Swedish payments startup Klarna is now a $2.25 billion company, but when CEO Sebastian Siemiatkowski cofounded the company a decade ago, none of the three founders had any experience in finance whatsoever.
That was, he tells Business Insider, actually a blessing.
The cofounders were naive 23-year-olds, who didn’t think the same way that traditional bank and finance executives did, and that gave them an advantage.
One of Klarna’s earliest ideas was to try and separate “buying” and “paying” for online purchases. Everyone knows how annoying it is to input card information when you are trying to check out. The Klarna dream was to have you just input an email address, one click, and then pay later. Klarna would guarantee the payment, and customers would have a week or two to pay up.
The problem was Klarna didn’t have any money to speak of, beyond some seed capital, which was certainly not enough to cover the money during the in-between period. How were they going to get the money to pay the merchants while they waited for customers to make a payment?
Klarna’s solution was to just ask the merchants if they would be okay with waiting to get their money.
“Banks would never have dreamed of asking that,” Siemiatkowski laughs. It simply wouldn’t have occurred to them that any merchants would ever agree to that. But the merchants Klarna talked with wanted to grow their online sales, badly, and were willing to experiment.
A decade later “pay after delivery” has become a cornerstone of Klarna. Klarna’s technology instantly assesses whether an online shopper is trustworthy for a particular transaction, taking up to 140 factors into account, and then assumes the risk. The customer puts in his or her email and zip code, and then gets to examine the product before paying 14 days later.
Klarna had $330 million in revenue in 2015, and is profitable, according to Siemiatkowski. It’s also in the midst of a big US push, and has been integrated with retailers like Shoes.com and Overstock.com.
But all this might never have happened if any of the founders had possessed any experience in finance before diving headfirst into the industry.