean sovereign wealth fund GIC and individual investor, rapper Snoop Dogg.
Headquartered in Stockholm, Sweden, Klarna claims 90 million users and 250,000 merchant partners around the world. The company is optimistic about its growth in the U.S., saying they expect it to overtake Germany as its biggest market by the end of this year. The company has inked partnerships with 20 of the top 100 brands in the U.S., and said it gained a million new customers a month in the States in the final quarter of last year.
Photo by Jean-Daniel Francoeur from Pexels