a look into Klarna's valuation and business model

It’s hard to review what happened this week in the Euro startup land without at least mentioning Klarna raising $1 billion at a 6X valuation since 2019. It now stands at $31 billion.

If you take a step back and look at the big picture, you have to wonder what all this means and what the trajectory looks like in the next 3 to 5 to 10 years.

What is Klarna trying to accomplish and what did the investors see in the company’s plans so that they made their equity bets accordingly?

In other words, is the 31 billion valuation really worth it?

When trying to find answers, the first thing you look at is sizeable markets the company can attack in order to command growth rates on sustainable basis. Hyper growth!

They are leaders in the Euro BNPL sector and started to get legs in US but is that ambitious enough? Is being a BNPL market leader the end game here?

I don’t think so, those are just natural baby steps, market-getting moves, which are a mean to an end. The big picture is different, and this is a chess game, not backgammon.

The low hanging fruit, of course, is attacking more of the financial services sector, a natural horizontal play across segments after Klarna established itself vertically as a significant payment processor. It is a good bet to cross-sell more types of products to the same consumers, on the infrastructure Klarna already built.

However, there is another move in play, a ballsy step that could be a game changing power move.

Klarna built a virtuous loop between the merchants and the consumers and it stands exactly in the middle of it. And this makes you wonder - do they extract all the economic value from this loop? What pieces is the puzzle missing for being a dominant player?

This is the position where you at least diligently think about becoming a market maker in the e-commerce space. Needless to say that e-commerce is a huge market, as sizeable as the financial sector.

If you look closer at those two pillars and at the business fundamentals, you will realise that Klarna’s label as a BNPL company is simply mis-representing what they do and the huge opportunity ahead.

And so, that makes the 31 billion simply peanuts now if you understand Klarna’s big picture in the future. As always though, the devil is in the execution but the upside is certainly there.

Since this is already a too long for an argument, I put all this thinking into a more detailed report analysing Klarna’s future. Got numbers and pictures too.

The conclusion: long Klarna!

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