Sweden's Klarna becomes biggest fintech firm in Europe
The Swedish “buy now and pay later” company raised $460m in equity from investors including Silicon Valley venture capital company Dragoneer, the Commonwealth Bank of Australia, and funds managed by the world’s largest asset management group BlackRock.
Klarna, the Swedish payments company with a “shop now, pay later” model, has become the largest private fintech firm in Europe after a fresh round of investor funding increased its value to $5.5bn (£4.5bn).
The blockbuster valuation comes after the startup raised $460m (£378m) from investors led by Silicon Valley-based Dragoneer, alongside others including BlackRock and Commonwealth Bank of Australia.
It makes Klarna, which counts the rapper Snoop Dogg among its shareholders, the largest private fintech in Europe and the sixth largest in the world.
The firm has become a notable disruptor in the payments sector, marketed as an alternative to credit cards and allowing users to shop now and pay later, either in a lump sum or in instalments and without interest on most items, as long as they pay on time.
It is offered alongside credit, debit or PayPal options when shoppers reach the online checkout at more than 130,000 retailers including JD Sports, Topshop and Asos.
Since its launch in 2005, Klarna has gained popularity among cash-strapped millennials and Generation Z – those born from the mid-1990s – who want to shop before payday but either do not have, or would like to avoid, a formal line of credit.
It now has 60 million users worldwide, and with 1 million transactions processed per day online and in store, Klarna says it is on track to make $1bn in annual revenue. The company charges fees to merchants, and customers who fail to pay on time.
Klarna, which is headquartered in Stockholm, said it would use the fresh funding to further expand in the US, where it is partnered with more than 3,000 companies including Toms, Sonos and Superdry. Its US user base is growing at an annual rate of 6 million per year.
Klarna’s biggest existing shareholders, including Sequoia and Bestseller, invested more than $100 million earlier this year, setting the stage for this external round.
It had raised a total of $775 million prior to the latest funding round, according to Crunchbase.
This round was joined by Commonwealth Bank of Australia, HMI Capital LLC, Merian Chrysalis Investment Company Limited, Första AP-Fonden (AP1), IPGL, IVP and funds and accounts managed by BlackRock.
The company, which holds a banking licence, has 60 million end customers, serving 130,000 merchants and processing an estimated 1 million transactions per day.
One merchant partner, fashion retailer H&M, bought a stake in Klarna last year when the fintech was valued at $2 billion.
In January, U.S. rapper Snoop Dogg also backed Klarna and took on a role as its marketing “face”.
The company, which employs 2,500 people, says it has a 10% share of the e-commerce market in northern Europe. It operates in 14 countries.
Klarna reported operating income last year of 161 million Swedish crowns ($17 million). Revenues grew by a third in the first quarter, but after years of profitability Klarna lost 96 million crowns in the period as management prioritized growth.
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