Insights

Fintech Startup Seeks Funding at Lower Valuation

For more crisp and insightful business and economic news, subscribe to
The Daily Upside newsletter.
It’s completely free and we guarantee you’ll learn something new every day.

Time is catching up with buy-now-pay-later firm Klarna.
The Swedish fintech company, and Europe’s third most valuable start-up, seeks to raise $1 billion at a valuation of around $30 billion, a third less than it fetched less than a year ago, according to The Wall Street Journal. Amid this year’s tech rout, it’s not the only firm that should expect to take a step back.
Value Proposition
Klarna was valued at just $3.5 billion in 2019, but came out the other side of the pandemic with a massive new valuation as more and more retail transactions moved online. “Buy now, pay later” (BNPL) pitches itself as a consumer-friendly way to make large purchases without interest or fees, and is especially popular with Gen Z. The segment now processes $55 billion in transactions in the US alone, according to Mercator.
Like many start-ups, Klarna is focused on growing its customer base and achieving scale, which means raising a lot of money and operating at a loss for a while. Investors buy-in because of the promise of profits and higher valuations down the road. But this year’s market downturn and major new BNPL entrants are putting up roadblocks to this approach:
When the company sought to raise money at a $50 billion valuation earlier this year, investors balked, according to the WSJ.Klarna’s not the only start-up to feel the sting: “If you plan to raise money in the next 6-12 months, you might be raising at the peak of the downturn,” Y Combinator, a famed tech incubator behind Dropbox and Reddit, wrote in a note to its portfolio company founders Thursday. “Remember that your chances of success are extremely low, even if your company is doing well.”Equity in private start-ups is still trading at a premium, according to private stock marketplace Forge Global, but on average it fell from a 58% premium over a company’s last fundraising round in Q4 2021 to a 24% premium in Q1 2022.
Concern Now, Regulation Later: Shares in Klarna’s BNPL competitor Affirm, which trades on the Nasdaq, are down 75% this year. Traditional lenders and PayPal, the original fintech giant, have moved into the space, while UK and US regulators have both hinted at forthcoming regulation. When it rains it pours. At least you can still pay for that fancy umbrella in four easy installments. –

For more crisp and insightful business and economic news, subscribe to
The Daily Upside newsletter.
It’s completely free and we guarantee you’ll learn something new every day.

Time is catching up with buy-now-pay-later firm Klarna.

The Swedish fintech company, and Europe’s third most valuable start-up, seeks to raise $1 billion at a valuation of around $30 billion, a third less than it fetched less than a year ago, according to The Wall Street Journal. Amid this year’s tech rout, it’s not the only firm that should expect to take a step back.

Value Proposition

Klarna was valued at just $3.5 billion in 2019, but came out the other side of the pandemic with a massive new valuation as more and more retail transactions moved online. “Buy now, pay later” (BNPL) pitches itself as a consumer-friendly way to make large purchases without interest or fees, and is especially popular with Gen Z. The segment now processes $55 billion in transactions in the US alone, according to Mercator.

Like many start-ups, Klarna is focused on growing its customer base and achieving scale, which means raising a lot of money and operating at a loss for a while. Investors buy-in because of the promise of profits and higher valuations down the road. But this year’s market downturn and major new BNPL entrants are putting up roadblocks to this approach:

When the company sought to raise money at a $50 billion valuation earlier this year, investors balked, according to the WSJ.Klarna’s not the only start-up to feel the sting: “If you plan to raise money in the next 6-12 months, you might be raising at the peak of the downturn,” Y Combinator, a famed tech incubator behind Dropbox and Reddit, wrote in a note to its portfolio company founders Thursday. “Remember that your chances of success are extremely low, even if your company is doing well.”

Equity in private start-ups is still trading at a premium, according to private stock marketplace Forge Global, but on average it fell from a 58% premium over a company’s last fundraising round in Q4 2021 to a 24% premium in Q1 2022.

Concern Now, Regulation Later: Shares in Klarna’s BNPL competitor Affirm, which trades on the Nasdaq, are down 75% this year. Traditional lenders and PayPal, the original fintech giant, have moved into the space, while UK and US regulators have both hinted at forthcoming regulation. When it rains it pours. At least you can still pay for that fancy umbrella in four easy installments.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here To Get Started
FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here For More Info