Klarna, the Swedish fintech that is one of the biggest players in buy now, pay later, is said to be pursuing an IPO this year.
Everything we see suggests 2024 will not be a banner year for VC funding, though it might be a little better than 2023. However, most analysts believe the IPO market will wake up a bit this year.
And some companies we talk about from time to time are likely to move off the sidelines and go public at some point this year. This list includes ServiceTitan, a big dog in SMB software that we write about occasionally.
And another is Klarna, which at one point had a valuation that topped $45 billion. Last year, Klarna’s valuation was tagged at around $7 billion. Still big, but wow, what a fall.
Revenue Diversification
As it readies for an IPO, Klarna appears to be engaging in an exercise we talk about a lot – revenue diversification. For example, Mike Boland’s recent post on FedX’s eCommerce as a service play was all about this.
And in BNPL, revenue diversification has been a bit of a challenge. Companies like Klarna, Affirm, and others seem to be trying very hard not to be pigeonholed as just offering an alternative credit scheme to millennials who want more shoes than they can afford.
Put another way, BNPL is kind of commoditized. And will a business with a commodity vibe have a strong IPO?
BNPL companies really haven’t had much luck shaking off the reputation that they are one-trick ponies.
BNPL remains wildly popular. And there is little if any sign of its popularity waning. Yet the companies selling it haven’t had much luck in changing how they are perceived. Let alone in diversifying their businesses.
In this spirit, Klarna is planning to launch a $ 7.99-a-month subscription product called Klarna Plus, designed for its most avid users.
For 8 bucks a month, subscribers will get a few different benefits. These include waived fees, exclusive access to discounts from companies like Nike and Instacart, and more.
Have We Seen This Before?
If this sounds familiar, it’s because Klarna’s rival Affirm also floated the idea of a subscription product last year. It did so with an even less compelling set of features, but never launched it.
I think the drive to revenue diversification in this case is an exercise in IPO marketing.
If BNPL is seen as a one-trick pony, investors may like it less than if it were a business with multiple revenue streams.
However, subscriptions still feel a little underwhelming to me. At least the flavor of subscriptions floated thus far by Klarna and Affirm do.
