Europe’s Most Valuable Startup Was Worth $46 Billion Last Year; It’s Down 85%

A year after earning a $46 billion price tag, Swedish payments firm Klarna announced Monday that it raised $800 million at a valuation of $6.7 billion. That’s a dramatic 85% drop for the pioneering buy now, pay later (BNPL) firm.

CEO Sebastian Siemiatkowski said Klarna maintains a “strong position.” Others might say it’s experiencing the end result of sky-high valuation now, down round later.

Valuation, Meet Inflation

BNPL lending grew rapidly during the pandemic as more people shopped from home, but companies that specialize in the service have been hammered amid the broader stock market selloff. Klarna, for one, was quick to point out that rivals are also down 80 to 90% from peak valuation. For example, publicly-traded Affirm has lost over 80% of its value this year.

There’s also considerable crowding. A raft of BNPL players have popped up, from Germany’s Billie and Mondu to Sweden’s Treyd to the UK’s Hokodo and Playter. Apple and Block, which bought BNPL firm Afterpay, have also entered the arena. Klarna’s bottom line, however, could still use a tweak some time closer to now than later:

• Klarna’s losses swelled to $748 million last year, compared to $150 million in 2020, as the company underwrote aggressive expansion. In May, the company laid off 10% of staff, blaming inflation and the war in Ukraine for deteriorating economic sentiment.
• Siemiatkowski said Klarna plans to “return to profitability” after taking losses to expand (the company had 147 million active consumers in 2021, up 70% year-on-year). “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,” he added, in a statement.

The New World: “An entire generation of entrepreneurs and tech investors built their entire perspectives on valuation during the second half of a 13-year amazing bull market run,” Bill Gurley, a general partner at venture capital firm Benchmark and one of Silicon Valley’s most respected dealmakers, tweeted earlier this year. “Previous ‘all-time’ highs are completely irrelevant. It’s not ‘cheap’ because it is down 70%. Forget those prices happened.”

Did the Check Clear? According to Bloomberg, participants in an $800 million funding round by Indian online education provider Byju, including Sumeru Ventures, have held back on transferring $250 million due to “macroeconomic reasons.” Maybe they can offer them a BNPL option.