An outsider’s path to financial inclusion
Burger King is the kind of company that rarely, if ever, tops lists of inspirational wellsprings for tech entrepreneurs. Yet Sebastian Siemiatkowski, founder and CEO of Swedish fintech insurgent Klarna, discovered plenty to admire when he worked at the fast-food giant as a teenager.
“These restaurant chains have incredibly meticulous processes,” Siemiatkowski enthuses. “They don’t have the advantages of a software firm; they are thin-margin businesses that are always squeezed. I realize now after running my own business for so long how well-engineered those kinds of systems are.”
If Siemiatkowski’s two years flipping burgers gave him a taste for the rigors of a well-oiled corporate machine, it also helped crystallize a relationship that would prove pivotal—that with his Klarna co-founder, Niklas Adalberth. Although Adalberth would eventually leave the company in 2015, the two boys’ formative experiences in the literal boiler room sparked a friendship that would evolve over the course of a round-the-world excursion, a failed entrepreneurship competition and the ultimate founding of Klarna in 2005.
“Niklas gave me a fantastic gift: in my youth, I was always convinced that I was right, while Niklas was always able to show me when I was wrong,” Siemiatkowski says. “He was this amazingly patient, focused, solid person, while I could be quite emotionally all over the place.”
“Niklas gave me a fantastic gift: in my youth, I was always convinced that I was right, while Niklas was always able to show me when I was wrong.”Sebastian Siemiatkowski
Siemiatkowski chalks this characteristic up to his upbringing as a Polish immigrant in Sweden. His parents fled the Communist bloc in 1980, becoming a minor cause célèbre in Swedish media due to the daughter they had to leave in Poland as they worked to overcome immigration hurdles. Siemiatkowski’s older sister would not be able to join the family until a year later, when Siemiatkowski was a few months old.
The family settled in Uppsala, a medium-sized city on the outskirts of Stockholm. It was a time of considerably less pan-European integration than today, when even a place like Sweden could feel alien to people from a country separated by nothing more than a thin slice of the Baltic Sea. The family maintained strong ties to their Polish background, and Siemiatkowski grew up speaking Polish at home, eating Polish food and celebrating Polish Catholic holidays. Stories of the trials his ancestors endured during World War II, including relatives who suffered in German concentration camps, lingered in the background.
Overall, the immigration experience was hard on Siemiatkowski’s parents, especially his father Michal, who sacrificed his budding career as a veterinarian in Poland in exchange for a job driving a taxi. Siemiatkowski’s parents had little money in his youth and struggled to provide the basics.
“We would go a full week at a time eating meal after meal of Swedish pancakes, which are essentially nothing more than flour and milk,” Siemiatkowski says. “My parents couldn’t afford anything else.”
Although Siemiatkowski describes both his parents as attentive and loving, poverty, poor health—his mother suffered from scoliosis—and an on-again, off-again marriage that persisted for much of his youth meant that his early years were not as carefree as many of his Swedish peers’ childhoods were. “I don’t want to put myself on the same level as people who go through much worse, but there were definitely some tough times,” he recalls. “Where other kids spent their summers traveling, I would bike to the library with my father and read.”
It was there that he discovered novels that pushed his conception of the possible—classic science fiction tomes like Hitchhiker’s Guide to the Galaxy and works by Isaac Asimov. Alongside books about corporate titans like IKEA founder Ingvar Kamprad and Virgin founder Richard Branson, they helped nurture an interest in business as a means of changing the world.
Fulfilling that vision saw Siemiatkowski march a path strewn with a mix of adventure, discovery and disappointment over the course of his pre-Klarna life. Excelling at school proved a relatively easy task. “I was always the kind of pupil who went all-in on my work,” he says. “If our teachers assigned students to write a group report on 17th century French writers, say, I would convince my group to stage a play about Molière.”
Following his early Burger King stint at 15, Siemiatkowski dipped his toe into different areas of the job pool, working as a caretaker for elderly people with dementia, a school teacher—a role that Siemiatkowski says would have been his lifelong career in a parallel universe—and a telemarketer hawking internet subscriptions. It was this stint that gave him his first inkling of the hustle and grind of the workaday salesperson—a mode he says he connected with instantly.
“Sales is typically seen as this kind of sleazy, lowlife thing, but I find it beautiful” he says. “I always loved polishing and refining my sales script; eventually I knew I got it perfect one day when I closed 16 calls in a row. This kind of thing—the art of convincing—it’s just a fascinating skill.”
Siemiatkowski’s mix of academic smarts and on-the-ground experience would go on to gain him entry into the Stockholm School of Economics, one of Sweden’s top institutions of higher learning. Siemiatkowski studied business, a field that his father in particular questioned. “He had no idea what I would do with that kind of training,” he says. “He wanted me to be a doctor.”
Indeed, Siemiatkowski found himself adrift and unhappy during his first few years of business school. The ambition of many of his classmates to land cushy jobs in consulting or investment banking put him off, and amid the dot-com bust of the early 2000s there was little zeal for entrepreneurship.
“It’s funny—when you look at Swedish students now, something like 70% want to start their own business,” he says. “When I was in school it was more like 7%.”
“It’s funny—when you look at Swedish students now, something like 70% want to start their own business. When I was in school it was more like 7%.”Sebastian Siemiatkowski
This mismatch spurred Siemiatkowski to take a leave of absence after his first two years. Joined by Adalberth, his Burger King colleague who would go onto become a business-school classmate, the two embarked on a series of projects and trips emblematic of restless young adults on a quest to find themselves: a certification from bartending school, a trip to Florida to look for work on a cruise ship (“no one wanted us,” Siemiatkowski admits), and finally a return to Europe to wait tables at a ski resort in St. Moritz.
The money earned from that gig funded the pair’s next idea: a hitchhiking jaunt around the world, entirely overground. “We literally buried a bottle of champagne in the ground in St. Moritz.” That bottle would sit entombed for months, beckoning the pair back as a reward for finishing their journey. User-generated video was just taking off at the time, and Siemiatkowski and Adalberth decided to document their travels on YouTube. “You can still find our travelogue there, incredibly,” Siemiatkowski says.
Cut to a loading dock halfway around the world: the pair just missed hitching a ride on the last monthly cargo ship to Los Angeles from Sydney. Siemiatkowski says the experience “really taught us the value of resilience. We had to spend a full month in a foreign city, unsure what we would do or how we would support ourselves. We eventually found cheap hostel beds and jobs as furniture movers. We proved to ourselves that we could be resourceful. No matter how bad things looked, we proved to ourselves that we could find a way to survive.”
The timing also proved fortuitous in another way. Because the duo had vowed to avoid air travel throughout their journey, once they arrived in North America (a month later than planned), they hitchhiked their way through the continent and jumped a ship back to Europe. Upon returning to Stockholm (after exhuming and imbibing the St. Moritz champagne), they realized they had narrowly missed the annual cut-off for course re-registration.
“This left a full year entirely blank,” Siemiatkowski says. “Here I was, thin and poor after a year’s travel, no job, no school, no support whatsoever.”
Siemiatkowski survived on welfare checks and food stamps until landing a job as a salesperson at a factoring company—essentially, loaning money to small companies that need cash to cover unpaid invoices. Through this experience, he discovered a wealth of mom-and-pop shops struggling with payments, especially as the budding e-commerce boom of the time proved to be overwhelming to outlets used to a slower pace of transactions. To guarantee their income, these sellers would demand debit cards at checkout on each transaction. Siemiatkowski started to wonder whether someone could step in as an intermediary between the customer and the merchant, paying the seller at checkout and claiming the money from the shopper upon receipt. From the customer’s perspective, paying only when they felt satisfied with the item would surely be preferable to paying upfront. This was how many mail-order transactions—also known as cash on delivery—already took place in Sweden, a country where trust was baked into the social fabric. Why couldn’t buy now, pay later (BNPL) work as well in digital commerce as it did in the brick-and-mortar world?
When Siemiatkowski brought this idea back to school with him the following term, he enlisted Adalberth and another classmate, Victor Jacobsson, to start Kreditor, a company aiming to usher BNPL into the digital era. They tapped into a then-tiny angel network at their university and landed $60,000 in seed financing from tech investor Jane Walerud in exchange for 10% of the company. They used the cash to hire engineers to build the first iteration of the Kreditor platform, trading away nearly two-fifths of the remaining shares in a transaction that Siemiatkowski now realizes was a mistake.
“We thought these guys would stay on and help us build the company, but they left after only a year—taking their shares with them,” he says. “It was my first real learning as a founder: you have to make sure your employment contracts don’t leave any room for uncertainty.”
The company’s early growth was fueled by a blitz of one-to-one outreach that put Siemiatkowski’s sales instincts to the test, as he and his co-founders hopscotched across Sweden in an old Volvo, enlisting small firms to use Kreditor’s BNPL service. The intent was to feel simultaneously as well-established and trustworthy as a big bank and as nimble and fresh as a tech startup.
They wanted to be taken seriously, so they honed everything down to the last detail. They got a phone number with more zeros at the end, which in Sweden at the time made it look like there was a big switchboard with a lot of extensions. They put their name cards on thick stock paper. They put on starched suits and “acted as if,” to paraphrase the movie Boiler Room.
Kreditor started catching on, growing from 1.5 million Swedish krona in revenue to 270 million in its early years. Uniquely for a fast-growing company in the Silicon Valley mold, the company also turned profitable soon after founding and stayed profitable for its first 16 years. “This meant that we developed a well-balanced culture, where creating value for customers was clearly what was paying the bills and our salaries,” Siemiatkowski says. “It was not about things that would simply drive valuation of the company or its perception in the wider world.”
These early successes helped them recover from an earlier setback that came just as the company was getting off the ground: Siemiatkowski, Adalberth and Jacobsson had entered Kreditor into an entrepreneurship competition at their school presided over by Sweden’s corporate elite, including Stefan Persson, chairman of H&M, and a member of the Wallenberg family, a prominent venture outfit. Even Sweden’s king was in attendance.
“Unfortunately, none of them was convinced,” Siemiatkowski says with a laugh. “‘It’ll never work…why can’t the banks just do it’…they had all kinds of arguments about why it wouldn’t pan out.”
Siemiatkowski describes their loss—they ranked last out of three startups—as an “emotional” blow that nevertheless provided spiritual fodder for the harder fight ahead. “My reaction wasn’t to give up and go home, it was to curl up my fist and say ‘I’ll show you’.”
“My reaction wasn’t to give up and go home, it was to curl up my fist and say ‘I’ll show you’.”Sebastian Siemiatkowski
The fact that Klarna has since become one of the most well-known companies in Swedish history is as much a comeuppance as Siemiatkowski could have imagined. Securing an early lead in digital BNPL helped pave the company’s expansion across Scandinavia in subsequent years. By 2009, the company decided it wanted a fresher name to present to its international clientele. It hired a consultant, which presented a list of “1,000 candidates,” in Siemiatkowski’s telling. The company’s bosses wanted to lean harder into the startup image and away from banking. “It wasn’t a matter of trust at that point—people trusted us,” Siemiatkowski says. “We needed something that could draw attention.”
The name “Movondo” bubbled to the top of the list, but was shot down by staff. “They decided to go with ‘Klarna,’ which means ‘clear’ in Swedish,” Siemiatkowski says. “We ran with it and I think it helped us make our point. It really represented what we wanted to do with the entire financial services world.”
Klarna’s progress in tapping into growing consumer appetites for BNPL continued largely unabated, including through the financial crisis of 2008–09 and into 2010. By then, a new goal had emerged for the company: to become the go-to technological architecture for processing digital transactions across virtually any medium and pathway. Klarna was approaching unicorn status after a successful rollout in Germany. Siemiatkowski had established himself as a rising star in fintech and knew the landscape inside and out. He decided that the time was ripe to conquer an adjacent market that was also exploding in popularity: digital payments.
Siemiatkowski presented his vision to the board, which endorsed it wholeheartedly. “We went over the competitive landscape and I kind of glossed over these other players—this company ‘Stripe’ founded by these two Irish brothers, and this other one, Adyen, founded by a few Dutch guys,” Siemiatkowski recalls sheepishly. “I knew these firms were onto something, I knew we had to keep an eye on them, but I was a bit too cocky for my own good.”
This overconfidence included a failed pitch to Adyen’s founding team to acquire the company. “After they rebuffed my offer we set about building this payments system ourselves. And that became a slow burn of dashed expectations,” Siemiatkowski admits, contrasting Adyen’s proliferation across huge markets in Asia and elsewhere against Klarna’s struggles to launch a single payments product in Germany.
“The moment that clinched it was in 2015, when Spotify went with Adyen over us,” Siemiatkowski notes. “Here was our Swedish neighbor, our BFF, going with our biggest rival.”
This frustrating loss of a massive opportunity proved a major turning point for Klarna. Siemiatkowski saw two potential options: sell the company, earning a tidy return for himself and his shareholders, and call it a day. Or double down on Klarna’s core competencies, embedding BNPL deeper into the consumer finance landscape across Europe, and setting his sights on the biggest prize of all: the United States. He chose the latter—but not before making some significant changes at the company.
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Siemiatkowski recounts harboring a fascination with Silicon Valley from an early age, of idle moments logging onto Google Maps, zooming in on a region halfway across the planet and thinking, this is the promised land. Unlike many founders, he did not physically move to the Bay Area to pursue his entrepreneurial dreams, instead latching onto the success story of Niklas Zennström, founder of Skype, as a model for what could be possible in his home continent.
When it came time to answer hard questions about Klarna’s future, however, he looked back to the highest flyers in his fabled promised land.
“We tried every startup tactic in the playbook” to reform Klarna’s corporate culture, he says. “Google let their engineers devote 20% of their time to pursue personal projects. We tried it and nothing changed. We put Legos, a ping pong table in our rec room. Big deal—nothing changed.”
Those strategies emerged in response to how Siemiatkowski and his leadership team diagnosed the problems that led up to Klarna’s failure to conquer payments. Put simply, Klarna was not set up in a way that permitted its employees to act fast and pivot quickly.
“The ideas were all solid—there was nothing wrong with the vision,” explains David Fock, a 13-year veteran of the company who now serves as its chief product officer. “It was our organization that hindered our ability to deliver on them.”
“The ideas were all solid—there was nothing wrong with the vision. It was our organization that hindered our ability to deliver on them.”David Fock
Fock describes the problem as one that bedevils myriad companies looking for new direction: a siloed hierarchy that separated technical and business functions, excluding each from buy-in on the other’s success. “At that time, we had a sales department that was generally out selling stuff, but weren’t really that interested in what they were selling,” Fock says. “Simultaneously, we had an engineering department that was solving technical problems, but without any real investment in growing the company. In between we had product, which was supposed to bridge the gap but ended up remaining subservient to both verticals.”
The result was a lack of accountability that tossed the burden of failure back and forth. “It was just this endless, pointless game,” Fock recalls.
For the remedy, Siemiatkowski and his team reached back to Silicon Valley, but took away something much more substantive than the superficial fixes he’d toyed with earlier: a wholesale restructure of the company, from root to stem.
In Fock’s telling, “a company like Amazon is composed of small, cross-functional teams that look to solve a single overarching problem. You have a page-long mission statement and the team will draw on the company’s resources to accomplish it. This is how we realized we needed to transform Klarna in order to thrive.”
Siemiatkowski says the positive effects of the reorganization soon became apparent. “We started to feel a greater sense of momentum, to get products out at a higher pace, to launch more features. It wasn’t a daylong exercise, to be sure, and some employees weren’t sold on it, but in the end it was the best thing for the company.”
This shift would set the stage for Klarna’s entry into the American market. The company had already laid the groundwork by opening offices in Columbus, Ohio and New York City in 2015, and started making a serious push in 2018. Similar to Kreditor’s embryonic days, Siemiatkowski filled his calendar with sales meetings with potential clients, a slew of merchants that the company was courting as a means of overtaking its chief rival in BNPL, Australia’s Afterpay (which has since been acquired by Block).
As Fock describes it, “we recognized that Afterpay was ahead of us, but we made a concerted effort to enter that race and win. Sebastian got out there and stayed on the road nonstop—he must have delivered 1,000 pitches.”
The covid-19 pandemic put a halt to Siemiatkowski’s travels. Like virtually all companies, Klarna entered a wait-and-see mode as the virus spread and lockdowns ensued. “It was so hard to predict what was going on,” Fock recalls. “We couldn’t do anything except monitor and adjust on practically a minute-to-minute basis.”
The opportunities the outbreak afforded for much of the tech sector are well-documented. Nowhere was this more apparent than in e-commerce. In 2019 Klarna had launched its consumer-facing app in the US, following its initial European rollout in 2017. Usage volumes spiked over the course of the pandemic.
“I remember one investor calling me early on, fretting about the end of the world and insisting that I start downsizing,” Siemiatkowski recalls. “I’m always glad I didn’t take that advice, because COVID ended up being a major acceleration.”
“I remember one investor calling me early on, fretting about the end of the world and insisting that I start downsizing. I’m always glad I didn’t take that advice, because COVID ended up being a major acceleration.”Sebastian Siemiatkowski
This acceleration would drive Klarna’s valuation to a peak of $45.6 billion by July 2021, a number that implied supernova-like growth ahead. The company harnessed this energy to push harder into the US market, incurring losses for the first time in the company’s history. Throughout this upward surge, Siemiatkowski remained wary about reading too much into valuation figures as a barometer for the company’s long-term health. “I was cautioning people that if your valuation grows faster than your revenue, there’s bound to be a correction.”
Siemiatkowski’s wife Nina says that Siemiatkowski has always tended toward circumspection. “During Klarna’s first half-decade or so, Sebastian would relay to me—on practically a weekly basis—that the company was on the brink of collapse, even when it was clearly growing at a phenomenal rate.”
As the froth built up on the entire tech sector, few expected that the bubble would deflate so sharply. By the time of Klarna’s mid-2022 investment round, its valuation had plummeted by 85%, in line with most of its peers. Despite drawing the largest funding infusion of any European startup that year, the urgency of job cuts became too pressing to ignore. The company ultimately reduced headcount by a little over 10% in 2022, drawing headlines amid this turbulent period for tech overall.
Siemiatkowski speaks frankly about “making mistakes” during this period, a stressful time marked by tears and sleepless nights and compounded by the difficulty of letting go of colleagues who had been on his team for years.
“It’s one of those balancing acts that I, as a boss, had never really encountered before,” Siemiatkowski admits. “Of course no one wants to lay people off, but it’s a matter of making sure I’m fulfilling my duty to every stakeholder—to shareholders, to customers and to current employees alike. And the fact that our first set of cuts preceded that of most of our peers meant that I didn’t have the opportunity to learn from their example. Unfortunately, we just had to ‘bite the sour apple’, as they say out here.”
Siemiatkowski’s wife Nina cites this confluence of unenviable factors—job cuts and a potentially make-or-break fundraise occurring against the backdrop of a savage market downturn—as pushing Siemiatkowski to his limit. “Every time I tried to get him to take a rest, he would just say to me, ‘I have to get this right, I have to do right by my colleagues’,” she recalls. “Another person might just lay back and give up, but he just worked around the clock for weeks.”
Despite the turmoil, Siemiatkowski sees silver linings in the need to make tough choices in order to right the ship.
“As you get older, you start to take a more measured view of these kinds of rollercoaster moments,” he says. “Startups are often propelled by the high of building, building, building, but at some point you need to take stock and ask tough questions. Am I really doing this in the most efficient way possible? Is there a way I can accomplish this goal with a bit more focus? This is the kind of test that can break a company, or it can help push it to emerge stronger and wiser. I know that’s where we are now.”
“Startups are often propelled by the high of building, building, building, but at some point you need to take stock and ask tough questions. Am I really doing this in the most efficient way possible? Is there a way I can accomplish this goal with a bit more focus?”Sebastian Siemiatkowski
Klarna now occupies a major perch in a sector worth nearly a third of a trillion dollars. The company’s vision for its growth lies in the opportunity to break the stranglehold of the credit card on consumer-finance. It hopes to shake up an ecosystem in which a large number of mostly low-income credit-card users spend beyond their means, paying high interest rates in order to prop up the perks and benefits of wealthier clientele who can typically afford to pay off balances in full.
Its efforts are playing out against flux in the global regulatory framework that permits this disparity. The EU is in the midst of updating its laws overseeing consumer credit of all kinds, while the UK recently proposed new legislation to regulate BNPL. The U.S., meanwhile, is grappling with fallout from three high-profile bank failures this year which, although unrelated to consumer credit provision, may spur tighter regulation over the financial system more broadly. At the same time, regulatory trends that increase competition and prioritize fair outcomes for consumers over onerous processes could help the company maintain its edge.
Regardless of how BNPL regulations shape up in the coming years, they will likely inject some uncertainty into the landscape. The broader macroeconomic environment—including high interest rates, which are squeezing finance across the board—could present another challenge. Still, Siemiatkowski has more than proved he can steer his company through choppy waters. Nina attributes this to a dogged work ethic he developed growing up as the child of a poor family. “He’s always had a bit of a chip on his shoulder,” Nina says. “He’s always craved the means to help his parents escape their own cycle of poverty, and he ended up mapping this aim onto the millions of consumers who use Klarna to buy things they wouldn’t be able to otherwise.”
The fact that his own father descended into depression and alcoholism during Siemiatkowski’s mid-20s and died when he was only 33 adds a level of poignancy to this description. “My father was a fantastic character,” Siemiatkowski muses. “I still think today about how little regard he had for my choice to go to business school. ‘What the hell would you learn there?’”
Although Siemiatkowski has achieved far more than his father could have wished for, the sense of living up to the hopes of others—of his parents and his heritage, of his shareholders and his employees, of the market and the wider world—lingers over both his personal and professional story. Expectations like these could easily overwhelm the person who bears them. To Siemiatkowski, they are the foundation of his resolve.