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Welcome to The Interchange! If you received this in your inbox, thank you for signing up and your vote of confidence. If you’re reading this as a post on our site, sign up here so you can receive it directly in the future. Every week, I’ll take a look at the hottest fintech news of the previous week. This will include everything from funding rounds to trends to an analysis of a particular space to hot takes on a particular company or phenomenon. There’s a lot of fintech news out there and it’s my job to stay on top of it — and make sense of it — so you can stay in the know. — Mary Ann
A humbling time for Klarna
Welp, I had a whole other topic planned for my intro today and then the Klarna news hit.
In case you missed it, on July 1, the Wall Street Journal reported that the Swedish buy now, pay later behemoth and upstart bank is reportedly raising $650 million at a $6.5 billion valuation, giving new meaning to the phrase “down round.” The news was shocking, to say the least. Why, you ask? Well, in June of 2021, Klarna was valued at $45.6 billion after closing on a $639 million round of funding — making it the highest-valued private fintech in Europe at that time.
When Klarna confirmed that raise on June 10, 2021, CEO and founder Sebastian Siemiatkowski sat down with me (via Zoom) in an exclusive interview, detailing why he was so excited about the company’s “explosive growth” in the U.S. and how it planned to use its new capital in part to continue to grow there and globally. He also said that an IPO was still in its sights “but not anytime soon.” The company then had 18 million users in the U.S.
Fast-forward to 2022. As of February, Klarna had 23 million monthly active users in the U.S. and 147 million globally. It reported 32% higher revenue of $1.42 billion for 2021.
By May, Klarna had laid off 10% of its workforce, or 700 people.
As TC’s Romain Dillet reported, the company didn’t name a single reason for the layoffs. Instead, Siemiatkowski listed different macro and geopolitical factors that led to the decision.
“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today,” he said. “Since then, 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.”
Now the company could be slashing its valuation by an astounding 1/7 to $6.5 billion. Notably, Klarna has not confirmed this, but, startlingly, the projection for the company’s alleged latest funding round and new valuation has steadily declined in recent weeks. The Wall Street Journal reported on June 16 that Klarna was considering raising capital at a valuation of around $15 billion. Even that new figure represented both a dramatic decline from Klarna’s mid-2021 valuation of more than $45 billion and the $30 billion figure it was reported to be targeting earlier this year, as our own Alex Wilhelm noted here. So from $45 billion to $30 billion to $15 billion to $6.5 billion. It’s hard to imagine it going even more downhill from here.
It’s also important to note, though, that Klarna is not the only BNPL provider that has seen a decline in valuation. As another tech enthusiast tweeted on Friday, competitor Affirm’s stock is also down significantly. On July 1 alone, shares were down 5% to $17.13 at the time of my writing this at about 2:30 p.m. CT, giving Affirm a market cap of $4.9 billion. That’s down from a 52-week-high of $176.65. Ouch.
Image Credits: Twitter
Weekly News
Speaking of valuations, Alex examined how after financial technology startups saw their fortunes rise during the venture capital boom in 2021, they’re now suffering from a slump of a similar scale. The damage, he wrote, is not unidimensional. Instead, pain around the fintech sphere is varied and multifactorial.
The layoffs in fintech continue. Amount, a company that reached unicorn status last year, recently laid off 18% of its workforce. The exact number of how many people were affected is not known, but when TechCrunch reported on its last raise in May of 2021, the company said that it had 400 employees. If that is still the case, then about 72 people were let go. Amount was spun out of Avant — an online lender that has raised over $600 million in equity — in January of 2020 to provide enterprise software built specifically for the banking industry. It partners with banks and financial institutions to “rapidly digitize their financial infrastructure and compete in the retail lending and buy now, pay later sectors,” CEO Adam Hughes told TechCrunch last year.
The Federal Trade Commission is suing Walmart for sitting by while scammers bilked customers out of more than $197 million, the agency alleged in a statement. It’s seeking a court order that would force Walmart to give money back to customers, on top of civil fines. In a brief response, Walmart described the lawsuit as both “factually flawed and legally baseless.” Money transfer scams are widespread, and they can involve everything from promises to share an inheritance to lies about a family emergency. They happen just about everywhere, from Zelle, Venmo and Cash App to crypto ATMs and popular dating apps. In this case, the FTC alleges that Walmart “turned a blind eye to fraud” that went down inside its stores.
Robinhood made headlines three times over the past week. First, Taylor looked at how the stock trading and investing app was blindsided by the surge in interest from the first big “meme stock” after Redditors and other retail investors rallied around $GME and sent its price into the stratosphere. Jacqueline Melnik then addressed the rumors that FTX is looking to acquire Robinhood in this piece. And then Alex broke down for us why a crypto exchange might want to buy Robinhood in the first place.
According to the International Monetary Fund (IMF), less than 2% of financial institutions’ CEOs are women, and for executive board members the figure is less than 20%. Why does this matter? Apart from the obvious lack of opportunities for talented women, there are broader implications for business resilience as well as economic policy at national and international levels. Read more at Fintech Futures.
Cash App last week launched Round Ups, allowing customers to invest their spare change into a stock of their choice or bitcoin every time they use their Cash Card. Cash App said the product would allow Cash Card users “to seamlessly accumulate bitcoin and stock investments through everyday purchases.”
If you haven’t heard yet, there is a fintech conference on the water coming to San Diego, California, on August 10. Fintech Fest 1.0 is bridging together leaders from Brex, Encore Bank, Mastercard, Checkout.com, Figment, Sift and many others for business meetings and discussions on the largest boat on the West Coast. You can get 40% off ticket prices this week only.
Speaking of discounts, be sure to take advantage of this amazing deal. TechCrunch+ is having an Independence Day sale! Save 50% on an annual subscription here. More information here. And the two-for-one ticket to TechCrunch Disrupt sale will expire on July 5.
Funding and M&A
Seen on TechCrunch
Drive now, pay later: Startups make EVs more accessible by putting off the biggest bill
HomeLister wants to make selling your home more of a DIY affair, and cheaper
Here’s Carta’s response to venture becoming more global
Sava, a spend management platform for African businesses, gets $2M pre-seed backing
And elsewhere
GoCardless goes after Plaid with Nordigen buy
Knox Financial to expand loan products with $50M in funding
Zilch draws $50M more funding to buck BNPL industry woes
That’s it for this week. For our readers in the U.S., I really hope you’re enjoying the long weekend and Happy Independence Day. And to all of you, have a wonderful week ahead. To borrow from my dear friend and colleague Natasha, you can support me by forwarding this newsletter to a friend or following me on Twitter. Xoxo, Mary Ann