Almost nobody makes unicorns quite like Sweden. 

Spotify, Mojang, King, iZettle — all are examples of billion-dollar companies born in Sweden that have made Stockholm the world’s biggest unicorn factory per capita behind Silicon Valley.

However, today all four companies are largely controlled from outside the Nordic country. Spotify’s main centre of gravity is now in New York, while the makers of games Minecraft and Candy Crush as well as payments company iZettle were sold off to deep-pocketed US companies: Microsoft, Activision Blizzard and PayPal respectively. 

Enter Klarna. The buy-now, pay-later start-up founded in Stockholm became Europe’s largest unlisted fintech this week, valued at $5.5bn — more than double its estimated worth at the start of this year.

The path Klarna and its 37-year-old chief executive and co-founder Sebastian Siemiatkowski now take is doubly interesting.

Firstly, it has the chance to be one of the main global players seeking to disrupt the traditional retail banking industry. The $460m it raised this week from venture capitalists, an Australian bank and pension funds will be used to speed up its longstanding attempts to crack the US market where after some years of struggling it is finally showing signs of success. 

The second aspect may be even more crucial for Sweden and Europe: can they hold on to their leading technology groups or simply watch them get swallowed up by US or Asian rivals? 

Mr Siemiatkowski is certainly aware of the issue. The decision of iZettle a year ago to pull its planned stock market listing and instead agree to be bought for $2.2bn by PayPal reignited anxiety around promising European tech companies often selling out rather than taking the longer and tougher route of trying to rival some of the biggest US groups. 

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The spotlight is now on what Klarna plans to do next. Mr Siemiatkowski says the company — founded by him and two friends at business school in 2005 — is as close as it has ever been to an initial public offering today, but that for now pursuing growth is the priority. 

Asked about iZettle and the temptations to sell out, he replied: “We are very humbled to be in this city that has given rise to companies like Spotify and King and others. The most important thing is, as Ingvar Kamprad [the founder of Ikea], said: most things are still not done. There is this massive industry — retail banking — that hasn’t put customers first. This is almost an unlimited addressable market.”

A person close to some of Klarna’s backers said: “It’s down to the founder’s mentality. Does Sebastian have the appetite to do another 10 years? And I think he does.” 

Klarna still has plenty of challenges. Unlike many fintechs, it is profitable and has been for some time. But last year its operating profit dropped 70 per cent to $19m on revenues up a third to $627m.

Klarna earns money both from online stores such as Asos, Hennes & Mauritz and Adidas, as well as consumers, by offering a deceptively simple solution that it claims boosts sales substantially as fewer shoppers abandon their baskets over difficulties paying. 

In return for a fee from merchants, it offers the customers the chance to buy now and pay later, while assuming from the seller the credit risk and the burden of collecting the money from the seller. The service is free for most customers but if they pay late or decide to pay in instalments, Klarna collects the interest.

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That has put it in the sights of the Swedish government and some debt counsellors, who worry about whether and how it aids young and vulnerable people in getting into debt. Mr Siemiatkowski said Klarna was keen to stay “humble and transparent” as well as learn from its mistakes but that its basic aim was merely to make online shopping as easy as buying in a shop. He highlighted how Klarna had become one of the 10 companies Swedes trusted the most, scoring better than any bank. 

Mr Siemiatkowski argued that now was the time for “a huge disruption” of the retail banking and payment card industry by putting customers first. An IPO seems to be the next logical step with Klarna’s founder saying it had “most of the things in place that we need”, even if this week’s fundraising showed it could access large sums of money away from public markets.

Whatever it does next will be closely scrutinised at home and abroad. Only a handful of Sweden’s 100 largest companies were started in the past 50 years, an extraordinary situation mirrored across much of Europe. The continent’s future vitality may depend on how many Klarnas it can develop and cling on to.

richard.milne@ft.com



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