How Sequoia Turned a $13 Million Bet Into $3.5 Billion

Klarna hit the NYSE last week at a $15 billion valuation, with shares popping 30% from their $40 offering price to open at $52—but the real story is Sequoia Capital's 23% stake worth $3.5 billion, validating the firm's contrarian 2010 bet when everyone else passed. The Swedish fintech raised $1.4 billion, though only $200 million went to Klarna itself while early investors cashed out $1.2 billion, marking a pivotal moment for European fintech's American ambitions.

CEO Sebastian Siemiatkowski, now worth $1.02 billion, didn't sell a single share—a signal that the 20-year journey from Stockholm rejects to Wall Street validation is just beginning. With Sequoia controlling nearly a quarter of the company after Michael Moritz's legendary first check 15 years ago, the IPO demonstrates how patient capital and European innovation can challenge American payment giants on their home turf.

The Numbers Behind the Pop

Klarna's IPO mechanics reveal sophisticated financial engineering designed to maximize valuation while rewarding long-term believers. Selling 34.3 million shares with only 5 million from the company treasury ensures minimal dilution while creating sufficient float to attract institutional investors who need $100+ million positions to move their portfolios.

The $40 pricing above the $35-37 range signals strong demand, while the immediate pop to $52 (settling to $46) created $3.5 billion in paper gains for holders in the first trading hour. This 30% first-day gain outperforms the 2024 IPO average of 18%, suggesting the market sees upside beyond the initial valuation.

Sequoia's 23% stake, worth $3.5 billion at current prices, represents a 270x return on their estimated $13 million initial investment—among the best venture returns this decade. Even after selling some shares, Sequoia retains the majority of its position, betting Klarna can reach $50+ billion valuation as it expands beyond buy-now-pay-later into full-service banking.

Why Existing Investors Dominated the Offering

The unusual structure—where existing investors sold 85% of IPO shares—reflects a calculated strategy to achieve optimal pricing. As one VC explained, early investors often contribute shares not because they want to sell at IPO prices, but to ensure sufficient float attracts tier-one institutional buyers like Fidelity and BlackRock who won't participate in sub-$1 billion offerings.

This approach, similar to Figma's IPO strategy, creates a virtuous cycle: more shares available means larger allocations for major funds, driving competitive bidding that pushes pricing higher, benefiting all shareholders including those not selling. The $1.2 billion in secondary sales provides liquidity for early employees and angels while maintaining insider confidence through retained majority stakes.

Notable sellers included entities controlled by Dutch billionaire Anders Holch Povlsen, Silver Lake, and BlackRock—yet all kept most of their holdings, signaling belief in continued appreciation. Co-founder Victor Jacobsson cashed out $44 million (1.1 million shares) but retained 8% of the company worth $1.2 billion, balancing liquidity with upside exposure.

Siemiatkowski's Billion-Dollar Conviction

CEO Sebastian Siemiatkowski's decision to hold all shares speaks volumes. His 7.5% stake, worth $1.02 billion at IPO and $1.15 billion at current trading, represents one of Europe's great founder wealth creation stories. "When we started Klarna back in 2005, it was just a wild idea," he reflected. "We got rejected left and right, laughed at more times than I can count."

That persistence through rejection mirrors Klarna's broader journey. The company survived the 2008 financial crisis, pivoted from European markets to global expansion, and navigated the 2022 fintech crash that saw its valuation plummet from $46 billion to $6.7 billion. The IPO at $15 billion represents recovery but remains below peak levels—suggesting significant upside if execution continues.

The founder dynamics reveal interesting tensions. Jacobsson, who left in 2012, remains the largest founder-shareholder at 8%+, having monetized $44 million while retaining more than Siemiatkowski. Niklas Adalberth holds just under 3 million shares worth $120 million, completing the Swedish trio that challenged global payments.

Sequoia's Masterclass in Venture Patience

Michael Moritz's 2010 investment in Klarna stands as one of venture capital's great contrarian bets. When American VCs focused on Silicon Valley, Moritz flew to Stockholm, writing Sequoia's first European check for a payments company everyone else rejected. His 15-year involvement, including staying as chairman after leaving Sequoia in 2023, demonstrates the relationship depth that generates outsized returns.

The boardroom drama when Sequoia added Andrew Reed in 2024 while Moritz remained chairman highlighted the delicate balance of founder-investor relations at scale. Yet the successful IPO validates Sequoia's approach: patient capital, active governance, and letting founders run their vision while providing strategic support.

Sequoia's 23% stake makes Klarna one of the firm's most successful investments ever, joining WhatsApp (22x return), Airbnb (600x), and Stripe (still private but valued at $65 billion). The Swedish success proves Sequoia's global thesis—exceptional companies emerge anywhere, requiring VCs to compete worldwide rather than within Sand Hill Road's five-mile radius.

Market Context and Competition

Klarna's $1.4 billion raise falls just short of 2025's record—CoreWeave's $1.5 billion in June—but represents the year's first major fintech IPO, potentially opening floodgates for Stripe, Chime, and others waiting in the wings. The successful pricing suggests public market appetite for profitable fintech has returned after 2022's crash.

The $15 billion valuation prices Klarna at roughly 3x its estimated $5 billion in gross merchandise volume, in line with PayPal's 2.8x and Block's 3.2x multiples. This suggests the market views Klarna as a payments platform rather than just BNPL, validating its expansion into banking, savings accounts, and cashback rewards.

Competition intensifies post-IPO. Apple's entry into BNPL, PayPal's expansion, and traditional banks launching competing products mean Klarna must execute flawlessly to justify growth multiples. The public market scrutiny adds pressure—quarterly earnings replace patient private capital, forcing shorter-term thinking that could conflict with long-term platform building.

The Path Forward

Klarna's successful IPO at $15 billion, while below its $46 billion peak, establishes a public market floor for European fintech valuations. The strong first-day performance suggests investors believe the company can reach previous highs as BNPL adoption accelerates and banking features gain traction.

For Sequoia, the IPO validates their global expansion thesis while generating returns that justify LP patience. For Siemiatkowski, public markets provide currency for acquisitions and validation after years of skeptics. For European startups, Klarna proves that building globally competitive companies from Stockholm is possible—even if listing still requires the NYSE.

"Going public in New York is huge," Siemiatkowski noted. "It's proof that a bunch of stubborn dreamers from Stockholm can take on the world—and win." With $15 billion in market cap and growing, that dream has become Wall Street reality.