After 20 years on the helm, Klarna’s CEO Sebastian Siemiatkowski is about to face his greatest check but

LONDON — After 20 years within the function as Klarna’s CEO, Sebastian Siemiatkowski is about to face his hardest check but because the monetary know-how agency prepares for its blockbuster debut in New York.

Siemiatkowski, 43, co-founded Klarna in 2005 with fellow Swedish entrepreneurs Niklas Adalberth and Victor Jacobsson with the purpose of taking over conventional banks and bank card companies with a extra user-friendly on-line funds expertise.

In the present day, Klarna is synonymous with “purchase now, pay later” — a way of cost that permits folks to purchase issues and both defer cost till the top of the month or repay their purchases over a collection of equal, interest-free month-to-month installments.

However whereas Siemiatkowski has grown Klarna right into a fintech powerhouse, his entrepreneurial journey hasn’t been with out its challenges — from going through rising competitors from rivals akin to PayPal, Affirm and Block‘s Afterpay, to an 85% valuation plunge.

Nonetheless, Siemiatkowski hasn’t taken these challenges mendacity down and the outspoken co-founder is not shy to problem criticisms within the run as much as an IPO that might worth it at $15 billion.

In October 2024, CNBC met with Siamiatkowski throughout a go to the Swedish entrepreneur made to London. For a businessman who’s confronted a rollercoaster experience of ups and downs over his two-year CEO tenure, Klarna’s chief has a relaxed air to him.

“Independently of all of the cycles and all the pieces we have gone by with the corporate, at any cut-off date I ask myself, do I nonetheless assume that Klarna can change into the following Google in measurement, that we are able to change into a a whole bunch of billions greenback market firm, or a trillion {dollars},” Siemiatkowski advised CNBC. “I nonetheless am loopy sufficient to assume that is achievable.”

As soon as a pandemic-era darling valued at $46 billion in a SoftBank-led funding spherical, Klarna noticed its valuation plummet 85% in 2022 to $6.7 billion as rising inflation and rates of interest dented investor sentiment on high-growth know-how companies.

However the agency has tried to rebuild that eroded worth within the years which have adopted.

Klarna makes cash predominantly from charges it costs retailers for offering its cost providers, along with earnings from interest-bearing financing plans and promoting income.

Financials disclosed in its IPO submitting present that Klarna reported income of $2.8 billion final 12 months, up 24% year-over-year, and a internet revenue of $21 million — up from a internet lack of $244 million in 2023.

After the launch of OpenAI’s generative AI ChatGPT in November 2022, Siemiatkowski rapidly pivoted Klarna’s focus to embracing the know-how, and particularly in a means that might slash prices and improve the agency’s profitability.

Nonetheless, Siemiatkowski’s technique and his feedback on AI have additionally attracted controversy.

Klarna imposed a freeze on hiring in 2023 because it seemed to tighten prices. The next 12 months, the corporate mentioned that its AI chatbot was doing the work of 700 full-time customer support jobs.

Klarna’s CEO then mentioned in August that his firm was in a position to cut back its general workforce to three,800 from 5,000 thanks partly to its software of AI in areas akin to advertising and customer support.

“By merely not hiring … the corporate is type of turning into smaller and smaller,” he advised Reuters information company, including that jobs had been disappearing as a result of attrition reasonably than layoffs.

Requested by CNBC about his views on AI and the upset they’ve brought about, Siemiatkowski steered he was “accomplished apologizing,” echoing feedback from Mark Zuckerberg in regards to the Meta CEO’s “20-year mistake” of taking accountability for points for which he believed his firm wasn’t in charge.

Doubling down, Siemiatkowski added that AI “already right now can do numerous the roles that folks do — however I do not need to be one of many tech leaders that stands on a stage and says, ‘Don’t be concerned about it, there’s going to be new jobs,’ as a result of I do not know what these new jobs are.”

“I simply need to be clear and sincere with what I believe is occurring, and I might reasonably be open about that, as a result of I do know what these folks, the tech leaders are saying once they’re not on public phases, and so they’re not saying the very same issues,” he advised CNBC in October.

Siemiatkowski is not any stranger to defending his firm in response to criticisms, particularly when challenged over Klarna’s enterprise mannequin of providing short-term financing for all types of issues from clothes to on-line takeout.

Final week, Klarna introduced a tie-up with DoorDash to supply its versatile cost choices on the U.S. meals supply app. Nonetheless, the transfer was met with backlash from web customers, who mentioned it dangers saddling struggling customers with extra debt.

One X consumer posted a meme exhibiting private finance pundit Dave Ramsey with the caption, “what do you imply you’ve $11k in ‘doordash debt’.”

Siemiatkowski took to X to defend the transfer, saying that Klarna “affords many cost strategies” together with the power to pay in full immediately or defer cost till the top of the month along with month-to-month installments.

“DoorDash affords many merchandise past meals!” Klarna’s boss mentioned on X in response to the criticisms. “I do know we’re most well-known for pay in 4. However you should utilize a bank card at DoorDash as nicely.”

In 2022, the outspoken entrepreneur confused his firm was “superior” to bank cards and “extraordinarily recession-proof” after the agency laid off 10% of its workforce.

As Klarna approaches its inventory market debut, buyers will possible be scrutinizing his observe report and whether or not he is nonetheless the appropriate individual to steer the corporate long term.

Lena Hackelöer, CEO of Stockholm-based fintech startup Brite Funds, is somebody who’s labored below Siemiatkowski’s management, having labored for the corporate for seven years between 2010 and 2017 in numerous advertising capabilities.

She expressed admiration for the Klarna co-founder — and pushed again on recommendations that management mismanaged the enterprise in the course of the pandemic period.

“I by no means thought that they’d mismanaged, which is someway the way it was reported,” Hackelöer advised CNBC in a November interview. “I believe that they had been simply very a lot specializing in progress — as a result of that was the path that buyers had been giving.”

Siemiatkowski admits the journey of constructing Klarna hasn’t at all times been rosy.

Requested in regards to the greatest problem he is ever confronted as CEO, Siemiatkowski mentioned that, for him, shedding 10% of Klarna’s workforce in 2022 was the hardest factor he is ever needed to do.

“That was very tough as a result of I did not predict that investor sentiment would shift that quick and other people would go from valuing firms like ours so excessive after which to one thing so low,” he mentioned.

“That is clearly very tough as a result of, then you definitely understand like, ‘OK, s—, I’ll should make a change. It is not going to be sustainable to proceed, and I want to guard the customers, who’re stakeholders within the firm, the staff, the buyers — I must [do] what’s proper for all of my constituents,” Siemiatkowski continued.

“However sadly, it’ll have an effect on the smaller group, which occurred to be about 10% of our staff.”

Like different tech companies, Klarna grew considerably over the Covid-19 pandemic. In 2020, the agency grew its gross merchandise quantity or the overall worth of all gross sales processed by its platform, by 46% year-over-year, to $53 billion.

The corporate additionally onboarded a whole bunch of recent staff to capitalize and develop on the chance it noticed from authorities lockdowns’ affect on client habits and the broader acceleration of e-commerce adoption at the moment.

“I believe anybody who’s a bit of bit sane, that is not one thing you are taking lighthearted, proper?” Klarna’s CEO mentioned, referring to the layoffs. “It is a powerful determination. It makes you cry. I’ve cried.”

Nonetheless, Siemiatkowski stood by his determination to put off staff: “I felt like I had an obligation to my constituents, everybody, all of those stakeholders, the corporate, and I believe it was a mandatory determination at that cut-off date.”

Now, Klarna’s CEO faces his greatest check but — taking the enterprise he co-founded 20 years in the past public.

“IPOs are dangerous for firms as share costs can fluctuate rapidly,” Nalin Patel, director of EMEA non-public capital analysis at PitchBook, advised CNBC through e mail. “They are often expensive and prolonged to rearrange with funding banks too.”

Klarna earlier this month filed its prospectus to listing on the New York Inventory Alternate. The corporate hasn’t but set a date for when it should go public, nor has it priced shares.

If it succeeds, the end result may catapult the web value of Siemiatkowski and different shareholders together with Sequoia Capital, Silver Lake, Mubadala Funding Firm, and the Canada Pension Plan Funding Board.

Sequoia is Klarna’s single-largest shareholder with a 22% stake. Siemiatkowski is the second-largest, proudly owning 7% of the enterprise.

A optimistic IPO final result would additionally carry the worth of Klarna staff’ stakes, and probably increase morale after a turbulent few years for the corporate.

“It is a steadiness between discovering a good worth for present buyers seeking to money out and new buyers searching for a stake in Klarna at a good worth. Overvaluing the corporate may result in its valuation falling sooner or later. Whereas undervaluing it could imply cash has been left on the desk for these exiting,” Patel mentioned.