How a Broke Swedish Kid Built a Fintech Empire

Hey y’all — I love a good founder story, don’t you?

You’ve probably heard of Klarna, the creator of the “Buy Now, Pay Later” craze that lets you split up the cost of everything from burritos to engagement rings into biweekly payments.

It’s sort of a crazy proposition to many of us here in the US — my first reaction when I heard about them was that so many people would abuse their trust-based business model that they’d eventually have trouble staying afloat.

And while there are reports of mounting losses as they prep for an IPO, did you know the company was actually founded way back in 2005? And it’s been working, and growing to as much as a $45 billion valuation, for over 20 years now?

So this week I spent hours researching Klarna and its founder, Sebastian Siemiatkowski.

What I found is an inspiring story of a broke kid who got laughed out of pitches but saw an opportunity to take a unique element of his local Swedish culture and apply it globally.

Here’s the story:

How a Broke Swedish Kid Built a Fintech Empire

You’re craving some tacos, so you open DoorDash and notice you can get the tacos now but pay in four small payments over two months.

Klarna’s “Buy Now, Pay Later” option has helped millions move away from credit cards — for everything from furniture to engagement rings. But it all started back in 2005 with a broke Swedish kid who once had to pawn his belongings and got laughed out of every investor pitch.

This is Klarna’s epic rise to become one of the world’s largest fintech unicorns.

Sebastian’s Early Life

Sebastian Siemiatkowski grew up as a Polish immigrant in Sweden. His family struggled. He remembers weeks of eating nothing but pancakes with his Mom.

After watching his parents divorce, Sebastian became convinced that money could ease pain. Inspired by Richard Branson and IKEA founder Ingvar Kamprad, he decided to pursue business.

Post-college, he landed in Stockholm right after the dotcom crash. He applied to countless big firms like McKinsey and PwC. He got zero interviews — and ended up cold-calling for a collections agency.

The Aha Moment

In 2005, Sweden didn’t use credit cards much. People preferred invoices: get the item first, pay a few days later.

But while working in collections, Sebastian saw an interesting trend. Early, fast-growing e-commerce companies didn’t need the cash — they just didn’t want the administrative hassle or to have to assume the financial risk in the first place.

Buy Now, Pay Later

Sebastian realized he could build a global business around Sweden’s unique invoice culture.

Buy Now, Pay Later wasn’t about lending — it was about building trust. Let the consumer get the product first, then pay. Klarna would assume the financial risk and handle the admin if someone didn’t pay.

The agreement Klarna makes with merchants is that if the customer doesn’t pay, Klarna’s the one left holding the bag — they still pay the merchant on schedule.

This made merchants happy. They got sales without the stress.

Enjoying the story so far? Check out the video I put together telling it in full:

Fundraising Struggles

Sebastian brought on two co-founders: Niklas Adalberth and Victor Jacobsson.

They pitched at their school’s incubator. No one was impressed. Neither were Swedish VCs. Or any of the 20+ other investors they talked to.

Everyone from pitch competition judges to investors said it would never scale — some thought the idea was too niche while others just didn’t trust these three inexperienced kids who had no product and were going to assume a ton of financial risk with their business model.

Just when they were about to give up, angel investor Jane Walerud stepped in. They asked for $40k but she gave $60k in exchange for 10%.

Unlike most other investors at the time, she also introduced them to engineers who built Klarna’s first MVP for no cash but, instead, sweat equity.

The 37% they took meant 47% of the company was already owned by non-founders after just one investor had come onboard, but Sebastian believed that their model would become profitable quickly and they would be able to grow without taking on a ton of other early investors.

By the time they spent just half of the $60k, they were profitable. The 37% they gave away to engineers started to look a little bit better.

International Expansion

Fast forward to 2014. Klarna was doing $257M in revenue and had over 1,000 employees.

They had just successfully expanded to the UK with merchants like ASOS, Sephora, and Macy’s.

Their success in a mature credit card market like the UK gave Sebastian the confidence to go after the US next. This was big — at first, even he didn’t think the BNPL model would work in countries with deep credit card penetration.

But after the 2008 financial crisis, American consumer preferences had started to change..

A 2014 McKinsey report coined the term “self-aware avoiders” — consumers who didn’t trust traditional credit cards. That group made up about 20% of the US. In particular.

Sebastian realized the US was becoming more like Sweden.

But by this point Klarna also had strong global competition: Affirm, Afterpay, and many others.

Pivoting

Even after a successful US launch, Klarna was struggling to secure marketshare against Afterpay (who had stronger domestic merchant relationships).

Sebastian realized he had to ditch the partner model, where Klarna acted as a payments processor for merchants, and pivot into a consumer brand where users could use Klarna anywhere (regardless of whether that company was partnered with Klarna or not)

To do this, his team built a shopping browser inside the Klarna app. Now users could generate a virtual Visa card and shop anywhere — even on Amazon.

They added other tools like price alerts, return management, and order tracking.

Growth exploded.

Growing Pains

In 2021, Klarna raised funding at a $45.6 billion valuation — becoming Europe’s most valuable private tech company in the process.

But the market crashed and, just one year later, Klarna’s value dropped to $6.7 billion. On top of that they were burning a billion dollars a year, leading to layoffs, intense media scrutiny, and countless other challenges. People started comparing them to WeWork.

But then Sebastian heard about a new tool: ChatGPT.

Klarna 🤝 OpenAI

Sebastian jumped on a plane to San Francisco just to meet Sam Altman.

At first, OpenAI was skeptical. Klarna was a European fintech and weren’t known as the fastest moving startup.

But Sebastian persisted. Klarna’s team set up Slack channels with OpenAI and tested everything they could. It was all hands on deck.

One of their first breakthroughs was replacing employee surveys with AI-powered interviews. These freeform conversations revealed company morale better than traditional tools.

But the game-changer was customer support.

Klarna’s AI copilot handled tickets better than humans. Resolution time dropped from 14 minutes to 2 minutes, and customer satisfaction actually improved.

Within a year, Klarna stopped hiring. Instead, they focused on scaling with AI — cutting duplication without needing layoffs.

Today, Sebastian doesn’t call Klarna a unicorn at all (even though it still is worth billions). He calls it a Tiger Company, which he defines as a company doing $5–10M+ in revenue per employee, with minimal duplication, powered by AI.

He believes in the next 6–12 months, we’ll start to see which companies truly reimagined themselves with AI — and those will pull ahead fast.

Klarna isn’t just a payments company. It’s a startup that nearly collapsed, reinvented itself multiple times, and found new purpose by embracing AI and Sebastian’s gut-level founder instincts.

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