Swedish startup Klarna's valuation has almost doubled because of how huge the payments industry is
But Klarna CEO Sebastian Siemiatkowski isn't worried about the competition. We caught up with him as the company announced partnerships with ten US retailers to discuss a new investment that has almost doubled the company's valuation to $2.25 billion (£1.4 billion).
He told Business Insider: "People talk about the US being a competitive market, but we really don't see anyone else doing what we do."
The big difference between Klarna and other online payment methods like PayPal and Stripe is that Klarna lets any retailer put the equivalent of Amazon's "buy with one click" button on its site. When shopping on a site that uses Klarna, a customer can buy an item by clicking the button and inputting their email and postcode. The buyer then gets an email from Klarna asking them to fill in payment and delivery details. Meanwhile, Klarna has already paid the retailer and will get that money back when the customer coughs up.
This method radically improves 'conversion rates,' which is the percentage of people who actually follow through with a purchase after looking or putting it in their basket.
This has turned into a billion dollar idea for Klarna. It was valued at $1.4 billion (£912 million) in 2014, and has attracted money from Silicon Valley's renowned venture capital fund Sequoia Capital. In August, venture capital firm Northzone, mutual fund Wellington Management Co. and foundation Wellcome Trust bought about $80 million (£52 million) worth of stock in a secondary offering that valued the company at $2.25 billion.
While the company has been planning a US launch for some time, that wasn't the reason Northzone, Wellcome and Wellington were interested in Klarna, Siemiatkowski says.
"When we went through the process of that transaction, the discussion of the US launch was very hypothetical. We were doing tests but it was too early to show concrete numbers. The valuation was more of a reflection of how extremely well Klarna is doing in Europe. That means the growth that we have had in the Nordics and DACH (European territories where German is an official language), as well as early signs of growth in the UK."