Klarna CEO Sebastian Siemiakowski in Stockholm, Sweden. Picture: REUTERS/MIA SHANLEY
Klarna CEO Sebastian Siemiakowski in Stockholm, Sweden. Picture: REUTERS/MIA SHANLEY

Frankfurt— Online payments firm Klarna, which has attracted a growing following with its "buy now, pay later" service for shoppers, said on Tuesday it had raised $460m in a funding round making it Europe's most valuable fintech startup.

Investors led by San Francisco-based Dragoneer Investment Group put new money into the Swedish company, giving it a valuation of $5.5bn.

Klarna, founded in 2005 by CEO Sebastian Siemiatkowski and partners, enables consumers to buy online without having to provide payment details to the merchant they are buying from.

Instead, Klarna pays for the order, which is then dispatched. It invoices the buyer, who typically gets 14 or 30 days to settle without having to pay interest.

Joining other European fintechs like Berlin-based smartphone bank N26, Klarna said it would invest proceeds to expand in the US, where it was adding new customers at an annual rate of 6-million.

Klarna said it wanted to offer US consumers a simpler alternative to credit cards, while building up partnerships with merchants including rue21, ASOS, Lulus, Toms, Superdry , Sonos and Acne Studios.

"Finally, transparency, technology and creativity will serve the consumer," Siemiatkowski said in a statement.

Insider backing

Klarna's biggest existing shareholders, including Sequoia and Bestseller, invested more than $100m  earlier in 2019, setting the stage for this external round.

It had raised a total of $775m prior to the latest funding round, according to Crunchbase.

The latest round was joined by Commonwealth Bank of Australia, HMI Capital, Merian Chrysalis Investment Company, Första AP-Fonden, IPGL, IVP and funds and accounts managed by BlackRock.

The company, which holds a banking licence, has 60-million end customers, serving 130,000 merchants and processing an estimated 1-million transactions per day.

One merchant partner, fashion retailer H&M, bought a stake in Klarna in 2018 when the fintech was valued at $2bn.

In January, US rapper Snoop Dogg also backed Klarna and took on a role as its marketing "face".

The company, which employs 2,500 people, says it has a 10% share of the ecommerce market in northern Europe. It operates in 14 countries.

Klarna reported operating income in 2018 of 161 million Swedish krone ($16.81m). Revenues grew by a third in the first quarter, but the company made a loss of 96-million krone for the period due to higher net credit losses.

Numis acted as financial adviser and placement agent to Klarna.