Financial technologies
Histor. performance +326%
Investment idea as of 30th November. Earlier investments of Element GTPP fund in Klarna: December 2020, June 2021.
Klarna develops a shopping payment solution with a short interest-free instalment plan, based on the “Buy Now Pay Later” concept. The company operates under the license of the Swedish Central Bank.
Official website: http://www.klarna.com/
Headquarter: Stockholm, Sweden
Why to invest in Klarna on pre-IPO?
The most valued and one of the fastest growing startups in Europe Since September 2020 to june 2021 the valuation of Klarna increased by 4 times The big potential of “Buy now pay later” market
Parameters of investment in Klarna
- Price for share — to know
- Valuation — to know
- Legal structure: licensed Private Investment Fund under the US SEC regulated investment adviser management
Financial metrics of Klarna
- Total funding: $3.7 billion
- Last round: $640 million
- Last round valuation: $45.6 billion
- Last round date: June 2021
- Lead investors: Sequoia Capital, Black Rock, Dragoneer, SoftBank, DST Global, Ant Group, Visa
Investment opportunity
More than 250,000 retail partners in 20 countries work with Klarna, the number of users exceeds 90 million. It is the largest startup in Europe with a valuation of $45.6 billion.
Recently, the company embarked on an aggressive marketing strategy to build a super app for shopping. The in-app browser allows users to purchase items in instalments from any online store, even if it is not a Klarna partner.
The Klarna service is available not only in online stores, but also in shopping centers. The company also issues its own plastic instalment cards.
In 2021, Klarna raised $1.6 billion in two funding rounds. The capital will be deployed to continue aggressive market strategy and for acquisition of startups. In November 2021, Klarna acquired PriceRunner for $930 million, a startup that developed an app for comparing product prices and reviews.
Market overview
The Buy Now Pay Later market is valued at $90 billion and will grow at CAGR of 45%, according to Allied Market Research. At this pace of growth it will become a trillion-dollar industry by 2027.
Both venture capitalists and investors in the stock market are showing interest in this market. One of the main representatives of BNPL market is American company – Affirm, which has increased its capitalization by 145% in the last 6 months alone.
BNPL is also interesting for large corporate investors. Pay Pal acquired a $2.7 billion startup Paidy, Square in the process of acquiring Australian Afterpay for $29 billion. Bank of America predicts that major BNPL players will process transactions worth between $650 billion and $1 trillion by 2025.
Competitive analysis: Klarna, Afterpay, Affirm
Klarna’s main competitors are the already mentioned Afterpay and Affirm. It is worth mentioning that both companies are public.
Klarna is the market leader and at the same time undervalued in comparison to the competitors in some metrics.
The index we created is compiled from 50% of the Valuation/ Transaction volume metric and 25% each of the other two metrics. According to this index, Klarna is undervalued to the market by 60-70%.
Founders and management
Sebastian Siemiatkowski is the founder and CEO of Klarna since 2005. Prior to that, he worked for 8 years in the sales department of Djuice Uppsala, including sales director position.
Klarna’s board includes representatives from Sequoia Capital and Navos Capital. Top management includes former employees of Goldman Sachs, Google, the US Federal Reserve and the Danish financial regulator.
Deal exit
According to the CEO of Klarna Sebastian Semyatkovsky, the company sees the public listing as a natural step in its development, but so far it is not preparing for the IPO. We do not rule out that Klarna may raise another funding round prior to the public listing.
In any case, the company’s IPO should become one of the largest placements and receive a lot of attention from stock market investors. The company’s valuation after a round or public listing can increase by 60-70% or more.
Risks of investing in Klarna
- Klarna is in late stage of development and is waiting for a public listing. The risk of a correction in public markets could negatively impact on the IPO success or trigger a postponement of it.
- Decrease in e-commerce trend. With the easing of pandemic restrictions around the world, online commerce could slow down the pace of growth – negatively affecting Klarna’s key sales channel.
- Regulatory risk. Tighter regulation on instalment plans and lending could increase the financial burden on the company and the entire sector. This will slow down the development of the entire Buy Now Pay Later industry.