It is not so stupid to lose 100 million dollars a month, says Klarna’s Sebastian Siemiatkowski

During the buy now, pay later giant Klarna’s hyper-growth heyday, the company was losing $100 million a month. But CEO Sebastian Siemiatkowski says the burn was justified given the market opportunity, despite media representations.

“The media was a little unfair and said, ‘How can you burn $100 million a month?'” he said on stage at Sifted Sessions \ Stockholm on Wednesday.

“Investors came to us and said, ‘We believe in you so much that we think you’re worth $50 billion based on your growth ambitions, and that means investing a billion dollars a year is 2% dilution… It’s not so crazy.”

But like many companies, Klarna’s focus has now shifted from growth to profitability.

“When we went all-in on the US, we were profitable, it was about ‘grow grow grow,'” Siemiatkowski said.There is a different focus on efficiency and improving things and fixing things now.”

Siemiatkowski also defended his latest 35% pay rise – done public in results published last month, according to the company’s decision to lay off 700 people in May 2022. He said that Klarna’s board had made the decision at the beginning of 2022.

Credit crunch

While Klarna had its biggest annual loss ever in 2022 – at 1 billion euros – the bank managed to reduce its credit losses towards the end of the year. In the fourth quarter, credit losses fell by 18%. Siemiatkowski said the company had benefited from being more nimble than big banks.

“When a financial situation changes, you have to make adjustments to your credit decisions,” he said. “The difference for us when we make a change is that we get an effect in eight weeks, the big banks get an effect in three years.”

He also said that Klarna offers a fairer alternative to one of the major products of its main competitors: credit cards.

“People criticize us for offering credit and the consequences of credit … Fighting fire with fire is actually quite effective. Credit has a role to play and we provide a healthier form,” he argued.

Life builds Klarna

When asked by a member of the audience what he would do if he wasn’t running Klarna, Siemiatkowski said, “I honestly don’t think I have the energy in my life to start another company.”

However, he hinted that he was frustrated with the level of quality in current social media apps, and said he would be keen to see a better technology solution.

He added that he sees great potential for generative AI in fintech, and that Klarna is actively looking at how the technology can provide consumers with better financial advice at a low cost.

He also played down plans to follow the lead of China’s Alibaba and build a so-called “super app”, saying: “I’m not really sure, I don’t think it’s that relevant to be honest.”

As for lessons learned from his 18 years building Klarna, Siemiatkowski said he’s starting to learn that you never quite know what you’re doing.

“I was talking to my co-founder, Niklas, a few weeks ago and I said to him, ‘You know what, this year I really feel like I’ve figured it out – now I know how to run a company,'” recalls he. “He just started laughing, and then I started laughing because I realized I say it every year — you think you know what you’re doing, and then you realize you have no idea.”