Swedish "buy now, pay later" company Klarna is laying off 10% of its workforce, CEO Sebastian Siemiatkowski told staff via a pre-recorded video call Monday. Interest in pay-later products has sagged somewhat as consumers have felt more financially strapped and advocates in the U.S. began investigating the deferred payment plans last year. Klarna has reportedly been looking for more funding, potentially at a lower valuation.
“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today,” Siemiatkowski said in the video, according to a company-provided transcript.
Tech valuations generally are down. But “buy now, pay later” companies, which became particularly popular during the pandemic ecommerce boom, have been particularly battered; Affirm, which went public last year, has seen its shares drop 75%.
A few "buy now, pay later" startups are still announcing large funding rounds, but an investigation from the Consumer Financial Protection Bureau has elevated the argument that the increased buying power can be risky for some consumers, and raised scrutiny.
Investors, too, are taking a hard look at their portfolios. The Wall Street Journal reported last week that Klarna was seeking another $1 billion in funding at a $30 billion valuation. That’s a decrease of over one-third from Klarna’s peak valuation of $46 billion last year. SoftBank, a prominent Klarna investor, just posted an annual loss of $13 billion and has said it will pare back on investments.
Laid-off European employees will be compensated, Siemiatkowski said, though it’s unclear how. Severance for employees in other regions will vary. Klarna has about 5,000 employees, according to the company’s website.