Klarna is shifting its business from growth to short-term profitability as Swedish fintech seeks to raise capital and cut 10% of jobs due to fears of an impending recession.
Sebastian Siemiatkowski, CEO and co-founder of Klarna, told the Financial Times that he was not “convinced” by reports that his bank should raise capital at a valuation below the most recent $ 46 billion, which become the most valuable private. technology company in Europe.
“I am just not convinced. We’ll see what happens. We’ll see, ”he said when asked if it would be a“ low round. ”A Klarna investor told FT he expected a valuation cut of 20 to 50 percent.
Klarna, the pioneer of buying now, paying later, faces one of the biggest challenges in its 17-year history as its losses increase and money is consumed with Russia’s war in Ukraine and the rise of inflation affecting the outlook for economies and consumers. expense.
“We decided to change the weight of our investments and focus more on short-term returns than on potential new long-term investments,” said Siemiatkowski, two days after cutting 10 percent of Klarna’s more than 7,000 members. labor force.
Klarna and other companies buy now, pay later face the skepticism of regulators and investors who care about encouraging vulnerable consumers to take on unsustainable debt by letting them hand out payments for online shopping.
Shares of listed rival Affirm have been down 86 percent since November, while PayPal has been down three-quarters since last summer.
Siemiatkowski said that both he and the president of Klarna, Sir Michael Moritz, a partner in venture capital firm Sequoia Capital, were “very committed to the idea that there is a benefit to being private, and the last 12 months have given us the reason”.
He added: “We will probably continue to be private for a little longer. It’s always a question of: the more long-term investors we can attract, the greater our desire to stay private for longer.”
Klarna’s first-quarter results, released on Monday, showed that net losses quadrupled from the previous year to SKr 2.5 billion ($ 254 million), while its cash flow fell from 7.6 billion of positive SKr to 7.3 billion negative SKr in one year.
Siemiatkowski said there would be a “considerable strengthening” of results next year with “a massive improvement in finances”.
He argued that Klarna’s business model “inherently” meant that as it entered new markets, such as its aggressive expansion into the U.S., its losses increased as it gained more customers. “You’re going through a phase where it’s very, very costly as you grow this market,” he added.
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But Klarna had found in other markets that as soon as it started to have more regular customers, its margins improved. “We hope this happens in the U.S. very soon,” he said.
Siemiatkowski added that he refused to lean the company completely towards profitability and away from growth.
“We don’t think it’s right. Klarna’s long-term goal, which is to really disrupt retail banking and payments and financial services, very similar to the situation in Amazon a decade earlier, we believe the opportunity is so “It’s not like the goal has changed, it’s just the way it can be affected and it needs to change.”
In particular, he stressed that while Klarna would cut “longer-term projects and beyond,” it would “double” growth in the U.S., but it would do so by focusing more on existing customers than on attracting new buyers.
“Once this recession is over, we can emerge as the strongest player,” said bullish Siemiatkowski.