Klarna’s latest round valued it at $6.7 billion, down 85% from its previous valuation of $45.6 billion last year.

It’s a monster down round (one in which the startup is forced to accept a lower valuation than that in a previous round) for Klarna, showing how risk averse venture firms have become in an environment that punishes tech companies first and asks questions later. It is also a pointer to the slowing allure of buy-now-pay-later (BNPL), a fintech product that is Klarna’s bread and butter line. The fintech’s latest round received investment from existing investors including Sequoia, the founders, Bestseller, Silver Lake and Commonwealth Bank of Australia. New investors included the Mubadala Investment Company and the Canada Pension Plan Investment Board. (CNBC)

CEO points to the stock market debacle

In explanation of the sharp cut in its valuation, the company said in a statement:

“Klarna has not been immune to the significant downdrafts of fintech stock in public markets. The company’s peers are down 80-90% vs peak valuations and consequently the adjustment in Klarna’s valuation is on par with its public peers from its $45.6bn valuation in June 2021.”

The fintech also observed that the round came “at a valuation 3x times higher than back in 2018, outperforming Klarna’s public peers for the same time period.”

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…Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve.”

The company also cited other macro factors including inflation, rising rates, potential recession, the after effects from the pandemic, and supply chain disruptions, that affected the investing environment, and in turn its valuation.

Growth and profitability

Sebastian Siemiatkowski, CEO of Klarna continued: “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.”

Klarna will use the new funds to expand its leading market position in the United States.

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