Klarna Completes $800M Financing Round Despite Fintech Stock Downdrafts

Klarna, the global leader in the generational shift away from credit cards, closed a $800 million funding round at a $6.7 billion post-money valuation on Monday(July 11 2022). Strongly supported by both existing and new investors, the payment giant targets the financing to extend its leading market position in the United States.

Despite facing many challenges amid the current economic depression, Klarna was backed by its existing investors including Sequoia, the founders, Bestseller, Silver Lake, and Commonwealth Bank of Australia in the new financing round. 

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It should be noted that Klarna attracted investment from several first-time investors known for long-term commitments, which includes Mubadala Investment Company, the $284bn sovereign fund of the UAE, and Canada Pension Plan Investment Board (CPP Investments) managing over C$539bn.

According to Klarna, it has laid a solid foundation to meet the future challenges as the company has become a global leader and innovator in the payments and retail banking industry since 2018 by making use of the favorable perspective the emerging fintech industry has received over recent years.

"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," said Sebastian Siemiatkowski, CEO of Klarna, "Klarna is the only fintech in the world that has been profitable for its first 14 years of existence. In 2017 Klarna recorded a 12% EBT margin. The last few years however we have made significant investments as we took the opportunity to transform Klarna into a global player. With the recent shift in investor sentiment we also now shift our focus and look forward to returning to a modus operandi of growth and profitability. The foundation for a global leader has been set." 

Michael Moritz, Partner at Sequoia commented: "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”.

As Fazzaco reported earlier, Klarna witnessed a surge of 408% in operating losses in 2021. In May, The company announced 10% layoff in response to the economic downturn.