After Checkout.com reduced its internal valuation, UK neobank Revolut seized the title of most valuable company in Europe.
Revolut and the buy-now-pay-later (BNPL) startup Klarna have been vying to be the continent’s most valuable privately owned business for years. It has been a close race.
In 2022, things have changed. Fintech businesses throughout the world have experienced a terrible year. Investors have tightened their purse strings as a result of the increase in market volatility. Financial services entrepreneurs are finding it more and more difficult to get additional funding to expand.
The tighter environment has had a noticeable impact on the top trio of largest startups in Europe. First, Klarna lost the crown in July after going through a $800 million down round that reduced its valuation from the $45.6 billion it had attained on the back of a $639 million investment round led by SoftBank one year earlier to $6.7 billion.
This year, the company has been under a lot of stress. In addition to competing with multibillion-dollar rivals like Affirm and Block’s Afterpay, it has also faced battle against other new startups hoping to capture market share for BNPL.
Additionally, established payment companies like PayPal and Big Tech companies like Apple have pushed their way into the market. It is simple to understand how tighter regulations have been imposed on the sector globally by regulators as well as the decline in online purchasing when these factors are combined with Klarna’s year-long financial struggles.
Even though CEO Sebastian Siemiatkowski put on a brave face, the downturn and huge layoffs at Klarna indicate that the Swedish fintech’s troubles are still far from over. Due to Klarna’s down round, Checkout.com and Revolut are now by default the most valued startups in Europe. Following the completion of a $1 billion Series D fundraising round in January, Checkout.com’s valuation reached $40 billion.
Checkout.com, however, lost the crown to Revolut this week after the payment startup reduced its internal estimate to $11 billion.
Those with knowledge of the decision who spoke with the Financial Times said that the London-based company informed its employees that it would lower its valuation in November. Checkout.com also reduced the cost of exercising employee stock options, from $252 a share to about $64, at the same time.
Employees can benefit from additional earnings in the event of future deals, such as an initial public offering, by lowering the company’s internal price. Instacart and Stripe, two fintech companies, recently took similar actions.
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