SoftBank-Backed Fintech Giant Klarna Looks for New Funds at Lower Valuation

Klarna AB is looking to raise new funds that could value the fintech giant at nearly a third less than the roughly $46 billion valuation it achieved just under a year ago, according to a report. people familiar with the matter, an example of the difficulties facing the technology investment world.

Klarna specializes in buy-now-pay later, a popular cash advance that competes with credit cards and allows customers to pay for goods and services in installments without paying interest. Klarna makes money by charging merchants who provide Klarna services.

Klarna became Europe’s most valuable financial-tech startup in June when SoftBank Group Corp.’s Vision Fund 2. led an investment in the company worth $45.6 billion.

The Sweden-based payments firm is aiming to raise up to $1 billion from new and existing investors in a deal that could value it in the 30-year range, the people said. billion dollars low after the money was poured in, the people said. That would represent a drop of about 30% from the previous round.

Earlier this year, Klarna talked to investors about a valuation of more than $50 billion, but some balked amid market turmoil, one of them said.

Goldman Sachs Group Inc.

People familiar with the potential deal said it was soliciting investors in the round. The date and list of investors of the deal could not be known. There’s also always the risk that a deal doesn’t happen.

In 2019, Klarna, with investors including Sequoia Capital, Silver Lake and Dragoneer Investment Group LLC, was valued at nearly $3.5 billion, according to data from PitchBook.

Its valuation has spiked through several fundraisers during the pandemic as consumers and businesses move transactions online, a trend accelerated by pandemic-induced account lockouts. out. Klarna raised money in March 2021 and was subsequently valued at $31 billion. The June fundraiser made Klarna more valuable than most major European banks.

Investors in the public and private markets are now second-guessing the entry of Klarna and other postpaid buyout companies made with consumers.

Affirm Holdings’ share price listed on Nasdaq Inc.,

a Klarna competitor, is down 75% this year, bringing in a market value of $7.2 billion. That drop comes even as the payments network earlier this month increased its 2022 revenue guidance from $1.33 billion to $1.34 billion, from $1.29 billion to $1. 31 billion dollars.

Klarna, Affirm and other postpaid instant buy providers face increasing competition. Traditional lenders such as Barclays PLC, as well as financial giant PayPay Holdings Inc., have launched their own services. Meanwhile, the industry faces tighter scrutiny. Last year, the UK government said it would start regulating BNPL products to protect consumers.

Several fast-growing tech companies are moving ahead with their fundraising plans despite tough market conditions, pressure to expand geographically and introduce new products to continue their growth and start generating profits. profit. Tech companies and investors are uncertain how long the current process will take, and some argue now is the best time to raise money, before things go awry. than.

Earlier this month, SoftBank posted its worst annual loss, more than $13 billion, due to a drop in the value of many technology investments.

Last year, Klarna’s net loss increased to 7.1 billion Swedish krona, or $705.7 million, while credit losses skyrocketed as the company grew its consumer base and expanded geographically.

CEO Sebastian Siemiatkowski founded the company with two friends in 2005. Klarna processed $80 billion worth of transactions in 2021, up 42% from the previous year. It has made a string of acquisitions in recent years, choosing PriceRunner, a price comparison service, as well as e-commerce technology company Hero Towers Ltd., which links online shoppers and salespeople through text messages, videos, and online chat rooms.

Other fintechs are also having to accept discounted pricing to complete the transaction.

SumUp, a UK fintech that makes card readers like Block Of Inc.

Square, is in talks to raise 400 million euros, or $419 million, in a fundraising round at a valuation of 6.5 billion euros, according to a person familiar with the matter. SumUp initially targeted a valuation of up to €15 billion from the funding round, the person said.

Write letter for Ben Dummett at ben.dummett@wsj.com and Julie Steinberg at julie.steinberg@wsj.com

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Edmund DeMarche

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