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Europe's most valuable startup, Klarna, is raising fresh cash from mega-investor SoftBank at a valuation above $40 billion

Sebastian Siemiatkowski_Subway_Copped_Landscape
Sebastian Siemiatkowski, the CEO of Klarna. Klarna

  • The "buy now, pay later" startup Klarna is close to finalizing a fresh capital injection from SoftBank.
  • The deal isn't finalized, but a source indicated it could be about $600 million.
  • The deal could value Klarna, already Europe's most valuable private startup, above $40 billion.

Klarna, Europe's most valuable private startup, is close to finalizing funding led by SoftBank at a higher valuation, according to three sources with knowledge of the matter.

The funding is expected to include other major US investors following rapid growth in the "buy now, pay later" startup's American business.

The size of the cash injection is not finalized but is expected to be less than the $1 billion Klarna raised in March. One source indicated it could be about $600 million. The figure could change, and the deal is expected to close soon.

Klarna is set to smash its $31 billion valuation, the source added — the deal could value the company somewhere between $40 billion and $50 billion. To date, the firm has raised $3 billion in private funding.

With the deal, SoftBank would double down on Klarna. The fintech is already listed as a portfolio company on SoftBank's website, indicating the Japanese investing giant participated in Klarna's March round, though neither announced it. This fresh capital injection may be an extension of that round.

Klarna declined to comment. SoftBank declined to comment.

Millions of online shoppers have encountered Klarna's services at some point.

The firm lets shoppers spread the cost of online purchases across interest-free installments. Thousands of popular retailers — including H&M, Nike, and Peloton — integrate its service. It has 90 million users globally and is booming in the US, where it has 60 million users.

klarna
A Klarna button on Topshop's website. Screenshot/Topshop

The firm has also been helped by the shift to online shopping, exacerbated by the COVID-19 pandemic. E-commerce accounted for 17% of global trade in 2020, up from 14% in 2019.

Klarna posted net operating income of $1.09 billion in its annual 2020 report, up 40% year on year.

The firm has said it is planning to list in 2021 or 2022, though CEO Sebastian Siemiatkowski indicated earlier this year that he hadn't decided on a location.

While investors are enthusiastic about Klarna and competitors such as Afterpay and Affirm, the explosion of the services has led to concerns that the sector is a reincarnation of payday loans and leads to debt. A study of US consumers conducted by Credit Karma in February found that nearly 40% of those using the services had missed more than one payment.

Users of these services skew younger, and Klarna has faced scrutiny in the UK over advertising its services as a positive lifestyle choice.

The space remains unregulated in the UK, though that is set to change.

Klarna's investors include BlackRock, HMI Capital, Merian Chrysalis, TCV, Northzone, Bonnier, Sequoia Capital, Dragoneer, Permira, Commonwealth Bank of Australia, Bestseller Group, and Ant Group.

VC Softbank

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