Klarna just became the second most valuable fintech startup in the world. First is Stripe, which is valued at $95 bn. This came after it announced that it had raised $639m in fresh money at a $45.6bn post-money valuation.
The fintech is based on the principal of buy-now-pay-later.
The new valuation is 47% more than its valuation in early March. At that time it raised $1 billion. The new one is also a 330% increase over the $10.6 bn valuations last September.
Klarna’s investors and future plans
Klarna said that it was going to use the money to continue its rapid expansion plans in the US.
The company has benefited from the increase in online shopping during the pandemic. Investors are betting that this is an accelerating trend.
The latest round was led by SoftBank’s Vision Fund 2. It also included participation from existing investors Adit Ventures, Honeycomb Asset Management, and WestCap Group. Previous backers include Sequoia Capital, SilverLake, Dragoneer, and Ant Group, among others.
How does the credit system work on Klarna
Klarna allows shoppers to pay for products bought online later in the month or in instalments. Thus, effectively giving them an interest-free loan. For taking on this credit risk, Klarna charges retailers such as Asos or H&M each time it is used. Retailers like the service because they think it encourages shoppers to buy online.
Klarna is rare among European fintech as it has pretty much always been profitable since it was founded in 2005. This is with the exception of 2019 when it made a $93m loss. This was mainly due to challenges in the American market.
There has been a massive amount of demographic shifts in the UK and in the US in the last ten years that we were unaware of. Although credit card volume has grown about twice, debit card volume has grown tenfold and 70% of millennials in the US do not have a credit card, they only have a debit cardSebastian Siemiatkowski