Europe’s most valuable fintech startup Klarna raises $800M in down round; valuation plunges to $6.7 billion from $45.6 billion a year ago

In a sign that the Buy Now, Pay Later (BNPL) market is beginning to cool off, Europe’s most valuable fintech startup Klarna announced it has raised a massive $800 million in down round funding at a $6.7 billion valuation, an 85% plunge from $45.6 billion a year ago.

The announcement comes almost three months after Klarna laid off 10% of its workforce as the economic downturn hits buy now, pay later space. Klarna CEO Sebastian Siemiatkowski said that the “vast majority” of Klarna employees won’t be affected by the measures. However some “will be informed that we cannot offer you a role in the new organization.”

The round was backed by existing investors Sequoia and Silver Lake, with additional investment from the Canada Pension Plan Investment Board Abu Dhabi’s Mubadala Investment Company in the round. Klarna said it will use the funding proceeds to continue its US expansion.

Siemiatkowski tried to downplay the significance of the company’s valuation decline. He insisted the deal was a “testament to the strength of Klarna’s business.”

“During the steepest drop in global stock markets in over fifty years, investors recognized our strong position and continued progress in revolutionizing the retail banking industry,” Siemiatkowski said in a statement Monday.

Klarna was founded in 2005 in Stockholm, Sweden with the aim of making it easier for people to shop online. In the last 12 years, technology has evolved, excited, and transformed the world around us, yet its mission remains as relevant as ever, to make paying as simple, safe, and above all, smooth as possible.

Klarna’s app has more than 12 million monthly active users worldwide, with 55,000 daily downloads, significantly outpacing its nearest competitor with almost 4x as many downloads over the last year. Klarna, a unicorn startup,  is one of the world’s largest providers of “buy now, pay later” services, which offer shoppers interest-free financing over a period of installments. The company said it now has almost 30 million U.S. users in total.

Early this year, Klarna also launched a new credit card in the UK to take on banks and credit card firms. Unlike regular credit cards, Klarna said the card will allow for payment on purchases to be delayed for up to 30 days, with no interest charged on the balance or fees levied for late payment when used at high street shops. The new credit card is offered to customers in addition to Klarna’s buy-now-pay-later (BNPL) products for UK customers.

The “Buy now, pay later” giant also confirmed it had built up a waitlist of 400,000 consumers in the UK, which it claimed showed “strong demand for a new approach to credit,” following a successful launch in Germany and Sweden. Over time, Klarna said it plans to add more of its payment options, including splitting purchases into three monthly payments.