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Sebastian Siemiatkowski, the co-founder and CEO of Klarna — the Swedish fintech “buy now, pay later” sensation that is currently Europe’s most valuable private tech company — is dismissive of the suggestion that non U.S. companies should relocate to Silicon Valley if they really want to grow.

“We did hear that and I think it’s very poor advice,” he says. An overheated market for tech talent and the fickle nature of employees that are constantly job-hopping, he argues, make it harder to build a company for the long term.

Then he goes further.

“When I went to San Francisco for the first time about 10 years ago, [it] was a magical place. It was the early days of Facebook, there was an amazing vibe. When I go to San Francisco today, it’s changed to become, in my opinion, fairly cold.”

Siemiatkowski, a Swedish national and the son of two immigrants from Poland, is also sceptical of the “American dream.” In contrast to America, he points out how Sweden is among the most successful societies in the world from a social mobility perspective — referencing its free education and free health care, which sets up as many people as possible for success. But there is one caveat: he doesn’t think first-generation immigrants in Sweden do nearly as well as their children.

“We didn’t have a lot of money,” he tells me. “My father was driving a cab, he was unemployed for many years, even though he had basically a doctorate in agronomy. That’s kind of the unfortunate part of this, but that has obviously created a massive amount of hunger with me.”

As second generation success stories go, the rise of Klarna is up there with the best, even if it has already been 15 years in the making.

Backed by the likes of Sequoia, Silverlake, and Atomico, a new $650 million funding round in September gave the company a whopping $10.65 billion valuation — almost double the price achieved a year earlier, cementing its status as a poster child for Europe’s ability to build tech companies valued far above $1 billion. Siemiatkowski still owns an 8.1 percent stake.

Klarna is also, perhaps, even more mythical than a unicorn: a fintech that has been profitable nearly from the get-go. That only changed in 2019, when it decided to incur losses in favor of investing millions trying to conquer the U.S. market, choosing New York and L.A. over San Francisco for its American offices.

The company has been built on the concept of giving consumers a way to buy things online without having to pay for them upfront, and without resorting to a credit card. It does this both by offering online retailer integrations where Klarna appears as an option at check out, and through its own “shopping mall” app, where users can browse all the stores that let you pay with Klarna. On the back of this, the company hopes to foster a bigger financial relationship with its users as a fully-fledged bank.

If a bank is partly about corralling enough users on to your platform to pay money in and out, Klarna is well on its way. Today, the company boasts a registered customer base of 90 million, 11 million of which are in the U.S. In the last year alone, 21 million users were added globally. Klarna’s direct to consumer app, which sits alongside its 200,000 strong merchant point of sale integrations, has 14 million active users globally. Combined, Klarna is processing over 1 million transactions per day through its platform.

This growth has continued apace as Klarna rides one macro trend and bucks another: Prompted by the pandemic, e-commerce has gone gangbusters, while, conversely, consumer credit as a whole has been in decline as people are paying down longer-term debt in record numbers. Even before COVID-19, Klarna and other buy now, pay later providers had been successfully picking up the slack created by a credit card market that, in some countries, has been steadily contracting.

Yet with a business model that generates the majority of its revenue by offering consumers short-term credit — and against a backdrop where the idea of easy credit and infinite consumption is increasingly criticised — the fintech giant is not without detractors.

When I mention Klarna to people who work in the European tech industry, the reaction tends to fall into one of three camps: those who reference the company’s “weird” above the line advertising and social media campaigns; those who use the service regularly and talk in terms of guilty pleasures; and those who are outright scornful of the impact on society they perceive Klarna to be making. And it’s true: You can’t help but be suspicious of something that gives consumers the feeling that they can spend money they might not have. And those “Smoooth” ads (below) certainly don’t offer much reassurance.

Delve a little deeper, however, and it becomes clear that the company’s business model can be misunderstood and that the arguments playing out in the media for and against buy now, pay later is only one part of the Klarna story.

In a wide-ranging interview, Siemiatkowski confronts criticisms head on, including that Klarna makes it too easy to get into debt, and that buy now, pay later needs to be regulated. We also discuss Klarna’s business model and the balancing act required to win over consumers and keep merchants onside.

We also learn how, under his watch and as the company began to scale, Klarna missed the next big opportunity in fintech, instead being usurped by Adyen and Stripe. Siemiatkowski also shares what’s next for the company as it ventures further into the world of retail banking after gaining a bank license in 2017.

And, told publicly for the first time, Siemiatkowski reveals how he once sought out PayPal co-founder Max Levchin as an advisor, only to learn a little later that he had started Affirm, one of Klarna’s most direct U.S. competitors and sometimes described by Europeans as a Klarna clone.

But first, let’s go back to the beginning.

Klarna’s first ever transaction took place at 11:06:40 am on April 10, 2005 at a Swedish bookshop called Pocketklubben, according to the abbreviated history published on the company’s website. However, what is made less explicit is that there was likely very little technology involved. The real innovation was a business one, with Klarna’s young and non-technical founders, Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsso, taking an old idea and reconfiguring it for the burgeoning e-commerce industry.

By enabling customers that shopped online to be mailed an invoice with 30 days to pay, online shopping could be made easier and safer for consumers, which in turn helped increase sales for retailers.

“When they started, they didn’t position themselves so much as a startup or as a tech company,” recalls Skype founder Niklas Zennström, whose venture capital firm Atomico would eventually become a Klarna investor in 2012. “People referred to them as the invoicing company.”

Today, Klarna is most certainly a tech company, employing 1,300 software engineers out of a staff of over 3,500. The company is now entirely cloud based and with various fully automated processes, from credit risk processing to algorithms in the Klarna shopping app to personalize content for individual consumers to AI/machine learning for 24 hour customer service.

Crucially, however, even this early and rudimentary version of what would become ‘buy now, pay later’ ticked two important boxes. Consumers, especially those who were distrusting of e-commerce, could be sure they’d receive goods before being charged, and if for any reason a product needed to be returned, customers wouldn’t have to wait weeks to be reimbursed as they hadn’t outlaid cash in the first place. Arguably both problems were already solved by credit cards, but in countries like Sweden, credit card take up was low, while the humble debit card doesn’t carry the same consumer protections as a credit card.

“The reason that we were able to launch it and be successful was because we were in a market where debit cards were much more prevalent than credit cards,” says Siemiatkowski. “And most people who have credit cards don’t reflect on the fact that if you have a debit card and you shop online, you face a number of struggles that a credit card holder does not.”

Those “struggles” include tying up your own money for the time it takes to return an item and process a refund. In contrast, when you spend on a credit card, the merchant is effectively holding your credit card company’s money.

“If I am buying some items and feel a bit unsafe about the merchant I’m using, if there’s a credit card, I don’t feel like I’m risking my money. If it’s my salary money you’re actually holding as a merchant for three weeks while you’re processing the return, that’s a problem,” Siemiatkowski argues.

Instead, Klarna would step in and offer to pay the merchant up front while providing customers 30 days to settle their invoice. Later this would be extended to include installments as an option. In return for taking on all of the risk and promising to increase conversions, merchants would give the Swedish upstart a percentage cut of the transactions.

“They wanted to make it really simple by just putting in your name, your Social Security number, and then you can instantaneously get an option to get an invoice sent to you later on. So what it did was remove a lot of friction from buying,” says Zennström.

Meanwhile, the more retailers sold, the more revenue Klarna would generate, all without consumers having to be charged interest on what might otherwise be described as a short-term loan. Pitch perfect, you might think. However, in early 2005 and before the company was incorporated, the concept was stress-tested at a “Shark Tank”-style event held at the Stockholm School of Economics and attended by the King of Sweden. The judging panel, made up of prominent Swedish financiers, were not convinced and Klarna’s invoicing idea came last in the competition. Despite the loss, Siemiatkowski held on to feedback from an unknown member of the audience, who surmised that banks would never launch something similar. Siemiatkowski left undeterred.

Angel investment from a former Erlang Systems sales manager, Jane Walerud, followed and she put Klarna’s founders in contact with a team of developers who helped build the first version of the platform. However, it soon surfaced that there was a misunderstanding in relation to the equity promised and how it should be linked to a longer commitment to the project.

Reflects Siemiatkowski: “One of the drawbacks that we had at the company was that none of the three co-founders had any engineering background; we couldn’t code. We were connected to five engineers that by themselves were amazing engineers, but we had a slight misunderstanding. Their idea was that they were going to come in, build a prototype, ship it, and then leave for 37% of the equity. Our understanding was that they were going to come in, ship it, and if it started scaling they would stay with us and work for a longer period of time. This is the classic mistake that you do as a startup.”

Eventually, the original five engineers quit, leaving Siemiatkowski to manage something he didn’t understand. “We obviously hired a CTO, but I also needed to be able to evaluate his decision making and all of these things in order to be able to assess whether we had the right setup to achieve what we want to achieve,” he says.

Between 2006 and 2008, Klarna continued to grow as more people started shopping online. The company expanded beyond Sweden to neighboring Nordic countries Norway, Finland and Denmark, with a headcount that had reached 120 employees. Even though there were signs of growth, Siemiatkowski says it still took a long time to realise that if Klarna was ever going to be really successful, it needed to fully transform into a tech company.

“We were really good at sales, we were okay at marketing, [and] we were service oriented: we really delivered to our customers. But it wasn’t really that technology driven,” he concedes.

To attract the kind of tech talent required, Siemiatkowski decided he needed to woo a renowned tech investor. Further backing had come in 2007 from Swedish investment firm Investment AB Öresund, but by 2010 the Klarna CEO had two new targets in his sights: Niklas Zennström, the Swedish entrepreneur who had already achieved legend status back home after building and selling Skype, and Sequoia Capital, the Silicon Valley venture capital firm that had invested in Apple, Google and PayPal.

“Part of our thinking about how we make Klarna attractive for people with engineering backgrounds was to get an investor that really had the brand and could kind of put their mark on us and say, ‘this is a tech company,’” says Siemiatkowski.

There is every likelihood that Zennström’s Atomico would have joined Klarna’s cap table in 2010 if it weren’t for a single line of text published on the VC firm’s website, which read something like, “don’t contact us, we’ll contact you.” Europe’s startup ecosystem was still immature and what now seems like aloofness was probably nothing more than a crude way to deter cold pitches from non-venture type businesses. But whatever the intent, it would be another two years before the firm eventually had the opportunity to invest in Klarna at what was almost certainly a much higher valuation.

“That was our loss for being too arrogant,” says Zennström. “Clearly we didn’t pursue them, we didn’t discover them because we didn’t have them on our radar. When we got to know them [two years later], what we liked a lot as a firm was the pain point that they were addressing.

“E-commerce was a relatively low single digit penetration of all retail, but of course growing, and we have always believed that e-commerce is going to continue to grow and become bigger than physical retailers. We thought that if you can remove that friction of the payment, and offer people different payment methods, that’s a really big proposition.”

“I always tease Niklas about it,” admits Siemiatkowski. “They wanted to, you know, keep it exclusive and I get it. So we were like, ‘okay, we can’t get hold of them, so let’s talk to Sequoia instead.’”

However, cold calling Sequoia wasn’t going to cut it either, not only because the firm didn’t generally invest in Europe, but also by Siemiatkowski’s own admission, Klarna didn’t look much like a tech company at the time. Luckily, a mutual contact got wind that Sequoia was on the lookout for interesting companies in the region and Klarna’s name was promptly thrown into the mix.

“Chris [Olsen], who was working at Sequoia at the time, called me, [but] I had this idea that I needed to be hard to catch. So I decided to not call back for three days, which was a very nervous time where I was just sitting on my hands not doing anything,” he said. “It was like, I don’t want to look like I’m too interested in this. Eventually, after three days, I call back and we did an exclusive deal with them, which I don’t recommend companies do.”

In hindsight, the Klarna CEO advises that it’s always smarter to foster competition in a round. As the only show in town, Sequoia invested at a $100 million valuation. “They bought 25 percent of the company and that was kind of it,” he says.

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Siemiatkowski believes a company is made up of three things.

The first he calls internal momentum: “How fast are we moving as an organisation? How good are the decisions we are taking? How much are we avoiding [company] politics? How much of a true meritocracy are we?”

The second is profit and loss.

And the third is valuation. In a small company these three things are closely correlated in time, he says, “so if you have great internal momentum, you will instantly see it in your P&L, and then you will instantly see that hopefully in your company valuation as well.”

But in a large company, because of its size, the challenge is that they start to become disconnected. “They’re obviously in the long term always 100% correlated, but in the short term, they can vary a lot,” cautions Siemiatkowski.

Unsurprisingly, fueled by Sequoia’s cash, Klarna continued to grow in 2010, ending the year with $54 million in annual revenue, an increase of 80%. In December 2011, General Atlantic and DST would invest $155 million in a round that gave Klarna the coveted status of a unicorn.

Siemiatkowski says, compared to the company’s subsequent $5.5 billion and $10.65 billion valuations, this is the one that put him under the most self-scrutiny.

“In just one and a half years, we went from $100 million to a $1 billion. And then I felt the pressure,” he tells me. “I felt like we made it such a competitive round because we wanted to compensate for what we saw partially as a mistake with Sequoia that we kind of went too far the other way.”

Klarna finally took Atomico’s money in 2012, and within two years had grown to over 1,000 employees. Along with multiple offices around the globe, the company moved to bigger headquarters in Stockholm and expanded to the U.K. with an office in central London. Yet, somewhere along the way, Siemiatkowski says Klarna had lost internal momentum.

“As the company scaled and we started adding more markets and growing fast, for me as CEO and co-founder, I found that very difficult,” he admits. “As long as we were up to 100 people, I found it easier, I understood how to talk to people, how to get things done, how to develop new products or features and so forth. It was all much less complex, and then we started approaching a couple of hundred people and I felt more and more lost in all of that.

“It was difficult, and at the same point of time, we still had a lot of success because we had built this product that worked really well and there was a lot of momentum coming solely from the product itself.”

Siemiatkowski says that most startups don’t recognize that “once you get the snowball rolling, you can actually do quite a lot of stupid things, and the snowball will continue rolling.”

The Klarna CEO doesn’t say it, but one of those “stupid things” came in 2012 when the startup faced a backlash in its home country. Instead of sending payment instructions in the post, the company had switched to email without considering that messages might go to spam or simply remain unread. This saw customers unintentionally defaulting and then being chased for payment, leading to accusations in the media that Klarna was tricking people so it could generate more revenue through late fees.

DealShare, a startup in India that has built an e-commerce platform for middle and lower income groups of consumers in the world’s second largest market, said on Tuesday it has raised $21 million in a new financing round.

WestBridge Capital led the Series C round of the three-year-old Bangalore-headquartered startup. Alpha Wave Incubation, a venture fund managed by Falcon Edge Capital, Z3Partners and existing investors Matrix Partners India and Omidyar Network India also participated in the round, which brings DealShare’s to-date raise to $34 million.

DealShare kickstarted its journey the day Walmart acquired Flipkart, the startup’s founder and chief executive Vineet Rao said at a recent virtual conference. Rao said that even as Amazon and Flipkart had been able to create a market for themselves in the urban Indian cities, much of the nation was still underserved. There was an opportunity for someone to jump in, he said.

The startup began as an e-commerce platform on WhatsApp, where it offered hundreds of products to consumers. But in the early days itself, it became clear that people were only interested in buying items that were selling at discounted rates, said Rao.

Over time, that idea has become part of DealShare’s core offering. Today it incentivizes consumers to share deals on products with their friends. The startup, which has since launched its own app and website, now operates in over two dozen cities in India.

Consumers wanted products that were relevant to them and they wanted to buy these items at a price that instilled the most value for their bucks, said Rao. “We focused on locally produced items instead of national brands. “Even today, 80% to 90% of items we sell are locally produced,” he said.

“We started building a network of these suppliers. It was very tough because none of these guys fancied joining modern retail like e-commerce. Some of them had tried to work with e-commerce firms before but the experience left a lot to be desired,” he said.

Sandeep Singhal, Co-founder and Managing Director of WestBridge, said in a statement, “Majority of Indian population is currently residing in the non-metros and there is a huge business opportunity in these regions. The buying pattern of low and middle-income group is different especially in smaller markets and DealShare seems to have understood the nuances very well. We are very impressed with how the team has scaled up in the last 2 years, while retaining a sharp focus on low cost, high impact model,” said

The startup says it spent the last 18 months to improve its finances and is nearing profitability. Now it plans to invest in its technology stack and expand its platform to 100 cities and towns in five states of India in the next one year.

More to follow…

Outfund, the revenue-based finance startup that wants to help online businesses fund growth without giving away equity, has raised £37 million in a “late seed” investment. A mixture of debt and equity, the round is led by Fuel Ventures, alongside TMT Investment.

Outfund says it will use the funds to offer larger financing to more businesses, and to invest in new finance products and grow the team. It is also committing to lending £100 million to e-commerce and subscription-based businesses in the next 12 months.

Co-founder and CEO Daniel Lipinski, who previously founded and sold logistics platform ParcelBright, says existing financing solutions for online businesses are far from optimum. “[There’s] organic growth which is slow and cumbersome; bank loans which force directors to give personal guarantees and put their home on the line; or venture capital, where you have to give up control of the business and dilute your shareholding. Sadly, none of these are aligned with company goals of revenue generation and equity retention,” he argues.

To remedy this, Outfund has set out to create a fairer — and better aligned — way for online businesses to grow fast. Based solely on revenues and performance, and targeting businesses that take online payments, Outfund offers between £10,000 and £2 million of funding. Companies must have a minimum of £10,000 monthly turnover and to have been trading for at least six months. Outfund then charges a share of revenue, starting from 5 percent and factoring in projected payback time, although the fee is fixed even if it takes longer to pay back the loan.

To assess risk before deploying funding, the fintech’s algorithm pulls information from multiple data sources to determine how a company is performing. “Outfund uses live data as the backbone of our lending decisions, making us non-biased and fast,” adds the Outfund CEO. “This allows us to provide funding of up to £2 million within 24 hours. And, as we use unfiltered data sources, this helps reduce risk on our side meaning we can provide the cheapest possible fees over the longest possible repayment period”.

On direct competitors, Lipinski cites Canada’s Clearbanc, which recently launched in the U.K. “They are based in Canada, [so] it’s a real challenge for them to provide the speed and responsiveness that a U.K.-based company like Outfund can provide,” he claims. Another relatively new local player is Uncapped.

“Outfund is very different in the market in that we provide one fixed fee from 5% regardless of how you spend the funds. For example, other providers in the space charge an increased fee if you use the funding for stock as opposed to marketing. We are focused on technology to make the best lending decisions and means we can advance the cheapest fixed rates on the market regardless of how you spend it”.

Most people know Wish as a site that sells throwaway doodads from China, but in anticipation of its impending IPO, the ten-year-old, San Francisco-based company has begun portraying itself as a kind of Amazon for the rest of us.

Judging by what we’ve read and heard from sources in recent months, Wish wants to paint itself as a patriotic alternative to the trillion-dollar juggernaut and is positioning itself as the better option for the estimated 60% of families in the U.S. without enough liquid savings to get through three months of expenses. Such cost-conscious customers can’t afford Amazon Prime and are — at least in Wish’s telling — willing to wait an extra week or three for a product if it means paying considerably less for it.

We’ll know soon enough if public market investors buy the pitch. Wish registered plans this morning to sell 46 million shares at between $22 an $24 per share in an offering that’s expected to take place next week. The current range would value Wish at up to $14 billion, up from the $11.2 billion valuation it was last assigned by its private investors.

Wish has a lot of reasons to feel optimistic about its story heading into the offering. For one thing, people are clearly still discovering its business. According to Sensor Tower, Wish’s mobile shopping app was downloaded 9 million times last month, compared with the 6 million downloads that Amazon’s shopping app saw and the 2 million downloads seen by Walmart. In 2019, across all types of apps, Wish was the 16th most downloaded app.

There’s a lot to discover once potential customers do check out Wish. According to the company’s prospectus, its more than 100 million monthly active users across more than 100 countries are now shopping from 500,000 merchants that are selling approximately 150 million items on the platform.

While many of these are the nonessential tchotchkes that Wish has long been identified with, from tattoo kits to pet nail trimmers, a growing percentage of the mix also includes essential goods like paper towels and disinfectants — the kinds of items that keep customers coming back in reliable fashion.

It’s a bit of an evolution for the company, whose early focus was almost exclusively on cheap items that didn’t weigh much. First, Wish has always worked with unbranded merchants, mostly in China, that don’t have marketing costs built into the products and like the platform because it enables them to reach new customers for free without cannibalizing their existing market.

But Wish — which takes 15% of each transaction —  had also been relying heavily on a partnership with the USPS and China called ePacket that long enabled it to send items overseas to the U.S. for $1 to $2 as long as the items weren’t unusually large or heavy. Yet that changed on July 1, with a new USPS pricing structure that now requires companies like Wish to pay more to ship their goods or else move to more costly commercial networks.

Unsurprisingly, Wish had back-up plans. One of these has involved packing together multiple orders in China based on customers’ locations, then sending them in bulk to the U.S. to a designated location where they can be picked up.

Relatedly, dating back to early 2019, Wish began partnering with what are now tens of thousands of small businesses in the U.S. and Europe that stock its products, trading their storage space for access to Wish’s customers along with a small financial bonus for every in-store pickup. (Wish will pay store owners even more if they can deliver orders directly to customers’ homes.) As Forbes described these partnerships, they provided Wish with an “inexpensive distribution network practically overnight.”

It happens to fit neatly into a larger anti-Amazon narrative wherein the Goliath, unable to disrupt convenience stores, is now trying to supplant them with its own branded convenience shops, while Wish may be helping them prosper.

It is also a very asset-lite model compared with Amazon.

Of course, none of these developments completely or even mostly address the challenges that unprofitable Wish is still facing, beginning with its scale, which remains tiny compared with the towering giants against which it is competing and Amazon in particular, whose growth has exploded in 2020.

While the company is showing moderate revenue growth, its filings also show steady losses owing in part to its marketing spend. (In 2019, Wish reported revenue of $1.9 billion, up 10% year over year, but it saw a net loss of $136 million.)

The company, which has been making inroads into new geographies around the world, is also still heavily dependent on China-based merchants, even while it has reportedly begun partnering increasingly with more U.S.- and Europe-based retailers, including those with overstocked or returned items that big retailers are looking to offload, along with those looking to sell refurbished electronics.

“We’d love to diversify,” Szulczewski told Forbes this summer.

Wish has always been plagued by quality control issues, too, which it has yet to fully resolve. In fact, there are YouTube channels — some very funny —  focused entirely around what Wish products look in person versus how they are presented to shoppers online. (See below.)

Largely, it’s a cultural issue. For example, at a 2016 event hosted by this editor, cofounder and CEO Peter Szulczewski talked about having to educate Chinese merchants, who aren’t accustomed to thinking about the lifetime value of customers.

“It’s true that consumer expectations in China are very different,” Szulczewski explained at the time. “Like, if you order a red sweater and you get a blue one, [shoppers are] like, ‘Eh, next time.’ So we have a lot of merchants that have only sold to Chinese consumers and we have to educate them that it’s not okay to ship a blue sweater because you don’t have any red sweaters in stock.”

Wish has been working to close the gap, as well as to tackle outright fraud on the platform. Just one of many moves has involved hiring a former community manager at Facebook as its own director of community engagement, a task that reportedly involves organizing Wish users to weed out bad apples. But Wish has surely lost plenty of shoppers burned by their experience along the way.

Whether it is doing enough is something that ultimately the market will decide along with consumers. In the meantime, plenty of private market investors will be watching and waiting. That’s true of the venture capitalists that have provided the company with $2.1 billion in funding over the years, including Formation 8, Third Point Ventures, GGV Capital, Raptor Group, Legend Capital, IDG Capital, DST Global, 8VC, 137 Ventures and Vika Ventures.

Other marketplace experts are also eager to see how this one plays out.

For her part, Anna Palmer of Boston-based Flybridge Capital Partners — who does not have a stake in Wish but who is focused very much on so-called commerce 3.0 — thinks that Wish “serves a different use case and a different customer need” than the Amazon shopper.

“If you look at the strong retail performance of the off-price and discount market —  think of retailers like Dollar General and Dollar Tree — it bodes well for the continued growth of Wish, especially since the discount market has been a tough one to bring online because of the additional logistics costs involved.”

Adds Patterson, “Amazon has dominated on convenience and inventory. Wish has really done a great job of carving out low-cost discovery and competing on price in a way that Amazon can’t get there . . . I’m bullish that Wish has plenty of breathing room to continue to expand.”

Lemonade is launching its renters insurance in France. This is the company’s third European launch after the Netherlands and Germany. Originally from the U.S., Lemonade is now a public company with a current market capitalization close to $4 billion.

Lemonade will compete directly with a local competitor called Luko. Both companies share a lot of similarities. But Luko has already attracted 100,000 customers and just raised $60 million.

https://techcrunch.com/2020/12/06/luko-raises-60-million-for-its-home-insurance-products/

Lemonade has optimized its insurance product in different ways. First, it’s supposed to be easier to sign up with Lemonade compared with a legacy insurance company. Second, the company wants to bring back trust by taking a flat fee for its operations.

Premiums are then pooled together and used to pay back claims. If there’s money left at the end of the year, customers can choose to donate to nonprofits. Lemonade is also a certified B-Corp.

But it’s worth noting that other insurance companies try to position themselves as socially responsible, such as MAIF. Insurtech companies aren’t reinventing the wheel on this front.

Third, Lemonade tries to pay you back as quickly as possible after you file a claim.

Chances are you don’t think that much about renters insurance. But it’s a lucrative industry. For instance, home insurance is a legal requirement in France. Due to tenant turnover, there are many opportunities to jump in and convince customers to switch to Lemonade when people move to a new place.

Let’s see how the fight between Lemonade and Luko plays out in France.

Shippit, a Sydney, Australia-based e-commerce logistics platform, will expand in Southeast Asia after closing a $30 million AUD (about $22.2 million USD) Series B led by Tiger Global, with participation from Jason Lenga. Founded in 2014, Shippit’s technology automates tasks related to order fulfillment, including finding the best carrier for an order, tracking packages and handling returns.

The company’s Series B, which brings its total raised since 2017 to $41 million AUD, will be used to expand in Southeast Asia and double its total team by hiring 100 new people, including 50 software developers.

Shippit says it currently handles five million deliveries a month in Australia from thousands of retailers, including Sephora, Target, Big W and Temple & Webster. The company launched in Singapore in May, followed by Malaysia in August.

“Southeast Asia is predicted to be the world’s largest e-commerce market in the next five years, and the addressable market for us in Southeast Asia alone is already five times the size of Australia and twice the size of the U.S.,” co-founder and co-chief executive officer William On told TechCrunch.

Shippit is considering expansion into the Philippines and Indonesia, too, and expects its Southeast Asian business to grow 100% year-over-year for the next three years at minimum.

Shippit’s Australian operations have also seen a threefold incraese in delivery volumes over the past twelve months, On added.

The increase in online sales combined with instability in the supply and logistics chain during COVID-19 has highlighted the importance of software like Shippit. E-commerce in the Asia-Pacific was already growing quickly before the pandemic hit, with Forrester forecasting online retail sales in the region to grow from $1.5 trillion in 2019 to $2.5 trillion in 2024, at a compound annual growth rate of 11.3%.

Other startups in the same space include ShipStation, EasyShip and Shippo. Shippit’s competitive strategy is to make online fulfillment as simple as possible for merchants, On said, with features like allowing the integration of online shopping carts with its allocation engine, which automatically picks the best carrier option for an order.

Despite several efforts from carriers, telecom regulators, mobile operating system developers, smartphone makers, and a global pandemic, spam calls continued to pester and scam people around the globe this year — and they only got worse.

Users worldwide received 31.3 billion spam calls between January and October this year, up from 26 billion during the same period last year, and 17.7 billion the year prior, according to Stockholm-headquartered firm Truecaller .

The firm, best known for its caller ID app, estimated that an average American received 28.4 spam calls a month this year, up from 18.2 last year. And with 49.9 spam calls per user a month, up from an already alarming 45.6 figure last year, Brazil remained the worst impacted nation to spam calls, the firm said in its yearly report on the subject.

The coronavirus pandemic, however, lowered the spam call frequency in several markets, including India, which topped Truecaller’s chart for the worst nation affected three years ago. The nation, the biggest market of Truecaller, dropped to the 9th position on the chart this year with 16.8 monthly spam calls per user, down from 25.6 last year.

“The COVID-19 pandemic has directly and indirectly affected not only global economies and societies, but spammer behaviour. As the virus spread exponentially worldwide, spam calls started to decrease around March,” the report said.

“Spam reached its lowest point in April, when strict curfews and lock downs were implemented worldwide. The overall volume of calls also dipped during this period.
However, from this point, reports of scammers taking advantage of the uncertainty around the pandemic emerged. In May, spam calls started to pick up again and have
been increasing on average by 9.7% per month. October, with a record high in terms of spam calls, was 22.4% higher than the pre-lockdown period.”

Some other trends from the report:

• Just like us, spammers took time off from work on weekends, as can be seen in a global weekly reduction of spam calls on those days.
• Last year, the top 10 countries were dominated by the South American region. This year Chile, Peru and Colombia have seen a decrease in spam calls.
• A lot of European countries have surfaced on the list – Hungary, Poland, Spain, UK, Ukraine, Germany, Romania, Greece and Belgium. None of these countries were on the list last year.
• The biggest increase of spam calls comes from Europe and the US – where Hungary has seen the biggest jump (1132%), followed by Germany (685%), Belgium (557%) and Romania (395%).
• Indonesia (18.3), India (16.8), Vietnam (14.7) and Russia (14.3) are the most affected countries in Asia.
• An escalation of scam calls and robocalls around the world is expanding their share within the most common spam categories. Scammers taking advantage of the pandemic is a reason for the increase of scam calls.

In addition to bringing annoyance, these calls are also being used to scam people out of money. As many as 56 million Americans reported having lost money to phone scams this year, and an estimated $19.7 billion was lost to such calls, according to an earlier Truecaller report.

More to follow…

Young people have long been a prime, if especially careful, target for financial services companies: find the right and responsible way to connect with them, and you could have a good customer for many years. Today, one of the startups building services specifically for those under 18 is announcing a round of growth funding, money that it plans to use to continue building out its business in the US and UK. GoHenry, which provides a pre-paid debit card and corresponding app to minors as young as 6 and no older than 18 that in turn can be controlled and topped up by parents, has raised $40 million.

Led by Edison Partners, the round also had participation from Gaia Capital Partners, Citi Ventures (the strategic investment arm of Citi Bank), and Muse Capital.

GoHenry is not disclosing its valuation with this round, its first institutional fundraise. Prior to this, the startup had raised about $30 million from friends and family, and via equity crowdfunding. (GoHenry has some 5,000 shareholders as a result, it says, half of which are GoHenry customers.)

As another mark of its rise, GoHenry has been seeing some strong growth.

The startup now has 1.2 million members — a figure that includes both parents and children — and it has doubled its customer base annually for the last six years. It does not disclose how many of those members are parents and how many are children, nor whether the UK or US, the two markets where it is currently active, is the stronger.

In its home market of the UK, GoHenry said that parents paid in £98 million in pocket money in 2019, with their children getting more than £2.2 million for completing tasks around the house. GoHenry’s young users then spent just under £100 million towards the UK economy. (Its cards are personalized with users’ names, eg “GoIngrid” would be on mine, which is a great touch that probably resonates especially well with younger customers.)

And at a time where some companies such as retailers have really been feeling the pinch from the drop in consumer spending this year because of Covid, GoHenry said that it turned profitable in March of this year.

Banking with a purpose

GoHenry was conceived not just as a banking service for young people, but a banking service with a purpose.

There has traditionally been a division between how young people interface with money: it’s more about what parents pay them in cash, or that they might earn from informal work, with maybe a savings account in the wings where money as presents gets deposited. Although it’s gotten easier in very recent times, it used to be almost impossible to get a bank account or any kind of “banking services” like payment cards as a minor.

Yet these days, people under the age of 18 are just as likely as their parents to have a smartphone — and possibly more likely to experiment with a wider variety of apps and services.

GoHenry, founded in 2012 by Louise Hill (who is now the COO), saw that smartphone usage as an opportunity to build a financial service for those younger consumers, one that could serve as an entry point for financial education, getting those young people used to being responsible with money, and understanding the relationship between work and earning it. Not a full-fledged bank account, GoHenry has provided some of the building blocks that mimic how the “adult” world of making money, saving it, and spending it all work.

“For too long, kids have been locked out of the digital economy and parents lacked the tools to help their children gain confidence with money and finances. GoHenry was the first to respond to these needs in 2012 when we launched a groundbreaking financial education app and prepaid debit card that truly empowered children. In 2020, we’ve achieved three key milestones: becoming profitable which many B2C fintechs seek, raising $40m during Covid, and partnering with world leading funds. All three will help us fuel our US expansion.” says Alex Zivoder, CEO, GoHenry, in a statement.

The service is based around a pre-paid debit card that has more controls for parents than an ordinary pre-paid card: they can top up the amount with an allowance, but they can also limit where the card is used and for what, and how much is can be spent in a given period.

Parents can also get reports on how the money on the card is used (or not as the case may be). There is no facility to go overdrawn and into the red on spending. The child’s app, meanwhile, not only gives the young person a way of checking the balance on the card, but also lets the parents set up tasks that the kids can do and check off to “earn” more money.

All of this comes at a price: after a one-month free trial, members pay $3.99 per month for the basic service, with different charges for other transactions, such as when the card is used abroad, or if a parent tops up the account with a debit card instead of a direct transfer from a bank account.

GoHenry is not alone in building banking apps for those under 18. In fact, in recent times there’s been a big rush of launches and funding for startups that have set out to do precisely that. They include teen banking app Step, which most recently raised $50 million earlier this month; Kard, which launched last year in France; Revolut, the challenger bank that recently launched “Revolut Junior”; PayPal’s Venmo, which prototyped a payment card for teenagers earlier this year; and Current, which started out also targeting teens but now has widened that out to any groups that are currently underserved by other banks. To that end, Current raised $131 million a few weeks ago.

GoHenry has some key differences in comparison with those. In addition to this not being a full banking app, perhaps even more notable is that GoHenry doesn’t seem to have any strategy at the moment for holding on to younger customers after they turn 18.

“Right now we are 100% focused on helping kids and teens aged 6-18 years old gain confidence in managing money and learning about finances,” said a spokesperson. In an industry — retail banking — that suffers from a lot of churn as customers migrate quickly from one service to another, it’s interesting (and a little refreshing, since these are kids we are talking about) to see a company that might build strong relationships but not try to leverage that for more business down the line.

“GoHenry is catering to millions of parents who are looking to raise smart, financially literate children but are currently underserved by existing solutions,” said Chris Sugden, managing partner, Edison Partners. “We’re thrilled to partner with Alex and the GoHenry management team on this next milestone in their growth journey and look forward to realizing their ambitions to improve the financial fitness of kids across the globe.” Sugden is joining the board with this round, along with Dawn Zier, a veteran CEO and marketing expert.

Getsafe, the digital-first insurance startup that initially launched with an app for home contents insurance, has closed $30 million in Series B funding.

Swiss Re, the reinsurer giant, led the round. Existing investors, including Earlybird and CommerzVentures, also participated. Getsafe has raised a total of $53 million to date since being founded in May 2015.

The company says it plans to extend its Series B funding with a second tranche to be closed ahead of the company launching products powered by its own insurance licence, scheduled for the first half of 2021.

Pitching itself as a digital insurer aimed at millennials, Getsafe’s first product offers flexible home contents insurance, along with other “modules,” such as personal possessions cover (which insures possessions out of home) and accidental damage cover. Available in the U.K. and Germany and delivered via an easy to use app, the idea is that you build and only pay for the exact cover you need.

Co-founder and CEO Christian Wiens tells me Getsafe currently has 150,000 active customers and that 90 percent of Getsafe users buy insurance for the first time. “We sell more policies to first-time insurance buyers in Germany than incumbents like Allianz, Axa, Zurich, etc,” he says.

Asked why Getsafe is moving to its own insurance license, Wiens says it will enable the insurtech to innovate with new products faster. “It’s better to have an insurance license, acting as a broker creates no innovation,” he says, adding that insurance is a “marathon” and a long term play.

“We hoped to navigate regulation faster and be able to use more existing software, but needed to build most tech from the ground up,” says Wiens.

Meanwhile, the new partnership between Getsafe and Swiss Re is already bearing fruit. Last month, the pair launched digital car insurance optimised for smartphones. “With just a few clicks, users can purchase insurance with the Getsafe app, file a claim, and manage their policy in real time”.

“You can cancel or discontinue the coverage any time e.g. if you don’t use the car in winter months or during summer holidays, just switch it off,” explains the Getsafe CEO.

You can also add up to five co-drivers to your coverage for free in the app. “In 2021, we plan to test driving behaviour based pricing,” adds Wiens. “We [will] track your driving with the app and you save money if you drive safely”.

Another federal judge has issued a preliminary injunction against U.S. government restrictions that would have effectively banned TikTok from operating in the United States.

The ruling (embedded below) was made by U.S. District Court Judge Carl Nichols in a lawsuit filed by TikTok and ByteDance against President Donald Trump, Secretary of Commerce Wilbur Ross and the Commerce Department. Judge Nichols wrote the government “likely exceeded IEEPA’s [the International Emergency Economic Powers Act] express limitations as part of an agency action that was arbitrary and capricious.”

This is the second time a federal judge has issued an injunction against Trump administration restrictions that would have prevented U.S. companies, including internet hosting services, from transactions with TikTok and ByteDance. The first injunction was granted in October by U.S. District Court Judge Wendy Beetlestone, in a separate lawsuit brought against the President Trump and the U.S. Commerce Department by three TikTok creators.

Both lawsuits challenge an executive order signed by President Trump on August 7, banning transactions with ByteDance. The order cited both the IEEPA and National Emergencies Act, claiming TikTok posed a national security threat because of its ownership by a Chinese company.

In today’s ruling, Judge Nichols wrote TikTok and ByteDance are likely to succeed in their claims that Secretary Ross’ prohibitions against TikTok and ByteDance, which were originally supposed to go into effect on November 12, violated limits in the IEEPA and the Administrative Procedures Act.

The Commerce Department already issued a notice last month saying it will comply with Judge Beetlestone’s injunction pending further legal developments.

ByteDance is also facing a divestiture order that would force it to sell TikTok’s U.S. operations. While it has reached a proposed agreement with Oracle and Walmart, ByteDance also asked the federal appeals court to vacate the order last month. On November 26, the Trump administration extended the order’s deadline to December 4, but allowed it to lapse without setting a new one.

In an email to TechCrunch, a TikTok spokesperson said, “We’re pleased that the court agreed with us and granted a preliminary injunction against all the prohibitions of the Executive Order. We’re focused on continuing to build TikTok as the home that 100 million Americans, including families and small businesses, rely upon for expression, connection, economic livelihood, and true joy.”

TechCrunch has also contacted the Commerce Department for comment.

To keep track of the often overlapping developments in ByteDance and TikTok’s fight with the U.S. government, we have compiled a comprehensive timeline and will keep it updated.

TikTok vs Trump Injunction by TechCrunch on Scribd