Snoop Dogg-backed Swedish payment startup valued at $5.5bn

Klarna cofounder and CEO Sebastian Siemiatkowski attends the official launch of the Klarna Pop-Up on 4 June in London, England. Photo: David M Benett/Getty

A Swedish payments and credit business founded in 2005 has become Europe’s most valuable private financial technology business.

Klarna said on Tuesday that it had been valued at $5.5bn (£4.5bn) in a funding round in which it raised $460m.

The money came from Dragoneer Investment Group, a San Francisco fund focused on growth funding.

The valuation puts Klarna ahead of other fast-growing and highly valued European fintech businesses like TransferWise and online-only bank N26, both valued at $3.5bn.

READ MORE: TransferWise now worth $3.5bn but founder says it's 'irrelevant'

Klarna allows online buyers to “try before they buy” by effectively extending them interest free credit.

Its “Buy now, Pay Later” feature lets customers place orders but only pay once they’ve received the item and decided they want it. Klarna is on the hook for any missing payments or failure to pay.

The company uses smart tech to ensure it doesn’t lose out and pitches itself as a smarter alternative to using a credit card. For retailers, Klarna can help boost sales.

Sales jumped by 36% to £21.6bn last year, Klarna said, and it now works with 130,000 merchants globally. Over 1 million sales a day use Klarna globally.

Popular names that use Klarna include Asos, Lulus, Toms, Superdry, Sonos, H&M, Abercrombie & Fitch, and Boohoo.

To date, Klarna has raised over $1bn to fuel its growth, including a $100m raise in April. The business has attracted money retailers like H&M, fund manager BlackRock, and even rapper-turned-investor Snoop Dogg, who has also advertised the business.

READ MORE: Snoop Dogg-backed 'try before you buy' payment firm sees sales jump

The new cash will be used to fund Klarna’s expansion into the US, where it currently works with about 3,000 companies.

“This is a decisive time in the history of retail banking,” Sebastian Siemiatkowski, co-founder and CEO of Klarna, said in a statement. “We, all 2,500 of us at Klarna, are humbled and honoured, and now also further empowered, to play a role in this improvement of an industry for the benefit of the consumer, worldwide and in the US in particular.”

Marc Stad, a founding partner at Dragoneer, said in a statement: “Our strategy is to partner with a small number of disruptive, growth companies that are highly differentiated and run by world-class management teams.

“Sebastian and the Klarna team have built an exceptional payments business with a global footprint, operating in a huge addressable market with strong tailwinds.”

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Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at@OscarWGrut.

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