Klarna’s valuation could fall by a third as the downturn catches up to private markets

Down and to the right… Booming buy now, pay later (BNPL) startup Klarna reportedly wants to raise money at a valuation a full third lower than its last raise. Klarna became Europe’s most valuable fintech startup in June after it raised a chunk of change from SoftBank at a $46B valuation. But since then markets have plunged, forcing cash-strapped Klarna to fundraise at a reduced valuation — aka a “down round.”

• Quick rise, quick fall: Klarna’s valuation ballooned 13X between 2019 and last year as BNPL took off. But its losses also grew as it burned through venture-capital cash to expand.
• Bad news for backers: Earlier this month, SoftBank posted its worst-ever annual loss of $13B+ as the value of its tech investments tanked.

What goes up… sometimes comes down. It wasn’t just Klarna: startups raised a record $600B from VCs last year, twice as much as the year before. But as tech stocks have fallen to Earth, so has investor confidence: startups raised 26% less $$ last quarter than at the same time last year.

• That’s where down rounds come in: startups that’ve burned through their cash have little choice but to raise more, even if it’s at a reduced valuation.