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Klarna valuation drop as investors reduce risk

By: PRLog

The Swedish BNPL fintech company Klarna, has raised $800 million in funding recently that adjusted their valuation from $45.6 billion a year ago to a $6.7 billion valuation now.

SEOUL, South Korea - Oct. 10, 2022 - PRLog -- The valuation that has been slashed by 85% reflects the investor sentiment around the "buy now, pay later" companies. This comes after speculation that Klarna was looking at a "down round", where a private firm raises capital at a valuation lower than when it last sold investors shares.

A positive spin

Klarna's valuation drop looks worse when taking a short-term view but it is actually performing quite well overall and the bigger picture is still positive. The majority of tech companies have had some sort of drop or correction in price following the pandemic. Looking at Klarna's valuations from the past few years, gives you a better idea of the progress.

  • 2019, $5.5 billion.
  • 2020, $10.6 billion.
  • 2021, $45.6 billion.
  • 2022, $6.7 billion.

So Klarna may be down from last year but since 2019 the valuation shows steady progress. Consider comparing the percentage increase to Klarna's competitors such as Affirm, Block or even Paypal you will start to see that Klarna is in fact still making a better progress in terms of valuation percentage increase. Also do not forget that a valuation is a reflection of what its investors think, and does not necessarily reflect what customers think.

What next for buy now, pay later?

Numerous venture capital-backed tech firms have seen their valuations fall due to fears of a possible upcoming recession. Klarna itself cut about 10% of its global workforce earlier this year. The development is also an indication of trouble in the buy now, pay later, or BNPL, market.

Services like Klarna and Affirm, which let clients spread the cost of their purchases over equal monthly instalment, have faced questions over the sustainability of their business models against a backdrop of rising inflation and higher interest rates.

Our Thoughts

"We are happy with our entry point into the Klarna Pre IPO and the revaluation is something we factor into our due diligence and formulas. The book hit subscription and closed in early September and we now work with our partners looking forward to the listing in 2023."

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