Klarna Series D

Sequoia and Mubadala just paid $6.7 billion for a company that lets millennials finance Zara purchases in four easy payments, and somehow this represents the *down round* from their previous $45.6 billion valuation. Let that marinate in your frontal cortex for a moment. In July 2022—literally as the fintech sector was doing its best impression of the Hindenburg—these absolute legends decided to wire $800 million into what is essentially a payday loan operation with better branding and a pastel color palette. The valuation justification here is like trying to explain why your band needs a theremin: theoretically interesting, practically delusional. Buy Now Pay Later was already showing cracks in its fundamentals as inflation spiked and loss rates climbed faster than my blood pressure reading these pitch decks. Affirm was trading at like 90% off its highs. Everyone could see the walls closing in except, apparently, the smartest money in Silicon Valley.

The timing on this deal is so cosmically bad it deserves its own Netflix documentary about hubris. July 2022: the Fed had already raised rates multiple times, the Nasdaq was down 30%, every fintech SPAC was getting delisted, and Klarna chose this moment to raise capital at a valuation that still implied they were building the next Visa. Their losses were accelerating, regulatory scrutiny was intensifying across Europe and the US, and consumer credit was tightening faster than my editor's deadline tolerance. But sure, let's write a check that values a lending business at infinity times deteriorating fundamentals because they have good user engagement metrics. The market conditions screamed "preserve capital and wait," yet here we are, watching Sequoia—the firm that supposedly invented pattern recognition—convince themselves this was opportunity, not capitulation. Meanwhile, Klarna had already laid off 10% of staff a month earlier. Nothing says "compelling entry point" like desperation meets delusion.

Let's talk about what Klarna actually does, which is approximately as innovative as putting wheels on luggage forty years after luggage was invented. They've convinced an entire generation that splitting a $60 purchase into four payments represents financial empowerment rather than a admission that wages haven't kept pace with the cost of living since the Reagan administration. Their business model depends on merchant fees and consumer late payments—which is just credit card companies with millennial aesthetics and worse unit economics. The competitive moat here is about as defensible as a sandcastle at high tide: every credit card company, bank, and fintech startup can offer BNPL with literally a few lines of code. Apple launched their version and suddenly Klarna's "proprietary technology" looked about as special as another band with a Moog synthesizer and trust fund parents. The exit potential is either IPO into a hostile market that now hates unprofitable fintech or acquisition by a bank that could've built this themselves for a rounding error.

Sequoia's involvement here actually makes the deal *worse*, not better, because it signals even the smart money had nowhere else to deploy capital except into companies actively hemorrhaging cash while regulatory frameworks closed in around them. This is the VC equivalent of that friend who keeps dating the same toxic person expecting different results. The red flags weren't subtle: rising default rates, tightening credit markets, regulatory pressure in multiple jurisdictions, commoditized product, negative network effects as users maxed out across platforms. But hey, at least they got that valuation down from $45 billion to a mere $6.7 billion—only an 85% haircut! That's practically a win in 2022 terms. The real tell is that this round was necessary for survival, not growth. Klarna needed the cash to not implode, and Sequoia needed to protect their existing position. This wasn't conviction; it was a hostage negotiation where everyone pretends they're here voluntarily.