It has been brewing for a while now, but Klarna is raising additional funding to keep its business afloat. Unfortunately, the company – formerly valued at $45.6 billion – is now raising funds at a valuation of $6.5 billion. That is a very steep setback for one of the many fintech unicorns.
Klarna Bites The Bullet
It is never fun for a company to raise money at a much lower valuation. Unfortunately for Klarna, the company grew too quickly too fast and now pays the price. Overarching market conditions won’t help matters either, and fresh capital is needed. Thankfully, it seems investors are willing to inject another $650 million into the company, per WSJ sources.
However, that capital would put the company’s valuation at $6.5 billion. Still a respectable amount, although Klarna was valued at $45.6 billion in 2021. That makes it a nearly 86% decrease in valuation in less than twelve months. Not a good outlook for the company, which also has to lay off a sizeable portion of its staff. One has to wonder if this resh capital will prove sufficient to keep Klarna afloat.
It is also worth noting that Klarna intended to push its valuation to $60 billion in February of 2022. Unfortunately, the landscape has been unfavorable for the company and other service providers, even if BNPL solutions remain very popular. Even so, the firm has operating losses of nearly $750 million in 2021, and that money has to come from somewhere.
It will be interesting to see what the future holds for Klarna over the coming months. The funding round has not been closed yet, although existing investors are unwilling to give up on the fintech firm. Sequoia Capital and other investors want to provide a financial lifeline, although their patience won’t be endless either. Sometimes it is better to pull the plug and take the loss, although Klarna may surprise everyone.