The Story of a Cap Table: Klarna
Sequoia bet big early & stayed the course. Permira won with a shrewd PE flip. DST & GA punted too early. SoftBank lost money. The Swedish fintech was an adventure in staying private.
Klarna & Sequoia’s 15-Year Journey Together Worked Out. There Were Many Scary Bumps Along the Way.
Venture capitalists love to tell neat stories about their successes: an investor jumping in early with high conviction, a startup showing years of compounding growth under the dutiful stewardship of the founder, and then everyone getting a spectacular return when the company finally goes public.
Klarna doesn’t exactly fit that mold.
Founded nearly 20 years ago by Swedish entrepreneurs Sebastian Siemiatkowski (pictured), Niklas Adalberth, and Victor Jacobsson when they themselves were in their 20s, Klarna over the years transformed from a provider of short-term loans into something more akin to a neobank. Last week’s IPO, which saw shares jump 15% on opening day and gave Klarna a market cap of $17.3 billion, was a big win.
Yet, the firm’s long journey in the private markets, which included founder departures, a crushing down-round, and a perilous board fight, complicates the traditional venture narrative.
We got the details on how it unfolded from sources close to multiple firms with present and historic stakes in Klarna, all of whom requested anonymity to discuss sensitive financial information.
Klarna’s shares were constantly changing hands over the years as it raised over $3.85 billion (per PitchBook) to finance an aggressive expansion strategy. Growth funds cashed out, private equity and sovereign wealth funds stepped in, and relatively obscure financiers like the family office Heartland A/S and the Commonwealth Bank of Australia took slices of the pie.
The one constant on the money side was Sequoia Capital, which played its hand shrewdly. Michael Moritz, then the firm’s managing partner, spearheaded a 2010 funding round that gave Sequoia a quarter of the company. But the firm sat out Klarna’s hugely inflated 2021 funding rounds and then put in more money in 2022 after the peak valuation was slashed by a startling 85%.
The story of Klarna’s cap table is a tale of two strategies: how to win by staying in, and how to time the markets for a big score.
Sequoia now owns just over 20% of Klarna shares after selling a small portion of its stake in the IPO, and its $500 million in total investment was worth $3.5 billion based on last Wednesday’s closing price of $45.82 a share — a roughly 7x return on capital, albeit over some years. The firm cashed in despite an unusual public board fight between Moritz and former Sequoia partner Matthew Miller stemming from divisions among the founders.
At the time of the IPO, no other venture capital firm or brand-name wealth fund invested in Klarna — including IVP, Atomico, Mubadala, and GIC — held 5% or more of the shares. Only Heartland A/S, the family offices of Danish billionaire Anders Holch Povlsen, and the Commonwealth Bank of Australia have shareholding approaching those of Sequoia or the founders. Sequoia’s overall gain remains the highest of any investor in Klarna.
And yet, Sequoia wasn’t the only shareholder who could claim an impressive exit, we’ve learned.