Sebastian Siemiatkowski was preparing for an initial public offering in the Swedish “buy now, pay later” fintech he founded nearly 20 years ago when CEO Klarna stood in front of him. There was one thing. It was his co-founder.
Last month, Siemiatkowski finally resolved a year-long boardroom dispute and replaced his executive ally in former chief financial officer Victor Jacobson, a college friend with whom he founded the company. Dismissed.
And on Wednesday, as Wall Street revved up in anticipation of a Donald Trump-era boom, Klarna revealed it had filed its long-awaited IPO papers in the United States.
Insiders, investors and bankers expect the company to achieve a valuation of $15 billion to $20 billion in its public offering. If Siemiatkowski can pull off an IPO, it would be a turnaround for the company that epitomizes the boom and bust of fintech. A 2021 funding round valued Klarna at $46 billion, but it plummeted to $6.7 billion a year later.
Even at the lower end of the valuation range, the 43-year-old former burger flipper would become a millionaire if his free-float shares were issued. At a valuation of $20 billion, an 8% individual stake would be worth about $1.6 billion.
Taavet Hinrichs, co-founder of London-listed fintech company Wise, said: “It’s quite remarkable that he has been able to lead the company for 20 years, taking what started out as a small Swedish company and turning it into a global business. I raised him,” he said. “This is really good for the European ecosystem.”
Founded in 2005 after Siemiatkowski and two other student friends proposed the idea in a university competition but failed, Klarna is a “buy now, pay later” service that allows customers to delay or pay in installments. The company pioneered the “pay with money” model.
The Stockholm-based company was regularly profitable for its first decade, until it decided to make an expensive move into the United States.
The new strategy meant accepting large losses in exchange for pursuing growth, and Siemiatkowski went after it.
Jacobsson, one of Klarna’s co-founders, left the company in 2012, but Klarna continued to hold an estimated 4% to 9% stake, managed through a special purpose vehicle. Jacobson was succeeded three years later by his second co-founder and deputy chief executive, Niklas Adalbert, who sold himself and chose a career in philanthropy.
According to an early collaborator, in the early days “the emphasis was on not making Klarna a one-man show,” but the company “became a one-man show” with Siemiatkowski at its core.
Siemiatkowski (also known as “Seb”) has achieved celebrity status in the Swedish technology industry. He is frequently asked to appear on podcasts and TV shows to talk about his journey and family struggles, including his father’s alcoholism and suicide.
He was vocal about not drinking alcohol anymore and spoke of his difficult upbringing in Uppsala, a medieval town 70 kilometers north of Stockholm. His parents, two academics, had emigrated from communist Poland before he was born in 1981 and were in dire straits. His father became a taxi driver, and his mother retired early due to illness.
“We ate Swedish pancakes, which were basically just flour and milk, for a whole week at a time,” Simiyatkowski was quoted as saying in a Sequoia Capital brochure. “My parents couldn’t afford anything else.”
To fund Klarna’s global ambitions, Swedish executives are banking on the backing of prominent Silicon Valley investors, including Sequoia Capital and Silver Lake, riding a wave of investor hype and cheap money. Secured. By 2021, a SoftBank-led funding round had crowned the company Europe’s most valuable startup, and online checkouts enjoyed a pandemic-era boom with “pay later” options becoming popular.
Just over a year later, rapidly rising interest rates brought the fintech frenzy to an abrupt end, leaving Klarna instead under pressure to prove its profitability potential and provide an exit for investors.
Since Klarna began raising money in the private markets more than a decade ago, many venture capitalists have not been able to monetize their stakes in Klarna (although there are exceptions). London-based investment firm Permira bought a 10% stake in 2017 for about $250 million and is thought to have sold about half of its stake for $1.7 billion since then.
Chief Executive Simiatkowski is trying to shift the party culture that was famous in the fintech industry’s early days to a more professional workplace, people who have worked with him said. He also sought to change perceptions about predatory businesses that rely on late fees for milk customers, introducing Klarna as a consumer-friendly “AI-powered global payments network and shopping assistant.”
Chief among these is his relationship with Michael Moritz, Sequoia’s former partner and Klarna chairman. Current and former employees describe Siemiatkowski as “uncompromising” and “demanding.” But one former executive said Mr. Siemiatkowski developed into a better manager under Mr. Moritz. Another said the duo had a “father and son” relationship.
It was Mr. Moritz who brought Klarna to the brink of a U.S. listing, and helped Mr. Siemiatkowski navigate power struggles with Mr. Jacobson and board allies that could derail any float. .
The dispute centered on the dispute between the two co-founders and the extent of Siemiatkowski’s influence over the company after its IPO. It was Chief Executive Klarna who secured victory in a shareholder vote last month after securing the support of the company’s major investors.
“Sebastian is more powerful than ever. Opposition to him is being dispelled little by little,” said one of his friends.
With an eye on an IPO, the fintech, which is regulated as a bank, has formed a number of partnerships with U.S. merchants to take on its main rival, Affirm. The company also sold its instant ‘checkout’ payments business for $520m in June, and subsequently sold £30bn worth of its UK loans to hedge fund Elliott to increase its chances of making new loans. We signed a contract to offload it.
Former executives say some strategic decisions raised eyebrows, including a number of small acquisitions when the company was losing money.
Klarna also faces an investigation from Sweden’s financial regulator over financial crime and risk management. One of the people close to the company said it had discussed the preliminary findings with regulators.
Khurana declined to comment on the matter.
“Sebastian rightly believes that Klarna’s success is his own work. However, he has a track record of investing in businesses that have underperformed and have been secretly sold or closed.” said a senior executive.
People close to the company said that although Siemiatkowski prevailed in the board battle, the dispute left a bitter feeling among some investors.
One shareholder said, “There are many anti-Cebu owners shaking their heads over the civil war.” But they added, “Most of them just want a liquidity event to happen and stop scaring prospective investors.”
