As Klarna looks to raise more capital, is it cutting its valuation enough?

All that was once old is new again. If a startup could not find a new investor for its next round, what did that say about the company?

Last year, that bit of conventional wisdom was inverted by abnormal market conditions and greed; inside rounds became a sign of strength as venture players doubled and at times tripled down on their portfolio companies, looking to get as much capital in the door as they could while the startup was still in its growth

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We have returned to the prior state of affairs. There are signs that things aren't going well at companies that pursue them. The richly valued BNPL giant is looking to take on new capital from existing backers at a discount to its prior valuation. The Wall Street Journal is reporting.

The Sweden-based payments company is aiming to raise up to $1 billion from new and existing investors in a deal that could value it in the low $30-billion-range after the money is injected, the people said. That would represent a roughly 30% drop from the previous round.

No one likes a long round. They are messy and demoralizing. Companies raise them when required because they are miles better than not raising money and dying.

Our question this morning is not whether it makes sense for Klarna to raise inside capital at a lower price. As the WSJ notes, the company tried to bump up its valuation slightly before changing course and pursuing a lower price. We know why Klarna is pursuing a down round: necessity. Instead, our question is whether the company is cutting its valuation enough to bring its worth in line with present market pricing.

Let's find out.

Klarna, Affirm and the BNPL valuation revision

Thankfully for our needs, there are public players for us to watch as we work to understand what the particular revenue is worth. Affirm is a publicly traded company.

Affirm is a perfect floating comp for the Swedish company because it is a pure BNPL play and has some market overlap with Klarna. The results of the US company's fiscal Q1 and Q3 were released over a week ago. We have fresh-off-the-vine data from a public company.

Data collection and math are needed to understand how well Klarna is repricing itself. We start with the collection side of things.