The Swedish buy-now-pay-later (BNPL) firm Klarna has managed to obtain new capital, backed by Mubadala Investments in Abu Dhabi, despite valuations plummeting by almost 85%.
Founded in Sweden in 2005, Klarna was valued at $45.6 billion following a $639 million funding round led by Japan’s SoftBank last year.
The most recent $800 million financing round was supported by the Canada Pension Plan Investment Board (CPP Investments) apart from Mubadala, and also included existing investors Sequoia and Silver Lake.
In May, the company announced its first-ever large-scale job cuts, firing almost 10 percent of its 7,000-odd staff, but in a series of tweets, Sebastian Siemiatkowski, CEO of Klarna, said that its popularity was at an all-time high and blamed the difficult fundraising for coming amid “possibly the worst set of circumstances to afflict stock markets since World War II.”
“It’s a testament to the strength of Klarna’s business that, during the steepest drop in global stock markets in over 50 years, investors recognized our strong position and continued progress in revolutionizing the retail banking industry,” Siemiatkowski said, adding “now, more than ever, businesses need a strong consumer base, a superior product, and a sustainable business model.”
Michael Moritz, a partner at Sequoia, said: “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.”
Siemiatkowski added in another tweet: “We are not immune to public peers being down 75-90 percent and hence our valuation is down on par.
“Klarna has been profitable for its first 14 years of existence. 2017 = 14 percent EBT. Our established markets currently generate 1 billion in gross profit per year. Since 2019, we have invested to become US market leaders with 30 million users, 60 percent brand awareness and 30 of top 100 US sites.”
“As investor sentiment shifts, it is time to return to profitability. But now we are doing so on a global platform, 150m users, over 20 markets and 400,000 partners. We don’t do preferential shares, only common stock. Other private startups fundraise and valuations are not comparable,” he added.
Mubadala, the UAE capital’s sovereign wealth fund, manages assets over $284 billion.
