This summer Klarna raised 8,5 billion SEK in new funding which is mainly to be used for the company's expansion in the USA. Due to tough conditions in the capital market the company had to accept a valuation of 71 billion SEK, which is a much lower valuation than the previous round. Despite a heavy down round Klarna succeeded in securing the funds necessary for future investments and also doing this by onboarding some prestigious investors such as Mubadala Investment Company. Worth mentioning is that the prices of secondaries immediately bumped up after the round was announced.

"It is a statement of strength for Klarna's business that investors confirmed our position and continued development in revolutionizing the banking industry during the biggest global stock market fall in over 50 years", CEO and co-founder Sebastian Siemiatkowski wrote in the press release.

It is clearly explained below how investors' risk appetite from growth at all cost to profitability literally changed overnight.

"The change in Klarna's valuation is entirely due to investors suddenly voting in the opposite direction to what they did in previous years. The irony is that the company's position in several markets and its popularity with consumers and merchants are stronger than ever since Sequoia first stepped in in 2010. Eventually, as investors emerge from their bunkers, Klarna's stock and other top-rated companies will receive the attention they deserve." announces Michael Moritz, partner at Sequoia and chairman of Klarna.

In conjunction with the new fundraising Klarna communicated a shift in their strategy from sole focus on growth back to profitability again with immediate actions taken to reduce costs.

Klarna  has already made significant progress on the path to profitability with their top line revenue continuing to grow while both credit losses and total operating expenses declined compared to the prior quarter. Total operating expenses before credit losses decreased 21% in Q3 22 compared to the prior quarter as the impact of changes announced in May (incl. downsizing the organization) and ongoing cost initiatives.

Additionally the Klarna app has been improved with a lot of new features and possibilities for both consumers and retail partners.

Building on last year’s product changes with removed unnecessary fees and revolving credit from their products, Klarna has launched an intelligent, unbiased in-app search tool in the US, UK, and the Nordics. It saves consumers time and money by comparing prices across thousands of retailers, offering a credible alternative to the established tech giants.

The search and compare tool, powered by PriceRunner, is a key acquisition channel for retailers, boosting visibility, traffic, and sales with an already engaged audience. Klarna now automatically adds available coupons at checkout in the US and UK with further markets to follow, making money-saving effortless while allowing consumers to collect rewards through Klarna in-app digital wallet for loyalty cards. Automated discounts have already saved US consumers in a small-scale pilot over USD 5 million in Q3 22 alone and will be a key consumer benefit during the peak holiday shopping season. Another example is shoppable video that is now live in the US, allowing consumers to discover, find inspiration, and shop items directly, powering retailer growth through a smooth, immersive shopping experience. Also the new Creator Platform, now available in all 45 markets, seamlessly connects creators and retailers to scale and optimize campaigns, ensuring strong, measurable results from marketing budgets.

Financial and operational highlights:

• Raising 8,5 billion SEK of additional funding in the summer of 2022

• Shifting towards profitability again from a period of growth focus. Aiming to become profitable on a month to month basis already in the summer of 2023. Historically the company has been profitable 14 out of 17 years before they shifted towards a pure growth strategy

• According to the Q3 2022 report, the company has already made significant progress on the path of profitability by reducing operating losses by 42%

• 30 million users in the US, which soon is the biggest market in terms of revenue

• Integrated price comparison tool directly into the Klarna app by using Pricerunners platform technology after the recent acquisition. This will change the company position from being solely a payment solution to a fully integrated one-stop shop, covering different aspects of the purchasing experience from now on.