(Photo Illustration by Thiago Prudencio/SOPA Images/LightRocket via Getty Images)
Klarna, a Sweden-based fintech company in the buy-now-pay-later space, announced plans to lay off about 10% of its global workforce, in a pre-recorded video message Monday.
According to TechCrunch, Sebastian Siemiątkowski, Klarna’s CEO and cofounder, said about the downsizing, “I am no stranger to sharing good and bad news. However, today is the hardest one to date.” Siemiątkowski added, “As much as we may like it to be the case, Klarna does not exist in a bubble.”
The Tech Bubble Is Bursting
Siemiątkowski’s firm is not the only company caught up in a high valuation without the profits to support the lofty valuations. There have already been a number of tech companies that have announced layoffs and hiring freezes, in an effort to cut costs. The chief executive stated, “When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today. Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.”
Klarna raised more than $639 million and was valued at over $45 billion. The fintech company partners with around 400,000 merchants and is a big player in the business of enabling consumers to purchase goods now, but pay later in installments. This is an attractive alternative to cash-strapped customers who desire to buy certain products, but don’t have the means to do so at the time of the transaction.
Buy Now, Pay Later Is Under Scrutiny
This sector has come under scrutiny. When an individual makes their monthly payments in full, everything is fine. However, whenever there is credit involved, it’s easy to rack up high interest rates or late fees. If you are unable to pay, there is the possibility of being called upon by a collection agency. The U.S. Consumer Financial Protection Bureau said it will make an inquiry into buy-now-pay-later programs to ensure that consumers are being protected.
The Is A Change Happening
Danni Hewson, a financial analyst for AJ Bell, said, "Markets are adjusting. Those sky-high market caps that some growth businesses have attained over the last couple of years are coming under considerable scrutiny and many investors are deciding they don't hold up."
The challenge for Klarna, as well as other high-flying tech unicorns, is how to keep growing when people are tightening their belts, due to inflation and deteriorating economic conditions. It's even harder when the tech darlings don’t generate sufficient profits to maintain their market capitalization. There is not a likelihood of investors to continually fund companies in this environment, as there is too much risk.
Laid-Off Workers Get Themselves Noticed On LinkedIn
Americans who worked for Klarna and were laid off took to LinkedIn, to share their stories and asked for job leads and career assistance. They were understandably sad, but most of them were relatively confident that they’d find a new role. Here are just some of the many postings.
Rachel Kayser
“Today has been an incredibly hard day for me. Unfortunately, after accepting my role at Klarna just a few months ago, I was one of the 10% impacted by the Klarna layoffs. I am absolutely devastated. I have loved this job and this recruiting team so much and I am heartbroken to have to leave. With that being said, I am officially in the market for a new opportunity—if you have openings on your recruiting team let's connect! Wishing the best to all the amazing, talented people in the same boat.”
Lauren Dyas
I was unfortunately impacted by a mass layoff today at Klarna. While I am so sad that one of the most enjoyable chapters of my career (and life tbh, I love all the friends I've made in the past four years) is closing, I'm really excited about future opportunities. If you or anyone you know is hiring for recruiters or sourcers, please feel free to pass along my information!”
Vanessa Zanghi
“I've never had to share news like this in my career. Today, I was laid off from Klarna because of a massive reorg, along with many of my fantastic TA colleagues. I have made amazing friends during my time here and while I'm disappointed, I'm optimistic about future opportunities. I'm open to senior recruiter/recruiting manager roles. Please do keep me in mind, I'm happy to connect!”
Aaron Getman
“Today, Klarna announced a layoff of 10% of the company, including my role. I thoroughly enjoyed my time at Klarna and enjoyed the challenge of launching cutting-edge card products with great colleagues. I am seeking new in-house attorney opportunities in the payments and fintech space and welcome any leads or discussions you can send my way!”
There was an outpouring of support from LinkedIn members. They offered introductions to open jobs at their companies and pointed the recently downsized to many open roles. Recruiters, résumé writers, career coaches and corporate talent acquisition professionals all weighed in with support and potential job leads.
Despite the challenges, Siemiątkowski said, “Klarna continues to hold a strong position in the market.” He’s still “relentlessly optimistic about Klarnas’s future.”
