In recent months, we have entered the “Post-Easy Money Era” with skyrocketing inflation rates and the resulting interest rate hikes. The Easy & Cheap Money policy, most recently driven by the Covid-19 pandemic, led to a macroeconomic valuation bubble across most asset classes that has now burst. Take the Swedish FinTech unicorn Klarna. Within one year, the valuation of $45.6 billion has collapsed by more than 80% to only $6.5 billion, at which the hopes to get $650 million from investors.
According to a WSJ report, CEO Sebastian Siemiatkowski is hoping for fresh capital for a valuation of just $6.5 billion. Not long ago, the “buy-now-pay-later” pioneer received $639 million at a valuation of $46 billion. The valuation surge made Klarna one of the world’s most valuable fintech companies and turned its CEO and co-founder, Sebastian Siemiatkowski, into a paper billionaire. Klarna expanded rapidly in the U.S. and has burned through its previously raised money.
The valuation of two of Klarna‘s US competitors, Affirm and Zip, are also down more than 80%. Allegedly, Klarna tried to negotiate a $50 billion valuation, reduced to around $30 billion, and then to $15 billion, before ending at $6.5 billion.
Klarna is only the most prominent showcase of the ongoing Fintech crisis. The collapsed valuation, down more than 80%, perfectly illustrates the new post-easy-money era and its difficulties for startups to raise fresh capital. In Silicon Valley, investors and startup teams are now bracing themselves for a very tough few years, including a new Crypto Winter and FinTech Ice Age. Financing is likely to become difficult or impossible for many companies. One does not need to be a rocket scientist to forecast a wave of bankruptcies.
