Finance

SoftBank investment helps Klarna to $45.6bn valuation

Klarna has boosted its valuation by 50 per cent to $45.6bn in just three months as the buy-now, pay-later company raised fresh capital from Japan’s SoftBank.

The new valuation — up from $31bn in March and $11bn last September — cements the Swedish group’s status as Europe’s most valuable private fintech company.

SoftBank’s Vision Fund 2 led the $639m fundraising round and joins investors including Silver Lake, China’s Ant Group, H&M, and Sequoia Capital ahead of a much touted initial public offering due in the next few years.

“Klarna’s growth is founded on a deep understanding of how the purchasing behaviours of consumers are changing, an evolution which we believe is accelerating,” said Yanni Pipilis, managing partner for SoftBank Investment Advisers.

Unlike SoftBank’s Vision Fund 1, which was largely funded by outside money, much of it from the Middle East, the second Vision Fund is made up of money purely from the Japanese investment group.

Last month, SoftBank founder Masayoshi Son said he would increase the company’s funding of Vision Fund 2 from $10bn to $30bn as the Japanese group ramps up investments in private start-ups around the world.

Klarna is pushing rapidly into the US and told investors that its American business would soon be “multiple times larger than our current business today”, according to material seen by the Financial Times. The volume of payments processed by Klarna in the US jumped 296 per cent in the fourth quarter, according to the same information provided to prospective investors.

Chief executive Sebastian Siemiatkowski told the Financial Times on Thursday that Klarna saw a particularly large opportunity in the US due to the “overuse” of credit cards there and a movement by millennials to rely more on debit cards.

Klarna, which is regulated as a bank in Sweden, is positioning its offering as a “super app”, used by consumers not just for payments but shopping and also retail banking.

However, it is facing challenges with the increasing political and regulatory scrutiny of buy now, pay later companies after worries over whether they push consumers to purchase goods they cannot afford.

Klarna’s app had problems on May 27 when about 90,000 users were briefly able to view information of other customers, including in some cases name, address, email and phone number.

Siemiatkowski previously called the “self-inflicted” incident “so sad and frustrating”, and it has drawn the attention of data protection regulators.

Siemiatkowski has just returned from the UK as Klarna continues to eye London as a possible venue for its stock market listing, even if the US still appears to be the favourite.

He continued to sing the praises of the UK and London, saying he had been “very deeply and genuinely impressed” by what he saw in London. He criticised the often “really bad” regulations passed by the EU and said that the UK had a “huge opportunity” to become a global centre for fintechs. “There is such awareness and interest in this topic,” he added.

Klarna is now valued just higher than Spotify, the music streaming service founded in Stockholm, and within spitting distance of Nordea, the largest bank in the Nordics.

Siemiatkowski said the proceeds from SoftBank and others could be used for acquisitions while an IPO would make sense not to raise capital but to provide “liquidity” to its employees who have stock options and as “we may want to do more M&A”. But he added that he was a “little bit nervous” about the frothiness of markets currently: “None of us are in a super hurry.”

Additional reporting by Miles Kruppa in San Francisco and Arash Massoudi in London

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