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“I knew Klarnas founder as early as 2005, when the company was just founded and were still sitting in the Business Laboratory of the Faculty of Business, Economics and Law in Saltmätargatan. One of my worst decisions in life is that I did not invest in them then, ”says investor Hans Otterling.
The following year he became a partner North Zone.
Within a few years, the venture capital company had already laid the foundation for its success story through initial investments in companies such as Spotify and Izettle. But Northzone missed an opportunity to buy Klarna early.
Instead, the first to take the place was business angel Jane Walerud, who has already invested in the idea stage and helped the company find developers for its first job. For a time, she owned 10 percent of the company.
Read more: CEO of Klarnas: does not exclude listing as “public action” in Stockholm
Investment company Öresund managed to buy Klarna as early as 2007, a couple of years after the start, with an investment of just under SEK 30 million.
But the big bang came in 2010 when Sequoia, one of Silicon Valley’s largest venture capital firms with companies like Google, Yahoo, and Paypal in the portfolio, invested SEK 70 million in Klarna and became the largest owner of the payment company. The then president of Öresund, Sven Hagströmer, became president and Michael Moritz, legendary partner of Sequoia, became a member of the board.
Sequoia took the entire round themselves. Apparently, they had not managed to invest in a similar company called Bill Me Later, which is now part of Paypal, ”sighs Hans Otterling.
In the same year, Jane Walerud sold most of her Klarna shares for approximately SEK 80 million, which was a formidable return of 150 times the invested capital. Klarna was then valued at just under SEK 1 billion, compared to SEK 93 billion today.
Öresund’s investment made 32 times more money when it was sold in 2014. A fantastic deal, which could have been significantly better if they had waited longer.
It wasn’t until 2015 that Northzone managed to buy Sweden’s second-largest tech company, after Spotify.
“Sebastian Siemiatkowski called and asked if we wanted to join,” recalls Hans Otterling, who has been responsible for Northzone’s investments in the company ever since.
Over the past five years, Northzone has participated in every major round, through its seventh fund, which initially contained € 250 million. According to the latest lists of owners, they own just under 1% of the business.
“We have defended our ownership interest,” says Hans Otterling.
Since selling its Spotify and Izettle holdings, Klarna is now Northzone’s largest holding.
“Klarna is our largest active investment today,” says Hans Otterling.
It describes how Sebastian Siemiatkowski over the years has been good at attracting strategically important investors such as American Sequoia, British Permira, and Atomico, as well as the Chinese payments company Ant Group.
It is not surprising to him that the company is now receiving SEK 5.7 billion and doubling its valuation to SEK 93 billion.
“No, the round has been oversubscribed. This valuation is low when compared to the p / s ratios of listed payment companies such as Paypal, Afterpay and Adyen,” he says.
Northzone did not buy newly issued shares in this round. Instead, they had to be content with buying shares on the secondary market, something Klarna helped convey. And therefore it was not a discount.
“No, Sebastian Siemiatkowski has been fantastically good at avoiding preferred shares and special conditions for different shareholders. He has kept it clean and simple when it comes to raising more capital. He doesn’t have to negotiate with different groups of shareholders. They all have the same shareholders. right to dividends and votes, “says Hans Otterling.
Do you think Klarna is about the securities of the big banks?
“It’s not a good comparison. Klarna’s valuation is rising rapidly now because it has been successful in Germany and shows that it can also be successful in Britain and America. It’s amazing, but not unique. Same thing happened with Spotify, the growth in value soared when it became clear that it had been successful in the US SEB and Handelsbanken have a completely different business concept, with corporate loans, mortgages and physical offices. They are very focused on the Nordic region. “
Not concerned about Klarna’s significant US credit losses?
“No. The turnover rate of Klarna’s loan stock is high. They have not run out of invisible sourdough. They have been transparent and have made provisions for any loss of clients. Problem loans are quickly liquidated, is our analysis. They are millions of small loans. “
But does it cost? Did Klarna’s credit losses reach SEK 1.2 billion in the first half of this year alone?
“Yes. It is difficult to learn a new market like the United States. The same thing happened when Klarna entered Germany.”
Northzone is today in its ninth bottom. It has 50 portfolio companies and SEK 15 billion under active management.
