Klarna: the history of Europe’s biggest fintech unicorn

Klarna is a Swedish bank at $10.65 billion valuation that provides payment solutions for 90 million consumers across more than 200,000 merchants in 17 countries. AIN.TECH tells the story of the highest-valued private fintech company in Europe and expert in Smoooth online shopping experience.

---

The beginning

Klarna, which was called Kreditor Europe AB, was founded in 2005 in Stockholm by Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson. The name of the company illustrated an approach to the business of young entrepreneurs greatly: “It made us sound serious, trustworthy and larger than we were,” they remembered. 

Even though their first products, invoice and part payments, with an idea of “buy now, pay later” were not successful and accepted by business leaders of that times, they continued to be serious in their belief in this solution. It must have made online payments easier and safer, both for consumers and retailers. Jane Walerud, an angel investor and previous Erlang Systems sales manager, also liked the Kreditor idea and provided founders with €60,000 and contacts of the programmers to help them build the platform.

After that, at the end of 2007, Kreditor raised more capital – Swedish company AB Öresund invested $2.2 million in a Series A financing round that allowed the company to grow internationally. During the next two years, Kreditor launched its payments platform in Norway, Finland and Denmark. Slowly but surely, the business starts to take off as more and more people were shopping online. 

Klarna appeared and started to grow rapidly

In 2009, Kreditor was rebranded as Klarna and employed 120 people. Next year Klarna started its operations in Germany and the Netherlands, opening first offices in Nuremberg and Amsterdam. In May, San Francisco-based VC firm Sequoia Capital entered the Klarna board as an investor. Together with the funding from business angel Karl Danowsky Prytz, the company has received $9 million and closed Series B financing round.

The company’s yearly revenue increased by 80% to $54 million. After that, more investors became interested in the company’s products and joined the board including General Atlantic who led the $155 million round with participation from DST Global. 

In May 2011, the fintech acquired Israeli-based risk management company Analyzd that operated in the USA, some European countries and Israel, and opened its sixth office located in Tel Aviv. Consequently, the founder of Analyzd was taken on the role of Chief Risk Officer as part of Klarna’s management team.

In 2012, Klarna launched its Checkout product. It was based on the “buy now, pay however you like” model and allowed the company to manage the whole checkout experience instead of being “just” one of the payment options. Both consumers and retailers liked the idea and during one year the number of its users increased to 10 million. In 2013, the company became a unicorn, being valued at €1 billion, and its revenue amounted to $200 million.

When the company acquired the German payment provider SOFORT in 2014, the Klarna Group was formed. At that time, its services were used by over 25 million consumers and 45,000 online retailers across 14 European countries. The company expanded and moved it headquarter to a much bigger office in Stockholm. That year it also entered the UK market and opened a new office in central London.

2014 was for the company a tough year, because of a huge number of invoices not paid on time, as well as complaints. But despite these difficulties, Klarna started testing its solutions in the USA and opened offices in Columbus, Ohio and New York City. The company’s valuation amounted to more than $2 billion.

Smoooth shopping

In 2016 the company launched its successful “Smoooth” marketing campaign, which featured bold images of a slippery fish gliding down a slide and across the floor, endless slicing of a brick of Swiss cheese and a silky fur-covered creature swimming underwater in slow-motion. It was aimed to illustrate how smooth payments can be for consumers and online merchants using its platform.

The “Smoooth” concept includes the three ways consumers can shop with Klarna:

• “Pay now” – Pay directly at checkout;
• “Pay later” – Pay after a 14-day period;
• “Slice it” – Slice up the payments on the purchase over time.

Marketing efforts were accompanied by transforming Klarna into a bank. In 2017, the company has been granted a full Swedish banking license for a which it applied in 2015. The license gave Klarna the ability to launch Open Banking Platform that enables access to more than 5,000 European banks in 16 countries through single Access to Account API.

After that, in 2019, Klarna raised $460 million from Commonwealth Bank of Australia, Dragoneer, HMI Capital LLC, Merian Chrysalis Investment Company Limited and others. This round pushed the company’s valuation to $5.5 billion and made Klarna the highest valued private fintech company in Europe and 6th globally. 

Klarna today

Klarna is active in 17 markets across 3 continents, has over 90 million consumers, more than 200,000 retail partners, and 3000 employees worldwide. On average, 1 million transactions per day are processed through the company’s systems.

On September 2020, Klarna has raised a $650 million round of funding at a post-money valuation of $10.65 billion. It was led by global technology investment firm Silver Lake. Klarna is still the biggest fintech in Europe, and the company is not planning to stop.

“The adventure is just beginning. Consumers and retailers will not settle for average. And at Klarna neither do we. There is so much more to be done in transforming how people shop, pay and bank into something smoother.”