As was previously reported, Klarna has raised $800 million in funding but at an even lower valuation. Klarna raised the capital at a “post-money” valuation of $6.7 billion. This is a profound drop in valuation as Klarna was valued at $45.6 billion in the not-so-distant past. The decline in value is indicative of both the challenging economic environment and concerns for Klarna’s growth as a digital bank and online lender active in the BNPL sector.
In a statement, Klarna said the new money will primarily be used to “expand Klarna’s leading position in the United States.”
Klarna CEO Sebastian Siemiatkowski, issued the following statement on the funding:
“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 recognized our strong position and continued progress in revolutionizing the retail banking industry. Now more than ever businesses need a strong consumer base, a superior product, and a sustainable business model.”
The Twitterati quickly pointed out that to date, Klarna has raised $4.5 billion in equity to achieve a valuation of just a bit higher than that amount.
Klarna has raised $4.5b of equity over the last 18 years, to build a business now worth $6.5b 🤔
— Christian Faes (@ChristianFaes) July 12, 2022
Siemiatkowski hopped on Twitter to defend the steep haircut in valuation claiming they are not immune to public peers being down 75% to 90% and thus their valuation drop is matching the market. He added some “facts that the media might omit.”
1. Klarna has been profitable for its first 14 years of existence. 2017 = 14% EBT. Our established markets currently generate 1 bn in gross profit per year.
2. Since 2019 we have invested to become US market leaders with 30 m users, 60% brand aware. and 30 of top 100 US sites
— Sebastian Siemiatkowski (@klarnaseb) July 11, 2022
Siemiatkowski noted they have been profitable for their first 14 years of existence while highlighting their performance in the US, adding that “what does not kill you, makes you stronger.”
Klarna said despite the challenging market, they received “strong backing” from existing investors including Sequoia. Of course, the money may have needed to keep the lights on and the alternative was rather worse.
Michael Moritz, Partner at Sequoia a lead investor, defended the company:
“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”.