(Bloomberg) — Klarna Bank AB’s valuation has been slashed to $6.7 billion in its latest funding round, in a dramatic reversal for one of Europe’s most high-profile startups.
The buy-now-pay-later giant said it raised $800 million from new and existing investors, according to a statement Monday. Its new valuation is down from the $45.6 billion it achieved in June 2021, with Klarna downgrading its ambitions several times during the latest talks with investors.
Klarna extends interest-free loans that let consumers spread payments for purchases over multiple installments, instead of all at once. It makes money by charging retailers a small fee on every transaction and from interest on longer-term loans.
However, interest rates for its own debt are rising and Klarna is burning through hundreds of millions of dollars per quarter. It posted an operating loss of 2.54 billion krona ($245 million) in the first quarter, and 6.58 billion krona last year.
Existing investors who backed the funding round include Sequoia, Bestseller, Silver Lake, and Commonwealth Bank of Australia. New investors included Mubadala Investment Co. and Canada Pension Plan Investment Board.
The lender, which is regulated by the Swedish Financial Supervisory Authority, also recently cut staff in an effort to curb costs.
A new valuation for Klarna comes as inflation, higher rates and looming recession pressures a raft of startups who have been seen their valuations rise dramatically over recent years. Shares of rival Affirm Holdings Ltd. have tumbled 75% in the past 12 months as investor sentiment on the buy-now, pay-later model has turned negative.
Klarna has 147 million global active users and 400,000 retail partners, including Nike Inc., Ikea, Sephora and Expedia Group Inc, according to its website. The new funds will target its expansion in the US, where the company has about 30 million customers, with volumes more than tripling in a year, Klarna said in the statement.
“It’s a testament to the strength of Klarna’s business that, during the steepest drop in global stock markets in over fifty years, investors recognized our strong position,” Chief Executive Officer Sebastian Siemiatkowski said in the statement.
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