Klarna CEO on Sequoia Drama & Rapid Valuation Changes
EP 109 of The Logan Bartlett Show: Untold stories from tech's inner circle
Klarna CEO Sebastian Siemiatkowski led the rise from a profitable business to their peak $50B valuation, in which they were burning $150 million a month. In my latest episode, Sebastian shares how he turned Klarna back to profitability and discusses Klarna’s ongoing pursuit of creating a digital financial assistant. He also reflects on recent boardroom drama with Sequoia and outlines the operating principles that have made Klarna the company it is today.
Click here to view the episode transcript | Watch on Youtube | Listen on Spotify or Apple Podcasts
✉️ Episode Memo
→ How Sebastian boosted productivity at Klarna
In the early days, the three Klarna co-founders faced challenges over perceived differences in work effort. So, they repositioned their computers so they could see each others' screens and started tracking their hours. The policies discouraged distractions and helped the founding team realize they could spend a bit more time doing productive things. Just like a personal trainer overlooks sets to help motivate you, accountability over working time helped Klarna boost productivity.
→ Don’t be too service-minded
Sebastian notes that some of the best leaders are driven by a desire to serve others, a trait rooted in empathy. However, this service-mindedness can lead to conflicts and burnout, as leaders might struggle to say no and try to fix every issue raised around them. However, sometimes saying no is necessary and not all problems need immediate fixing. This balance between empathy and assertiveness is crucial for sustainable leadership.
→ Are small teams better?
In pursuing an ambitious $100B+ opportunity of creating a digital financial assistant, Klarna realized the need for improved operating execution. They shifted from a traditional functional setup to autonomous, small "startups" within the company, influenced by Amazon's two-pizza team concept. Each team, consisting of eight people, was tasked with writing a press release detailing their future accomplishments. While this approach initially boosted productivity and agility, it also led to a lack of coherence and standardization, with teams working in different directions. Now, Sebastian acknowledges the value of agile methodologies but also recognizes they need to be balanced with consistency and standardization within the organization.
→ Klarna’s Volatile Valuation
To aggressively pursue winning the U.S. market, Klarna raised money fast and started burning cash rapidly. High-profile investors quickly boosted their valuation from $5 billion to $10 billion and soon to $30 billion just a year later during COVID-19. However, the rapid valuation growth outpaced their actual business performance, and Sebastian acknowledges getting caught up in the exuberance of the market. Despite the challenges of a significant down round, their heavy investment in the U.S. market paid off, as it became their largest and profitable market, and the rollercoaster taught Klarna to become more thoughtful with resource allocation.
More insights in the full episode.
⭐ Trailer
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