Klarna raises 460 million US dollars in equity funding

Klarna, payment provider and bank, popular for its 'buy now, pay later’ services, has raised 460 million US dollars in an equity funding round to become Europe’s largest private fintech firm, valued at 5.5 billion US dollars.

The Swedish finance company, which works with 130,000 merchants globally including H&M, Asos, Michael Kors, Zara, Topshop, and Superdry, stated that the funding would allow it to continue its “rapid rise” in the US market, where it is currently growing at an annual rate of 6 million new US consumers.

The funding round was led by Dragoneer Investment Group, a leading San Francisco-based growth-oriented investor, which has been an investor in companies such as Airbnb, Spotify, and Uber. They were joined by other investors including Commonwealth Bank of Australia, HMI Capital LLC, Merian Chrysalis Investment Company Limited, Första AP-Fonden (AP1), IPGL, IVP and funds and accounts managed by BlackRock.

This investment follows a funding round in April of this year that closed above the company’s 100 million US dollar target, driven by strong demand from Klarna’s existing investor base.

Sebastian Siemiatkowski, co-founder and chief executive of Klarna said in a statement: “This is a decisive time in the history of retail banking. Finally, transparency, technology and creativity will serve the consumer, and there will be no more room for unimaginative products, non-transparent terms of use or lack of genuine care of one's customers.

“We, all 2500 of us at Klarna, are humbled and honoured, and now also further empowered, to play a role in this improvement of an industry for the benefit of the consumer, worldwide and in the US in particular.”

Marc Stad, founding partner at Dragoneer added: “Our strategy is to partner with a small number of disruptive, growth companies that are highly differentiated and run by world-class management teams. Sebastian and the Klarna team have built an exceptional payments business with a global footprint, operating in a huge addressable market with strong tailwinds.”

Klarna raises 460 million US dollars led by Dragoneer to become Europe’s largest private fintech firm

The US is a big growth market for the payments firm, which states its services provides a “healthier, simpler and smarter alternative to credit cards,” that are “clearly resonating” with the US consumer.

Klarna notes that it has also seen a surge in merchant demand for its services in America, now powering more than 3,000 merchants, including Rue21, Asos, Lulus, Toms, Superdry, Sonos and Acne Studios. Merchants who are offering Klarna’s ‘Pay in 4’ option are reporting a 68 percent increase in average order value, a 44 percent increase in conversion compared to cards and 21 percent higher purchase frequency.

Global brands H&M, Abercrombie and Fitch and Boohoo Group will soon go live with Klarna and there are currently more than a 1,000 merchants integrating with Klarna with a combined volume of 10 billion US dollars, added the Swedish bank.

Klarna’s footprint continues to grow, it now serves over 60 million consumers globally, 130,000 merchants partners, 1 million transactions daily and is in sight of a 1 billion US dollar annual revenue.

Klarna to launch exclusive partnership in Australia and New Zealand

The deal, which also included participation from Australia’s largest retail and commercial bank, Commonwealth Bank of Australia, will also see Klarna establish an exclusive partnership for the Australian and New Zealand markets, which will increase the payment providers footprint even further.

Richard Watts, Merian Chrysalis Investment Company, added: “Klarna has built a highly-impressive, digital payment ecosystem, trusted by both retailers and consumers. By simplifying and improving the flexibility of the payments process, retail partners working with Klarna have seen considerable improvement in customer engagement and sales. Klarna is one of Europe’s great fintech success stories and the company continues to develop truly innovative payment solutions. This latest funding round will enable the company to execute on its ambitious international growth plans.”

Images: courtesy of Klarna