Klarna, the “buy now, pay later” fintech darling that was once Europe’s most valuable private tech company, has seen its value slashed by 85% to less than $7bn in its latest round of fundraising. The company, which enjoyed stellar growth while also being criticised for potentially leading shoppers into unsustainable debt, announced the valuation after the conclusion of a difficult $800m funding round as investors continued to question the true worth of many tech businesses. Just over a year ago, Klarna, founded in Sweden in 2005, hit a peak valuation of $46bn after a $639m funding round led by Japan’s SoftBank. “The shift in Klarna’s valuation is entirely due to investors suddenly voting in the opposite manner to the way they voted for the past few years,” said Michael Moritz, chair of Klarna and a partner at investor Sequoia. “Eventually, after investors emerge from their bunkers, the stocks of Klarna and other first-rate companies will receive the attention they deserve.” Klarna, which in May announced its first ever large-scale job cuts, shedding 10% of its more than 7,000 staff, said that its popularity was continuing to surge and that with more than 150 million customers globally, it is bigger than American Express. Klarna has more than 16 million UK customers. It blamed the difficult fundraising for coming amid “possibly the worst set of circumstances to afflict stock markets since World War II”. “It’s a testament to the strength of Klarna’s business that, during the steepest drop in global stock markets in over 50 years, investors recognised our strong position and continued progress in revolutionising the retail banking industry,” said Sebastian Siemiatkowski, the company’s chief executive. “Now more than ever businesses need a strong consumer base, a superior product, and a sustainable business model.” Investor enthusiasm for fintech companies, especially buy now, pay later firms, has waned as consumers struggle to cope with the cost of living crisis and the risk of defaults on payments rise. Meanwhile, deep-pocketed Silicon Valley rivals such as Apple have moved into the market with products like Apple Pay Later. Last year, the Treasury announced that the Financial Conduct Authority was to be given powers to regulate firms such as Klarna and Clearpay, amid fears that a surge in their popularity during the pandemic could leave consumers with high levels of debt. Klarna’s latest fundraising round, which attracted new investors including Mubadala, the sovereign wealth fund of the United Arab Emirates, and the Canada pension plan investment board, has given the company its lowest valuation since August 2019, when it was worth $5.5bn.