Swedish payment giant Klarna will cut hundreds of jobs in the coming days. Today’s news comes a few days after the Wall Street Journal reported that the company was going to lower its valuation to raise fresh capital.
The company currently employs approximately 7,000 people. Cutting 10% of the company’s workforce means that about 700 people will lose their jobs at the fintech company. It will potentially affect all domains and offices around the world.
“I am no stranger to sharing good and bad news. Today, however, is the hardest yet,” Klarna co-founder and CEO Sebastian Siemiatkowski wrote in a message shared with all employees. “As much as we’d like to, Klarna doesn’t exist in a bubble.”
In the coming days, a number of employees in Europe will be asked to leave the company in exchange for severance pay. Some employees outside of Europe will also have to leave the company, but “the process for affected employees will look different depending on where you work,” Siemiatkowski said.
The company has not stated any reason for the layoffs. Instead, Siemiatkowski lists several macro and geopolitical factors that led to today’s tough decision.
“When we drew up our business plans for 2022 in the fall of last year, it was a very different world from the one we find ourselves in today,” he said. “Since then, we have seen a tragic and unnecessary war unfold in Ukraine, a shift in consumer confidence, a sharp rise in inflation, a highly volatile stock market and a likely recession.”
“It saddens me to say that about 10% of our colleagues and friends in all areas of the company are affected by this,” he added later.
Last year, many tech startups raised mega-funds at skyrocketing valuations. And more specifically, Klarna raised $639 million at a valuation of $45.6 billion.
Klarna currently works with 400,000 merchants around the world. The company’s flagship product is a payment feature that allows you to buy something now and pay for it in multiple installments later.
Over the years, Klarna has expanded into other markets and launched new products. It offers a shopping app so you can manage your payments, save items for later, track deliveries, and more. In some markets, the company also offers a payment card that you can control from the app.
In Europe, Klarna operates as a regulated bank. Customers can open a bank account with Klarna and use the service to earn interest on fixed-term savings plans. In this way, the company can collect deposits directly from retail investors.
And yet, as the Wall Street Journal report Right, Klarna is thinking of lowering its valuation to a “low $30 billion” post-money valuation so it can raise more money. That process may have affected the current state of affairs at Klarna, resulting in some employees losing their jobs.
Unfortunately for Klarna’s employees, the company has not said who will be affected by the job cuts. Calendar invites will be sent out in the next few days. “In the interest of the privacy of the people affected by these changes, we are asking everyone to work from home this week,” Siemiatkowski said.