Klarna’s $650m funding round makes it Europe’s biggest fintech unicorn

15 Sep 2020313 Views

The Klarna app. Image: Klarna

The ‘shop now, pay later’ fintech start-up has soared in value after securing $650m in new funding.

Swedish fintech start-up Klarna has almost doubled its value in just over a year after closing a huge round of funding. The company announced today (15 September) that it has raised $650m in equity funding to give it a valuation of $10.65bn –making it the highest-valued private fintech in Europe and the fourth largest in the world.

The funding round was led by Silver Lake alongside Singapore’s sovereign wealth fund, GIC, as well as funds and accounts managed by BlackRock and HMI Capital. Klarna said the funding will be used to continue product development, further its global presence and push into international markets, particularly in the US.

Founded in 2005, Klarna has brought the ‘shop now, pay later’ model to the mainstream, with shoppers being given the option of buying goods to pay off after 30 days or paying in instalments over a series of months. It now has more than 3,500 employees and is active in 17 countries with retail partners including H&M, Ikea, Samsung, Asos and Nike.

The company’s consumer app has more than 12m monthly active users globally and recently added the function of allowing customers to add items to a wish list, access discounts and track spending and deliveries. Klarna’s CEO, Sebastian Siemiatkowski, said the company is at a “true inflection point in both retail and finance”.

“The shift to online retail is now truly supercharged and there is a very tangible change in the behaviour of consumers who are now actively seeking services which offer convenience, flexibility and control in how they pay and an overall superior shopping experience,” he said.

Significant losses

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Speaking about the fresh investment, Egon Durban and Jonathan Durham of Silver Lake said that Klarna “is one of the most disruptive and promising fintech companies in the world”.

“[It is] redefining the e-commerce experience for millions of consumers and global retailers, just as e-commerce growth is accelerating worldwide and rapidly shifting to mobile,” they said.

Despite the valuation boost, the company experienced significant losses between January and June this year, totalling $59.8m. This was a sevenfold increase on losses it experienced during the same period in 2019.

As reported by CNBC, the company said that it saw 1.2bn Swedish krona ($137.2m) in credit losses, incurred when customers didn’t pay back their loans. It also invested heavily in international expansion and funding its reserves to deal with both credit losses and the Covid-19 pandemic.

However, Klarna said that it had a “strong” balance sheet and its overall losses were just 0.6pc of sales volume through the platform.

Colm Gorey is a senior journalist with Siliconrepublic.com

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