Klarna to raise fresh cash at slashed $6.5B valuation
wsj.com> But if completed, it would represent a huge discount on the company’s valuation when investors led by an arm of SoftBank Group Corp.
Why is it that SoftBank somehow always manages to buy the top?
I've thought about this too and I think it's because their strategy is structurally flawed. Their focus is on new/newish tech companies, but they don't make $3 million investments. They want to make $3 billion investments.
But when you're buying stakes that size in companies that aren't yet mature, you're almost necessarily going to be chronically overpaying. There just aren't many 4 year old companies that actually have real upside when you're buying in at a $100b or $200b valuation.
When you're making investments that big, you've got to go back to value investing like Warren Buffett or the Norwegian Sovereign Fund. That's the only place to sustainably put billions to work. And you'll have to accept the 8% annual returns that come with it.
If you have that kind of money and you want to invest in newish tech, then you have to accept the fact that your investments will move the market and make that work in your favor. Retail can buy a share here and there but you cannot. So how to make it work in your favor? Ask yourself "who can make productive use of this much money? who needs this much money to even be viable?" And it will be really capital intensive moon-shot type stuff. Self driving cars for instance, but that might already be overcrowded now. AGI in general too, that's kind of a more uncertain bet. Europe needs a shitton of energy investment now, both for geopolitical reasons but also to charge all the electric cars they will start buying soon. Building those nukes or solar+batteries can easily absorb hundreds of billions of dollars. Then there is medicine and biotech but that might take a lot of savvy to capture the value you create by spending on r&d. But like nanobots and brain coprocessors and immortality and stuff that is something we will eventually build and it's not that out of reach. Might wanna figure out some intermediary profitable goals. In summary take a long hard look at what Musk is doing. Except maybe his twitter persona.
Edit: Might wanna take a look at Gosplan too. After all a sufficiently rich investor is indistinguishable from a plan economy planning committee.
Musk is a textbook fraudster who is pioneering fake ideas, especially going to Mars. The maths provided by SpaceX for the Starship just do not translate into good astrophysics.
He over-promises and under-delivers, but there is an actual product. He isn't the kind of fraudster that mails you a bag of bricks.
I met Masa personally a couple times, and used to know several people in his inner circle.
The reason why Softbank buys at the top is because they do not have good internal filters to judge technology. "Masa invests in cr*p," one of them said.
They want the prestige of investing in the best tech companies, and to them, that often translates as "the most overvalued startups with the most media attention."
Their LPs know even less about tech than they do, so who's going to stop them?
For these reasons, Softbank is incapable of making contrarian bets on undervalued companies, and always puts money behind the startups that have already raised too much, too soon.
SoftBank will end up being the reverse Berkshire Hathaway:
Started (accidently) with a lot of money, consistently investing at the top, or in failed hype-projects, in things they didn't understand and end up mostly being negative signalling
My thought exactly. If it were possible to short private companies I would just look for whenever SoftBank leads a round at a nutso valuation.
lol plenty of frothy public cos you could have shorted down 80-90% since beginning of the year don’t need to find private ones…
Exuberance + deep pockets. When you are unconstrained, it is easy to be less judicious about investments.
I very much enjoyed Matt Levine's take on how exuberant Masayoshi Son is.
https://www.bloomberg.com/opinion/newsletters/2019-10-23/mon...
But deep pockets would suggest that you have more.momey to spend on negotiations. A one billion investment justifies spending a million on the negotiations.
how does it still exist and have money left after so many huge failures
It mad wild, wild money through a massive single investment: Alibaba.
Its been searching for the next Alibaba since.
Klarna and affirm are the next gen of bullshit companies. Like Uber and WeWork before it. Absolutely massive scams fed with easy money and dumping on the next fool.
Uber provides a real service. Think about what you used to do before Uber and how difficult and annoying things were.
Not everyone lives in a car-dependent asphalt wasteland. I rode a bike and still do - my own, and Capital Bikeshare.
What about when you want to get to/from the airport or other transportation hub like a train station or bus station? One experience I had was I called the taxi company the day prior to my trip to reserve a taxi to the airport, but it did not show up, and I had to scramble.
What kind of airport doesn't have a convenient transit connection already?
Actually, don't answer that question because I live close-ish to IAD and... it's a whole thing. But Dulles is located in a car-dependent asphalt wasteland so I think my point still holds. DCA is actually sane about this and is right off a major subway line (Blue).
One example is SFO from South Bay. Add in people with families, and public transit is out of the question.
What about families that makes public transit "out of the question"? I haven't been to SFO but it looks like it's the same issue as with IAD, which is that it's smack dab in the middle of the suburbs and has very poor transit connections to the surrounding areas (although it has an actual train line, which IAD still doesn't have!)
North America is really a unique beast in this regard, though, as nowhere else is it common to intentionally make airports so difficult to get to and from. Even in Europe, certainly for remote airports you might not expect lots of train connections, but IAD and SFO don't fit that bill.
I guess you can say that Uber's value prop is that they smooth over the failures of American urban planning in exchange for their cut of flesh.
I get around London in a regular taxi just fine?
If only taxis in the rest of the world were as good as London's, Uber probably wouldn't exist.
Agreed. But given that legacy dispatch infra is bad/inefficient, you need rider density to support the quality of service of a London.
Great. Now try Tallahassee, Florida. Or Liverpool. Or the myriad of other non-global/dense city with limited public transportation infrastructure especially during off hours.
Except in zone 1 Ubers are still way more convenient than other taxis.
Which is said for Klarna, because there seems to be an actual market for what they do. Using cheap VC money ruined a perfectly fine market opportunity, and a chance to build a sustainable business. Well, I think we will see a lot more of those in the next months.
Klarna is notorious for privacy violations. For a good while it was possible to pretty much doxx any of their users just by entering some of their details in any Klarna-enabled online store. If my memory serves, they may even have had a ”which of these similarly named persons are you” dropdown at some point…
Oh dear... Never really bought through them, just saw them all over the internet as a payment option...
I once checked them out (or a provider they had bought, might be "Sofort") when all other options seemed worse.
IIRC I would have had to log into my bank account through them, giving them my login data and letting them read all of my transactions (data they use to gauge trustworthiness, I think). I was shocked that that's legal and amused to find out it probably isn't.
(Disclaimer: Highly anecdotal, it was multiple years ago)
Uber has no business being in this group. They provide real value to customers and drivers. Taxis have provided absolute shit service in many places and Uber absolutely came in with a superior product and business.
at this point the average Uber driver is no better than the average taxi driver, and the last time I compared the price of an Uber ride to the price of a taxi the taxi was 10% cheaper.
Uber got where it did by losing vc money and by ignoring laws. That fits my personal definition of bullshit company.
Your Uber driver will never mysteriously "forget to turn on the meter", have a "broken credit card machine", or any of the other scams taxi drivers pulled on me constantly.
No instead they will call you before the trip and ask you where you are going and then cancel the trip after hanging up.
If it is raining or the sun is out or the trains are busy or it is any of one a hundred random reasons - you will have surge pricing. Not just 10-15% extra but 100-150% extra. But don't worry keep standing around for a 30-40 minutes and checking the app eventually the price will come down...
No, they do more dangerous and violent things, because they are completely unregulated.
Depends on the region. In Latin America, Uber is way better than taxis -- both price and Trust/Safety.
Is it profitable? Can it be?
klarna and affirm are what happens when you graft the business model of a rent to own furniture/electronics store (where an xbox will end up costing $1425 after all payments) or a "buy here, pay here" used car sales lot onto some web2.0 bullshit and marketing hype
Klarna has good tech for payment solutions, and they have really optimized the funnel for purchasing through debt. I mean, the latter to me is bad, but do you mean they dont or wont make money and how so?
They're all real business with real value. I blame the VCs who kept feeding them endless amounts of capital when they were clearly hitting a ceiling of how much value they could generate.
Klarna is absolutely over-hyped, overvalued and a glorified bank and a complete scam. It also seems that an investor unloaded their shares worth $7.6m a year ago [0][1][2] at a $48B valuation to get retail sucked in and investing at that valuation on a crowdfunding platform.
Fast forward today, those 6,971 new investors have lost money as Klarna is on a series of downrounds; now at $6.5B.
Now that is what I call a magnificent exit scam that Crowdcube has done, which retail once again loses and becomes the bag holders.
[0] https://www.crowdcube.com/cubex/klarna
[1] https://milled.com/navia/klarna-pitch-is-launching-tomorrow-...
[2] https://www.thetimes.co.uk/article/online-investment-platfor...
Something tells me you're confusing an actual business (Klarna) with someone offloading shares through Crowdcube.
Nope. They are both scams. One being a platform for larger investors facilitating and dumping on retail and a debt collector masquerading as a 'friendly' interest-free and financing platform for consumers with soft credit checks.
So yes, both are scams.
I tried getting into the Crowdcube investment round, but after they got the allocations, the whole deal fell through and I was refunded.
Needless to say I’m pretty happy they didn’t take my money in the end.
Hopefully, the investment round in Crowdcube was cancelled as they had "issues issuing the share in a timely manner". So Crowdcube users were saved by chance!
That's just $36M per month for 18 months!
A year ago this company raised $639 million. Additionally, the article states the company makes it's money from fees paid by retailers:
>"Instead of charging consumers interest, Klarna takes a fee from the retailers."
This suggests they're not subsidizing their customers with VC money in the same way that cheap Uber rides did. Can anyone say why they are they trying to raise more money almost exactly a year after raising the kind of money they did? Are they simply trying to squirrel away some rainy day money or did they burn through most of that $639 million already? If the latter why is this such a capital heavy business if the model is based on retailers paying fees to the company?
This is a good question and even as an employee i do not know. The company made a few acquisitions (google them), then there was the huge USA launch where they spent lot of marketing money (super bowl ad, chicago bulls etc.) They also started a lot of projects / markets to see what works.
The sad part is, unlike silicon valley the employee salaries were still quite low, they do not discuss plans with the employees, they only hire juniors and management does not share any numbers / overall plans with the employees. Even after last round of layoffs we were told that all is good. Now, we hear that company is seeking fresh funding after raising more than half a billion last year!
Honestly that sounds like a pretty bad place to work then. If you wanted to be kept in the dark and paid poorly, you can get that at any big corporation and with far more stability.
Can you get your equity wiped out at a big corporation? Probably not!
> Additionally, the article states the company makes it's money from fees paid by retailers
They operated their own debt collection firm until March 2021 called Segoria. They liked to keep quiet about that.
From the horse's mouth: https://youtu.be/ZasUQuoCw2Q?t=1887
They of course still use debt collection but outsource it now.
Interesting. Also from your link they outsource their customer service too. So you've go three separate companies, the bank, the debt collection agency and the customer service. It sounds like bad customer experience waiting to happen.
It's probably still a "growth & engagement" operation where most of the money is pissed away in marketing and building an engineering playground to solicit further funding rounds.
Wow Affirm’s stock has literally gone down more than 90% in 7 months or so. Crazy.
Don't look at Peloton's charts.
Most of these make BTC look like a safe haven
Peloton feels like the 2020's GoPro
Yea. My equity has been dismal. The benefits are fantastic though.
i can affirm that. was $170
We need a new word for de-unicorned startups.
I‘m visualizing a unicorn that after a second look turned out to be a mule with litter stuck on his head…
Why not just "ass"?
Well that's one way to wipe out your common stock holders. Later rounds probably have some sort of down round protection. So this is probably terrible for founders and employees.
Buy now, pay later would never have left the drawing board if interest rates weren’t artificially low for so long. Who wouldn’t want to to take a 0% interest loan in a bull market?
All the investors burned by BNPL nonsense have the Federal Reserve to thank. Making winners and losers every day. But it’s a free market still, because it sounds cool to say it muh man!
All while admitting they don’t know anything:
Powell was recently quoted as saying "We understand better how little we understand about inflation.”
The authority and respect the last generation commands needs a real challenge. Substantive change and not just chanting “disrupt” while playing the same game.
Their figurative identities should not be sacrosanct.
Anybody get tired of reading the opinions of what must be 13 year olds pretending to know something about multi-billion dollar business valuations?
X happened and I knew all along it was obviously going to happen.
If you want to keep track of how the Klarna story evolves - and also other startup & tech news from Sweden - I allow myself to recommend my free newsletter http://www.swedishtechweekly.com.
I apologize for the spammy nature of this comment, but I know some of you will actually appreciate this one.
They had a valuation of ~ $17B not long ago. Does it mean more layoffs? I hope not.
they were trying to raise at $40B+
They raised $640M at a $46B valuation a year ago:
https://www.cnbc.com/2021/06/10/klarna-softbank-funding-roun...
All these fintechs are completely overvalued.
Chime is the most notable in my eyes