Welcome to The Switch! If you got this in your inbox, thank you for signing up and trusting us. If you read this as a post on our site, please sign up here so that you can receive it immediately in the future. Every week I watch the hottest fintech news from the past week. This includes 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 up to date – and understand it – so you stay informed. † Mary Ann
A Humble Time for Klarna
Welp, I had a completely different 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 and the new bank is reportedly raising $650 million at a valuation of $6.5 billion, giving new meaning to the expression “down round”. The news was shocking to say the least. Why do you ask that? Well, in June 2021, Klarna was valued at $45.6 billion after closing a $639 million financing round – making it the highest-valued privately held fintech in Europe at the time.
When Klarna confirmed that increase on June 10, 2021, CEO and founder Sebastian Siemiatkowski sat down with me (via Zoom) in an exclusive interview, explaining why he was so excited about the company’s “explosive growth” in the US and how it intended to help use its new capital to continue growing there and worldwide. He also said an IPO is still in the crosshairs “but not anytime soon”. At the time, the company had 18 million users in the US
Fast-forward to 2022. In February, Klarna had 23 million monthly active users in the US and 147 million worldwide. It reported a 32% increase in 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 did not state any reason for the layoffs. Instead, Siemiatkowski listed several macro and geopolitical factors that led to the decision.
“When we drew up our business plans for 2022 in the fall of last year, it was a very different world from the one we find ourselves in today,” he said. “Since then, we have seen a tragic and unnecessary war unfold in Ukraine, a shift in consumer confidence, a surge in inflation, a highly volatile stock market and a likely recession.”
Now the company could lower its valuation by an astonishing 1/7 to $6.5 billion. Notably, Klarna has not confirmed this, but, surprisingly, the projection for the company’s alleged final round of funding and new valuation has steadily declined in recent weeks. The Wall Street Journal reported on June 16 that Klarna is considering raising capital at a valuation of approximately $15 billion. Even That The new figure represented both a dramatic drop from Klarna’s mid-2021 valuation of more than $45 billion and the $30 billion figure it was 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 any more downhill from here.
However, it is also important to note that Klarna is not the only BNPL provider to have seen a drop in valuation. Like another tech enthusiast tweeted on Friday, the share of competitor Affirm also fell sharply. On July 1 alone, the shares were down 5% to $17.13 at the time of writing at approximately 2:30 p.m. CT, giving Affirm a market cap of $4.9 billion. That’s below the 52-week high of $176.65. ouch.
Speaking of appraisalsAlex examined how financial technology startups saw their fortunes soar during the venture capital boom in 2021, they are now suffering a slump of a similar magnitude. The damage, he wrote, is not one-dimensional. Instead, the pain surrounding the fintech sphere is varied and multifactorial.
The layoffs in fintech continue† Amount, a company that achieved unicorn status last year, recently laid off 18% of its workforce. The exact number of people is unknown, but when BestFitnessBands reported the latest increase in May 2021, the company said it had 400 employees. If that’s still the case, about 72 people were released. The money was spun in January 2020 from Avant — an online lender that has raised more than $600 million in equity capital — to deliver business software built specifically for the banking industry. It is working with banks and financial institutions to “digitize their financial infrastructure quickly and compete in the retail lending and buy now, pay later,” CEO Adam Hughes told BestFitnessBands last year.
The Federal Trade Commission is suing Walmart to watch as scammers jack up clients worth more than $197 million, the agency claimed in a statement. It is seeking a court order that would force Walmart to return money to customers, on top of civil fines. In a brief response, Walmart described the lawsuit as both “factually flawed and legally unfounded.” Money transfer scams are rife and can be anything from promises to share an inheritance to lies about a family emergency. They happen just about everywhere from Zelle, Venmo and Cash App to cryptocurrency ATMs and popular dating apps. In this case, the FTC claims that Walmart “turned a blind eye to fraud” that was taking place in its stores.
Robinhood made headlines three times in the past week† First, Taylor looked at how the stock trading and investment app was caught off guard by the surge of interest from the first major “meme stocks” after Redditors and other retail investors soared around $GME, sending the price into the stratosphere. Jacqueline Melnik then went on to address the rumors that FTX is looking to take over Robinhood in this piece. And then Alex broke out in front of us as to why a crypto exchange would want to buy Robinhood in the first place.
According to the International Monetary Fund (IMF), less than 2% of CEOs of financial institutions are women, and less than 20% for board members. Why does this matter? Aside from the apparent lack of opportunities for talented women, there are broader implications for corporate resilience and economic policy at the national and international levels. Read more on Fintech Futures.
Cash App launched Round Ups last week, allowing customers to invest their change in a stock of their choice or bitcoin each time they use their Cash Card. Cash App said the product would allow Cash Card users to seamlessly accumulate bitcoin and stock investments through daily purchases.
If you haven’t heard it yet, there is a fintech conference on the water coming to San Diego, California on August 10. Fintech Fest 1.0 brings 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. Only this week you get a 40% discount on the ticket prices.
Speaking of discounts, be sure to take advantage of this great deal. BestFitnessBands+ is holding an Independence Day sale! Save 50% on an annual subscription here. More information here. And the two-for-one ticket to the BestFitnessBands Disrupt sale ends on July 5.
Financing and M&A
Seen on BestFitnessBands
Drive now, pay later: Startups make EVs more accessible by deferring the highest bill
A look at how Conversion Capital plans to support early stage fintech startups from its new 6x larger fund
HomeLister wants to make selling your home a DIY business, and cheaper
Brazilian motorcycle rental startup Mottu raises $40 million to help more Latin Americans become couriers
Here’s Carta’s Response to an Increasingly Global Company
Sava, an Expense Management Platform for African Businesses, Receives $2M Pre-Seed Support
GoCardless goes after Plaid with Nordigen buy
Knox Financial Expands Loan Products With $50M in Financing
Zilch Raises $50 Million More Funding to Fix BNPL Industry’s Misery
That’s it for this week. To our readers in the US, I really hope you enjoy the long weekend and Happy Independence Day. And to all from you guys, have a nice week ahead. To borrow from my dear friend and colleague Natasha, please support me by forwarding this newsletter to a friend or follow me on twitter† Xoxo, Mary Ann