The $15B Fintech Nobody Believed In
Sebastian Siemiatkowski, Klarna.
Sebastian Siemiatkowski and his two school friends, Niklas Adalberth and Victor Jacobsson, have just stepped through the grand entrance of the Stockholm School of Economics. But this time, they’re not here for class. They’re here to pitch their new project, Kreditor.
The school’s incubator is hosting a pitch competition and it’s the perfect chance for the three friends to get noticed. The jury is impressive. Very impressive. Leading the panel: the chairman of H&M and a member of the Wallenberg family, one of the wealthiest and most influential families in the country. Even the King of Sweden is in the room. If there’s ever a time to deliver, it’s now.
The three friends are there to present something new: a “buy now, pay later” solution. They watch the other teams go before them when their turn comes. Heart pounding, they step on stage and deliver their pitch. Perfectly.
After a few minutes of deliberation, the jury shares its verdict: “It’ll never work… why can’t the banks just do it?” The feedback is harsh. Kreditor finishes last in the competition. It’s hard to stay motivated when such important figures dismiss your hopes in two short sentences. But as a sign of their character, instead of giving up, the young founders tell themselves, “We’ll show you.”
Twenty years later, Klarna is valued at $15 billion.
***
That strength of character, Sebastian Siemiatkowski got it from his childhood. Born in Sweden to Polish immigrant parents, he grew up in a precarious environment and found escape through books. Classic science fiction tomes like Hitchhiker’s Guide to the Galaxy, but also biographies of entrepreneurs like the founder of IKEA or Richard Branson, the founder of Virgin. That’s when his interest in business started to take shape. Starting a company might be his way out of hardship.
At 15, Sebastian was hired at Burger King. He spent two years there, apron on, assembling burgers in the kitchen of the American fast-food giant. That’s where he learned discipline and developed a taste for well-oiled systems — no pun intended — but above all, that’s where he made a key encounter: Niklas Adalberth. You may have forgotten already, but his name appeared in the very first line of this story.
The two of them would stay close for quite some time. They studied together at the Stockholm School of Economics, and even embarked on a wild one-year adventure together. Between two academic years, the two friends travelled the world without ever taking a plane, spending an average of $10 a day. Enough to create some incredible memories.
Back in Stockholm, Sebastian found a job in a factoring company as a sales rep before returning to his studies. While he struggled to convince old-school business owners to buy his solution, a new generation of entrepreneurs showed real interest: e-commerce founders. At the time, there were still few of them, and e-commerce was a new industry. So when it came time to make a purchase, pulling out a debit card without having touched the product or spoken to a salesperson felt risky.
But what if you could place the order, receive the product, and pay later? Good idea, right?
***
Well, that wasn’t the jury’s opinion at the pitch session. But, as if fate wanted to send a small sign of encouragement, a stranger stopped the young entrepreneurs just as they stepped off stage: “Hey, I don't care what those guys said. Just go for it, and the banks will never understand what happened.”
It was Jane Walerud's opinion too. A few months later, she invested €60,000 and became Kreditor’s first angel investor. The problem now was that none of the three co-founders had a technical background. They needed developers and Jane helped with that too, introducing Sebastian to four engineers from her previous company. The team was hyped by the idea, and also the 40% equity they were offered to build the product.
The guys were good. It took them just four months to launch. On April 10, 2005 — easy date to remember since I was born on April 10 — the first transaction went through. Everything worked perfectly. Now came the time to scale, fast. The concept was simple: Kreditor paid the merchant upfront and gave customers 30 days to settle their invoice. In exchange for taking on the risk and promising higher conversion rates, merchants gave a commission on each transaction to the young Swedish startup.
But things didn’t go as planned. A few months after the launch, the four engineers decided to leave. A contract had been signed without much attention to detail, and there had been a misunderstanding about how long they were expected to stay involved. In reality, it had never been clearly defined. “We thought these guys would stay on and help us build the company, but they left after only a year, taking their shares with them,” Sebastian says. “It was my first real learning as a founder: you have to make sure your employment contracts don’t leave any room for uncertainty.”
The shares were eventually bought back — probably a bit too quickly for the engineers, who might regret it now — and Klarna found a new CTO to take over.
***
Between 2006 and 2008, Kreditor experienced strong growth, driven by the rise of online commerce. The company expanded beyond Sweden’s borders and began offering its services in neighboring countries: Norway, Finland, and Denmark. At the time, the startup wasn’t fully technology-driven yet, and focused entirely on the service it provided to customers.
Things really picked up speed in 2010, when Kreditor set out to become a tech company. To build credibility and attract top tech talent, Sebastian wanted to raise funds from leading tech investors. He quickly had two names in mind: Atomico — the fund created by Skype founder Niklas Zennström — and Sequoia Capital. It was with the latter that Kreditor, renamed Klarna that same year, raised $9 million at a €100 million valuation.
Klarna’s growth in the following years was impressive. The fintech continued raising capital, including a $155 million Series C in 2011 from General Atlantic and DST Global, to fuel its expansion. Confident in its results, the company set a new goal: to become the go-to infrastructure for processing online payments. Two other young companies had already built solid reputations and seemed to be pulling ahead: Stripe and Adyen. The market was clearly moving fast, a sign there were opportunities to seize, right?
Klarna decided to enter the German market to kick off this new phase. But the teams struggled to release a solid first version of their payment product. Meanwhile, Adyen was expanding at breakneck speed across continents and outperforming expectations. Was Klarna aiming too high? The wake-up call came in 2015. Klarna and Adyen were both in the running to handle payments for the giant Spotify. It was a major blow when the streaming company chose Adyen. Ouch… the Swedish company picking the rival.
Two options were then laid on the table for Klarna’s future: Sell the company and walk away with a modest profit, or double down on what they did best, BNPL, and take on the massive US market.
Well… ten years later, Klarna still isn’t for sale.
***
The Swedish fintech entered the US market in 2015, opening offices in Columbus and New York. Affirm was already a well-established competitor in the US, and the Australian company AfterPay was also experiencing impressive growth in the land of Uncle Sam. Sebastian took on the role of first salesperson again, just like in Kreditor’s early days, and pitched the product again and again. But the company hit a wall. There was a structural problem inside the organization, which slowed down product launches.
Klarna was facing an issue I’ve often talked about in this newsletter — and with my clients for whom I write: silos had formed between teams as the headcount grew. Sales, engineering, and product were operating separately, with no shared responsibility or motivation, and it affected the company’s velocity.
To fix this internal organizational problem, Klarna took inspiration from Amazon and restructured everything into small, autonomous, cross-functional teams. “We started to feel a greater sense of momentum, to get products out at a higher pace, to launch more features. It wasn’t a daylong exercise, to be sure, and some employees weren’t sold on it, but in the end it was the best thing for the company,” Siemiatkowski says.
The benefits of the restructuring showed quickly and paved the way for continued growth. In 2017, Klarna obtained a banking license to expand its financial services offering. A few years later, COVID became a real accelerator for the fintech as people could no longer shop in stores. In 2021, Klarna processed $80 billion. The fintech also reached a record valuation of $45.6 billion, even as its losses multiplied fivefold compared to the previous year.
In July 2022, Klarna made headlines. But not for the right reasons. “Klarna valuation plunges 85% to $6.7 billion as ‘buy now, pay later’ hype fades,” CNBC reported. WSJ, TechCrunch, and all the major media outlets picked up the story. The macroeconomic context wasn’t great, coming out of the COVID crisis and with the war in Ukraine underway. Regulators were also starting to question the BNPL model, sometimes criticized for enabling painless over-indebtedness. And, of course, there was the 2020s tech bubble, which had inflated valuations far faster than revenues. “I was cautioning people that if your valuation grows faster than your revenue, there’s bound to be a correction,” Sebastian reminds.
The company faced its first major round of layoffs. 10% of the workforce, around 700 people at the time, were let go. Seventeen years after Klarna’s beginnings, its CEO was once again facing massive, unfamiliar challenges. It turned out to be a very difficult period, marked by countless sleepless nights.
***
In 2023, Klarna weathered the storm and cut its losses by 69%. In 2024, it returned to profitability for the first time since 2021 with a net profit of $21 million on $2.81 billion in revenue. It’s always striking to see that these fintech giants — the same goes for companies like Stripe or Revolut — continue to show strong growth, even with billion-dollar revenues and years of maturity behind them.
A holy grail for many entrepreneurs and a major hope for any investor seeking liquidity, Klarna was expected to go public last March. It was supposed to mark the beginning of a new cycle for the whole ecosystem. Everything was in place. The communication was sharp. Profitability had returned. But the economic context had other plans and just days before the IPO, Klarna pulled back. The listing would have to wait.
Klarna has been around since 2005… twenty years! I had no idea the company had been around that long. And yet, despite the years, the problems just keep piling up. We often see the successes, much less the dark sides. But Sebastian “prefers chaos over success” and thrives in the heat of action. Success bores him. And I get the sense that’s something many entrepreneurs have in common.
Credit to my main sources:
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Thomas