Klarna CEO Sebastian Siemiatkowski still faces the biggest test: IPO

LONDON – After 20 years as CEO of Klarna, Sebastian Siemiatkowski is about to face his toughest tests as the financial technology company prepares for the debut of a blockbuster in New York.

Siemiatkowski, 43, co-founded Klarna in 2005, aims to undertake traditional banking and credit card companies with Swedish entrepreneurs Niklas Adalberth and Victor Jacobsson with more user-friendly online payment experiences.

Today, Klarna is synonymous with “Buy now, pay later.” This is a way for people to buy things and either postpone payments until the end of the month or repay their purchases in a series of equal, interest-free monthly installments.

However, Siemiatkowski has grown Klarna into a fintech powerhouse, but his entrepreneurial journey was not without challenges – PayPal, positive and blockThe rating of 85% drops sharply.

Nevertheless, Siemiatkowski doesn’t have these challenges, and the outspoken co-founder is not embarrassed to challenge criticism that reaches an IPO that can value it for $15 billion.

In October 2024, CNBC met Siamiatkowski during a visit by a Swedish entrepreneur who went to London. Klarna’s chief has a calm atmosphere for the businessman who has been in the light of highlights over his two-year CEO tenure.

“Independent of every cycle and everything we’ve experienced in the company, whenever I ask myself, do I still think Klarna can become the next one? Google Siemiatkowski told CNBC that it could become a hundred million dollar market company, or even a trillion dollars, “I’m still crazy enough to think it’s achievable.”

A $46 billion pandemic-era darling in a Softbank-led funding round once saw $6.7 billion in 2022, when 85% fell to 85%.

However, the company tried to reconstruct what had eroded its value in the years that followed.

Klarna makes money from interest financing plans and income from advertising revenue, as well as fees that it charges merchants primarily to provide payment services.

Financials discloses in its IPO filing, which shows that Klarna reported revenues of $2.8 billion, up 24% last year, and net profit of $21 million.

After Openai’s Generated AI ChatGpt was launched in November 2022, Siemiatkowski quickly pivoted Klarna’s focus to adopt the technology.

However, Siemiatkowski’s strategy and his comments on AI also attracted controversy.

Klarna imposed a freeze on employment as it attempted to close costs in 2023. The following year, the company said that the AI ​​chatbot is working in 700 full-time customer service jobs.

The CEO of Klarna then said in August that his company was able to reduce the overall workforce from 5,000 to 3,800 thanks to some of the application of AI in areas such as marketing and customer service.

“Just by not hiring… the company is getting a little smaller,” he told Reuters, adding that employment was disappearing due to wear and tear, not layoffs.

Asked by CNBC about his views on AI and the agitation they caused, Siemiatkowski proposed that he “adjectives” and reflected a comment from Mark Zuckerberg that he was responsible for issues that he believed his company was not responsible for “twenty years of mistakes” by Meta CEO.

Doubled, Siemiatkowski added that AI “can do a lot of work people do nowadays, but I don’t want to go on stage and say, ‘Don’t worry, there’s going to be a new job’.

“I just want to be transparent and honest about what I think is happening. I know what these people know and what they’re saying when they’re not in the public phase, so they’re not saying the exact same thing,” he told CNBC in October.

Siemiatkowski is not used to responding to criticism and protecting the company, especially when it challenges Klarna’s business model of providing short-term funding for all kinds of things, from clothing to online takeout.

Last week, Klarna announced its partnership with Doordash, offering flexible payment options on its US food distribution app. However, this move was met with backlash from internet users. Internet users said there is a risk of sadness for consumers struggling with more debt.

One X user posted a meme that marked personal finance expert Dave Ramsey with the caption, “What does it mean to have $11K in “Doordash debt”?”

Siemiatkowski gained an X and protected his movements. Klarna said it “offers many payment methods” including the ability to pay in full instantly or postpone payments until the end of the month, in addition to monthly installments.

“Doordash offers more products than food!” Klarna’s boss said in X in response to criticism. “We know we are the most famous of 4. But you can also use your credit card in Doordash.”

In 2022, the outspoken entrepreneur emphasized that his company is “better” than credit cards, and that he “bears a very recession” after the company fired 10% of its workforce.

As Klarna approaches her stock market debut, investors will likely scrutinise his track record and scrutinise whether he is still the right person to lead the company in the long term.

Lena Hackelöer, CEO of Stockholm-based Fintech startup Brite Payments, was a person who worked under the leadership of Siemiatkowski and has worked in a variety of marketing functions for seven years between 2010 and 2017.

She praised Klarna’s co-founder and pushed back the suggestion that leadership mismanaged the business during the pandemic era.

“I didn’t think they were mismanaged. That’s how it was reported somehow,” Hackelur told CNBC in an interview in November. “I think they were very focused on growth because that was the direction the investors were giving.”

Siemiatkowski admits that Klarna’s construction journey is not always rosy.

Asked about the biggest challenges he faced as CEO, Siemiatkowski said for him that laying off 10% of Klarna’s workforce in 2022 was the most difficult thing he had to do.

“It was very difficult because investor sentiment would change so quickly and people wouldn’t expect companies like us to move to something very high and then very low,” he said.

“It’s obviously very difficult because, ‘OK, S —, I’m going to have to make changes because continuing is not sustainable, it needs to protect consumers who are the stakeholders, employees and investors of the company. [do] What is right for all my constituents,” continued Siemiatkowski.

“But unfortunately, that affects a small group that happened to be around 10% of the employees.”

Like other tech companies, Klarna has grown significantly more than the Covid-19 pandemic. In 2020, the company increased the total volume of all sales processed through the platform, a 46% increase from the previous year to $53 billion.

The company has also mounted hundreds of new employees to expand by taking advantage of the impact of the government lockdown and the opportunities from the broader acceleration of e-commerce adoption at the time.

“Anyone who’s a little sane, that’s not something you can take comfortably, right?” Klarna CEO said, referring to the layoffs. “It’s a difficult decision. It makes you cry. I cried.”

However, Siemiatkowski confronted his decision to fire the workers. “I felt I had an obligation to my members, to all of these stakeholders, to the company.

Currently, Klarna’s CEO is still facing his biggest test. I filmed a business he co-founded 20 years ago.

“IPOs are dangerous for businesses as stock prices can fluctuate rapidly,” Nalin Patel, director of EMEA Private Capital Research at Pitchbook, told CNBC via email. “They can be expensive and long to arrange for investment banks as well.”

Klarna filed a prospectus earlier this month to list on the New York Stock Exchange. The company has not yet set a date on when it will be published, nor has it set a price for the stock.

If it is successful, the results could catapult the net assets of Siemiatkowski and other shareholders, such as Sequoia Capital, Silver Lake, Mubadala Investment Company, and Canada Pension Plan Investment Board.

Sequoia is one of Klarna’s largest shareholders, with a 22% stake. Siemiatkowski is the second largest, owning 7% of the business.

Also, positive IPO results could increase the value of Klarna’s employees’ stocks and boost morale after years of turbulence for the company.

“It’s a balance between finding fair value for existing investors looking for cash out and finding fair value for new investors looking for stock in Klarna at a fair price. Overvaluing your company can lead to future valuations.