Why Klarna is now worth $45 billion

...and why Softbank invested in the global BNPL leader

💰The big deal

Why do investors keep pouring cash into fintech? Because that’s where the money is.1

The trend continued on Thursday, when buy-now-pay-later startup Klarna announced it raised an additional $639 million in funding from SoftBank's Vision Fund 2 and other investors in a deal that raised its private valuation to $45.6 billion.2

Klarna was already the most highly valued company in Europe thanks to a funding round just a few months go. In that deal, which was announced in March, the company had raised $1 billion at a $30 billion valuation.

With its “buy now, pay later” (BNPL) business model, Klarna offers short-term financing to consumers looking to make pricier purchases, allowing them to pay things off in installments. The company has partnered with a wide range of retail outfits both online and in-store to make financing available at the point of purchase.

In that way, it closely resembles U.S.-based Affirm, which was founded by PayPal founder Max Levchin and went public earlier this year. For comparison, Affirm now has a market cap of around $17 billion.

But Klarna is processing a much higher volume of transactions, according to a report in TechCrunch:

In the first quarter, Klarna notched $18.1 billion in volume compared to $9.9 billion in the prior year first quarter. In all of 2020, it processed $53 billion in volume. To put that into context; Affirm’s financial report in May projected it would process $8.04 billion in volume for the entire fiscal year of 2021 and Afterpay is projecting $16 billion in volume for its entire fiscal year.

Even so, Klarna looks like it has a huge amount of room to grow. It operates in 20 markets around the world and has partnered with more than 250,000 retailers. But it’s still betting on partnerships with major players like Macy’s, Ikea, Nike, and Saks, and touts that it is partnered with 24 of the top 100 U.S. retailers.

It has been aggressively expanding in the U.S., where the company expects a lot of that growth to come from. In that same interview with TechCrunch, Klarna CEO Sebastian Siemiatkowski said it now has more than 18 million American consumers using its services, up from 10 million at the end of last year’s third quarter.

Furthermore, while many of its competitors seem to be focused primarily on online commerce, Klarna is making a big bet on in-store financing3 through partnerships with retail outlets like H&M, O.N.S. Clothing, The North Face, and Timberland. As the world begins to open up and more people find themselves IRL shopping, that could give it a competitive advantage.

While Klarna has been rumored to go public for some time, the latest financing should enable it to stay private a little bit longer while continuing to expand. And for Softbank, this investment shows that through Vision Fund 2 it will continue to hunt unicorns and make big bets on market leaders it believes have a significant moat.


💸 Money moves

Balderton raises $680 million growth fund to help European tech compete globally [Forbes]
The fund will be managed by Balderton managing partner Bernard Liautaud and general partners Rana Yared, David Thévenon, and aims to invest in around 15 companies.

Monday.com raises $574 million in above-target U.S. IPO [Bloomberg]
The IPO gives Monday.com a market value of about $6.8 billion based on the outstanding shares listed in its filings with the U.S. Securities and Exchange Commission. Including stock options, the company’s diluted value would be more than $7.8 billion.

Crypto wallet manufacturer Ledger hits unicorn status after $380M raise [Decrypt]
The round was led by Dan Tapiero’s 10T Holdings and included participation from Draper Associates, Digital Currency Group, Tekne Capital, and Uphold Ventures.

SoftBank, Viking invest $250 million in Latam fintech unicorn Clip [Bloomberg]
Clip has 600 employees and offers three different payment devices, including a $7 credit-card reader that fits onto smartphones.

Talent matching startup Eightfold AI raises $220 million led by SoftBank [Reuters]
Eightfold AI helps companies evaluate talent by scraping data from company sources such as sales and customer management or human resources platforms along with public data from patents, publications, or design portfolios.

Alexis Ohanian’s new VC firm Seven Seven Six launches with $150 million [Forbes]
Among its LPs, Seven Seven Six targeted a base of 50 percent women and 15 percent Black or indigenous investors.

Data analytics firm Glassbox raises $100 million in Israeli IPO [Bloomberg]
The company will have a post-listing valuation of almost $500 million, Glassbox said in a statement. It plans to use the funds to expand into new markets, make acquisitions and double its workforce from more than 250 employees.

Fuel Ventures launches its new £45million early-stage VC fund [TechCrunch]
Since launching in 2015, Fuel has raised £80m in capital to invest in seed and series A founders, and the VC will also be aiming for pre-seed ventures with the new fund.

Yousign raises $36.6 million to build a European alternative to DocuSign [TechCrunch]
Lead Edge Capital is leading the round and eFounders is investing once again in the company.

Slintel raises $20 million in funding round led by GGV Capital [Economic Times]
Existing investors Accel and Inspirisys Solutions also participated in the round, and Hans Tung and Madhu Yalamarthi from GGV Capital will join Slintel’s board of directors.

Fintech startup TreasurySpring raises $10M for platform giving online access to Fixed-term-funds [TechCrunch]
The Series A investment round was co-led by MMC Ventures and Anthemis Group. Existing investors, including ETFS Capital, participated, taking the total its raised to $15 million.


🧘‍♂️Your moment of zen

1

I promise, I didn’t set out to make this a fintech-only newsletter; it just seems that way this week due to all the activity in the market!

2

Other investors in Klarna include Adit Ventures, Honeycomb Asset Management, WestCap Group, Sequoia Capital, SilverLake, Dragoneer, Permira, Commonwealth Bank of Australia, Bestseller Group, Ant Group, Northzone, Singapore's sovereign wealth fund GIC, as well as funds and accounts managed by BlackRock and HMI

3

While in-store financing is nothing new, most of the time it was made available in the form of retailer-branded credit cards that charged high interest rates, so this could theoretically provide a better customer experience to consumers.