Klarna will raise $ 1 billion at a valuation of $ 31 billion

LONDON – Klarna is close to completing a $ 1 billion round of funding that would give the Swedish fintech company a $ 31 billion valuation, two people familiar with the matter told CNBC.

The Stockholm-based firm is one of the world’s largest providers of “Buy Now, Pay Later” (BNPL) services, which allow buyers to split the cost of purchases over an interest-free installment period.

The company is picking up a quick round ahead of a potential listing, which would be an advantage for some of its top venture capital investors, such as Atomico and Sequoia. Klarna is also backed by renowned investors such as Snoop Dogg and Ant Group.

The agreement could be concluded in a few days, the sources said, preferring to remain anonymous, as the details have not yet been made public. The new capital injection was oversubscribed and lifted in just one week, said one source.

Klarna declined to comment when contacted by CNBC.

Klarna is now the top unicorn in Europe, surpassing payment software firm Checkout.com, which reached a $ 15 billion valuation last month.

Klarna continues to grow rapidly more than a decade after its inception and has made significant strides in expanding into the United States. Last year, it gained momentum due to increased demand for BNPL plans, partially fueled by the coronavirus blockade that accelerated the transition to online shopping.

This increase in BNPL products has been a concern for UK regulators, and the country’s government recently announced that companies in the sector will be subject to stricter regulations. BNPL plans are often supported as an alternative to credit cards, but consumer advocacy groups, such as Which, warn that they often entice people – especially young people – to spend more than they can afford. For her part, Klarna says she welcomes the new rules.

“We are on the right side of this,” Sebastian Siemiatkowski, CEO and co-founder of Klarna, told CNBC on Wednesday.

“With this product, we are challenging a massive industry that has overburdened consumers with overdraft fees, with interest-free terms,” ​​he added. “There are a lot of misconceptions in the UK, but when we have the opportunity to sit down with politicians in the UK … they are convinced and then they change sides.”

Klarna had annual revenues of $ 1 billion for the first time last year, recording a record operating income of $ 1.2 billion. However, losses also accelerated by 50% due to the increased costs associated with international expansion, with Klarna’s net loss reaching approximately $ 109.2 million.

Klarna earns revenue by taking a fee from merchants every time a customer makes a transaction. The company is a regulated bank and has increasingly taken a step towards retail banking in its home country as well as in Germany.

Founded in 2005, Klarna is one of many potential IPO candidates in Europe. It is rumored that several companies will go public this year, including Deliveroo, TransferWise and Darktrace. Siemiatkowski said a listing could take place immediately this year, but the company is waiting until its new chief financial officer, former HSBC executive Niclas Neglen, settles down before making official plans.

“Maybe it could happen this year, maybe next year, but obviously it will happen soon enough,” Siemiatkowski said. “It’s definitely underway, but we haven’t officially started the process.”

Chief Klarna added that the company finds direct listings – an alternative to a traditional IPO in which companies list without issuing new shares – “interesting”. Siemiatkowski highlighted the example of Spotify, which went public by direct listing in 2018. But he decided to merge with a special-purpose purchasing company, or SPAC, a listing method that has gained significant traction on Wall Street recently.