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

LONDON — After 20 years within the function as Klarna’s CEO, Sebastian Siemiatkowski is about to face his hardest take a look at 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 goal of taking over conventional banks and bank card companies with a extra user-friendly on-line funds expertise.

Right this moment, Klarna is synonymous with “purchase now, pay later” — a way of cost that permits folks to purchase issues and both defer cost till the tip of the month or repay their purchases over a sequence 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 dealing with rising competitors from rivals reminiscent of PayPal, Affirm and Block‘s Afterpay, to an 85% valuation plunge.

However, 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 would 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 trip 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 every thing we have gone by with the corporate, at any cut-off date I ask myself, do I nonetheless assume that Klarna can grow to be the subsequent Google in measurement, that we are able to grow to be a a whole lot of billions greenback market firm, or a trillion {dollars},” Siemiatkowski informed 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 revenue 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 web revenue of $21 million — up from a web lack of $244 million in 2023.

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

Nevertheless, 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 scale back its total workforce to three,800 from 5,000 thanks partially to its utility of AI in areas reminiscent of advertising and customer support.

“By merely not hiring … the corporate is sort of changing into smaller and smaller,” he informed Reuters information company, including that jobs have been disappearing as a result of attrition quite than layoffs.

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

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

“I simply wish to be clear and sincere with what I feel is occurring, and I would quite 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 informed 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. Nevertheless, 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 displaying private finance pundit Dave Ramsey with the caption, “what do you imply you’ve gotten $11k in ‘doordash debt’.”

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

“DoorDash gives 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 effectively.”

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 probably be scrutinizing his observe document 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 underneath Siemiatkowski’s management, having labored for the corporate for seven years between 2010 and 2017 in numerous advertising features.

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 one way or the other the way it was reported,” Hackelöer informed CNBC in a November interview. “I feel that they have been simply very a lot specializing in progress — as a result of that was the path that buyers have 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 troublesome as a result of I did not predict that investor sentiment would shift that quick and other people would go from valuing corporations like ours so excessive after which to one thing so low,” he mentioned.

“That is clearly very troublesome as a result of, you then notice like, ‘OK, s—, I’ll must make a change. It isn’t going to be sustainable to proceed, and I would like to guard the customers, who’re stakeholders within the firm, the workers, the buyers — I have to [do] what’s proper for all of my constituents,” Siemiatkowski continued.

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

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

The corporate additionally onboarded a whole lot of recent workers to capitalize and develop on the chance it noticed from authorities lockdowns’ affect on shopper conduct and the broader acceleration of e-commerce adoption at the moment.

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

Nevertheless, Siemiatkowski stood by his choice to put off employees: “I felt like I had an obligation to my constituents, everybody, all of those stakeholders, the corporate, and I feel it was a crucial choice at that cut-off date.”

Now, Klarna’s CEO faces his greatest take a look at but — taking the enterprise he co-founded twenty years in the past public.

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

Klarna earlier this month filed its prospectus to checklist on the New York Inventory Change. The corporate hasn’t but set a date for when it’s going to 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 constructive IPO end result would additionally elevate the worth of Klarna workers’ stakes, and doubtlessly enhance morale after a turbulent few years for the corporate.

“It is a stability between discovering a good worth for current buyers trying to money out and new buyers looking 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.