* Germany to drive near double-digit revenue growth
* Keen to expand to North America, Britain
By Mia Shanley
STOCKHOLM, March 25 Swedish online payments firm
Klarna, one of Europe's hottest tech start-ups, will focus its
firepower on Germany this year while keeping its eye on the
United States, home to EBay's big money-maker PayPal.
Klarna had a near $1 billion valuation based on its latest
financing round and has grown rapidly in northern Europe since
2005, turning profitable in only its second year of business.
The firm is one of the many Swedish tech start-ups giving
the bigwigs a run for their money, though analysts say its dream
of expanding across the Atlantic may be ambitious given PayPal's
clear dominance there.
Klarna does dominate the markets where it is
well-established, creating a niche for itself in the
fast-growing world of e-commerce and assuming risk for
"We are creating the same experience you have offline,
online," Niklas Adalberth, one of three co-founders, told
Reuters at a headquarters dotted with bean bags and flags for
its global staff. "Customers want to order the product, touch
and feel it, and then pay the money."
So far, no company has managed to take significant market
share from PayPal, the payment pioneer and leader which was
bought by EBay in 2002 for $1.5 billion and is now its
crown jewel, making up well over a third of total revenue.
PayPal did acquire in 2008 Bill Me Later, which offers
credit lines, but the service is only available in the United
Klarna is however gaining ground. It completes an average
70,000 transactions a day, with its 20,000 merchants and 9
million consumers, under one-tenth PayPal's user count.
Klarna, which ditched its first name Kreditor for Klarna - a
Swedish word meaning clear - is keen to tackle new markets in
Britain and North America.
"I think it would be very fun to challenge them," Adalberth
said, though he declined to say how close a U.S. launch might
Gil Luria, a Wedbush Securities analyst who covers EBay,
said while Klarna was one of the "emerging leaders" in its area,
taking on PayPal at home could be an uphill task.
"It's quite difficult to compete in countries where PayPal
is already established, and accepted," he said.
But Klarna's co-founders like a good challenge. They wound
up last place in a business school competition after some of
Sweden's top executives snubbed the concept.
They pressed on anyway, bringing in Russian investor DST,
one of Facebook's biggest shareholders. Michael Moritz, a
partner at Sequoia Capital whose milestone investments include
PayPal and Google, is on its board of directors.
Other Swedish firms who have taken on giants include
Spotify, which competes with Apple's iTunes, and
Rebtel, the world's second-biggest provider of voice-over
internet calls after Microsoft's Skype.
Klarna, which takes a cut from merchants and charges
interest on instalment payments, had a 1.2 billion crown ($186
million) turnover in 2012, up 60 percent on the year. Germany
should drive a near doubling in revenue growth this year.
The Swedes have been approached about takeovers.
"As we see now, the upside is just too compelling for us to
consider anything," Adalberth said.