Klarna Bank AB announced it had raised $ 1 billion valued at $ 31 billion. This is three times the price investors gave the Swedish payment firm in its latest round of funding after rapidly growing its US business.
Europe’s most valuable startup initially wanted to raise $ 500 million. Sebastian Siemiatkowski, Klarna’s chief executive officer, said high investor demand led to this doubling, but could have been as high as $ 3 billion. As recently as September, it was worth $ 10.6 billion.
“What has definitely accelerated and changed is the success in the US market,” said Siemiatkowski in an interview. Investors see that Klarna is ahead of its competitors, he said. “I think that changed the perspective and view of our assessment.”
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The company has around 90 million users worldwide and the US is well on the way to overtaking Germany as the largest market by the end of 2021. Last week it signed 20 of the 100 largest brands in the US and attracted a million new customers a month there in the final quarter of 2020.
Klarna competes with PayPal Holdings Inc. and Square Inc. as well as traditional credit cards. Customers can “buy now and pay later” in four interest-free installments when shopping online or in-store from brands such as Abercrombie & Fitch, H&M, Adidas and Lululemon.
Retailers cut their purchases to cover costs. It also offers savings accounts and other banking services.
Financial technology companies have seen more and more people use their products during the pandemic, resulting in a shift to e-commerce while stores had to close. Klarna previously said that the introduction of vaccines won’t completely reverse this trend as shoppers learn new habits.
However, the interest-free “buy now, pay later” business model has also been scrutinized by regulators, for example in the UK, where it is encouraging people to spend more than they can afford. PayPal launched a similar point of sale loan product in the UK last year.
Siemiatkowski said the new funding would help Klarna challenge the credit card industry further. Buy-now-pay-later services provided a more egalitarian system by offering the same deal to every consumer, he said.
“There are a number of investors who agree,” he said. “You can see that this credit card industry is actually flawed at its core and needs some innovation.”
Klarna will use some of the money to acquire technology companies. Siemiatkowski said he was less interested in mergers and acquisitions with competitors because of the complexity of integrating new services, but was interested in goals that could help people save time or money. He said about $ 10 million would also be donated to organizations that help fight climate change.
As the company’s valuation has risen, so has speculation about a stock exchange listing. Siemiatkowski said he will wait for his new CFO Niclas Neglen to reach an agreement in the coming weeks before making any decisions.
He said he was “excited and intrigued” by the idea of a direct listing and was not ruling anything out this year.
More than 30 existing and new investors took part in the round announced on Monday, which Bloomberg first reported on last week.
Klarna didn’t name any of the investors, but existing supporters include Silver Lake, Sequoia Capital, Singapore’s sovereign wealth fund GIC, BlackRock Inc. and HMI Capital, as well as rapper Snoop Dogg, who also appears in some companies ad.