Buy-now pay-later giant Klarna is moving away from rapid growth to focus on a fast-track route to profitability, boss Sebastian Siemiatkowski said today.
The Swedish fintech firm has been on a major growth push in recent years but Siemiatkowski said the firm was now tapering back growth amid a downturn in the tech industry that forced it to slash ten per cent of its workforce this week.
“We decided that we’re going to change the weight of our investments and focus more on short-term profitability over long-term new, potential investments,” Siemiatkowski told the Financial Times.
Klarna announced losses of $487m in 2021 as it fuelled a major growth push in the US, its fastest growing market with a 71 per cent annual boost in consumers to 25m last year.
But speaking on staff to Monday Siemiatkowski said Klarna was braced for a long term downturn in the market and needed to “act” by cutting around 700 of its 7000 staff.
He added that the firm was now operating in a “different world” than it was at the start of the year.
“We have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession,” he said.
Klarna is now reportedly looking to raise fresh capital and investors have suggested that a new round could see the firm shed almost a third of the $46bn valuation it bagged in a round last year.
Siemiatkowski said he was “not convinced” by the reports. “We’ll see what happens. We’ll see,” he told the FT.
The potential plunge in valuation comes amid a sharp downturn in tech valuations on the public markets, as investors shun growth-focused tech stocks amid soaring inflation.
Venture capital analysts are predicting a lag effect on valuations in the private markets as investors find cash harder to come by due to rising interest rates and lower risk appetites among investors.
A move onto the public markets has long been mooted for Klarna but Siemiatkowski said the firm’s decision to stay private had been vindicated in the past year.
“We’ll probably continue being private for a little more time. It’s always a question of: the more great long-term investors we can attract, the bigger our appetite to stay longer private,” he said.