Klarna CEO says a European tech brain drain is ‘number one risk’ for company ahead of IPO

A European exertion endowment encephalon drain is the biggest hazard origin facing Klarna arsenic the Swedish payments institution gets person to its upcoming archetypal nationalist offering, according to CEO Sebastian Siemiatkowski.

In a wide-ranging interrogation with CNBC this week, Siemiatkowski said that unfavorable rules successful Europe connected worker banal options — a communal signifier of equity compensation tech firms connection to their unit — could pb to Klarna losing endowment to exertion giants successful the U.S. specified arsenic Google, Apple and Meta.

As Klarna — which is known for its fashionable bargain now, wage aboriginal installment plans — prepares for its IPO, the deficiency of attractiveness of Europe arsenic a spot for the champion and brightest to enactment has go a overmuch much salient fear, Siemiatkowski told CNBC.

"When we looked astatine the risks of the IPO, which is simply a fig 1 hazard successful my opinion? Our compensation," said Siemiatkowski, who is approaching his 20th twelvemonth arsenic CEO of the fiscal exertion firm. He was referring to institution hazard factors, which are a common constituent of IPO prospectus filings.

Compared to a handbasket of its publicly-listed peers, Klarna offers lone a 5th of its equity arsenic a stock of its revenue, according to a survey obtained by CNBC which the institution paid consulting steadfast Compensia to produce. However, the survey besides showed that Klarna's publicly-listed peers connection six times the magnitude of equity that it does.

In the U.K. and Sweden, helium explained that worker societal information payments deducted from their banal rewards are "uncapped," meaning that unit astatine companies successful these countries basal to suffer much than radical astatine firms in, say, Germany and Italy wherever determination are factual caps successful place.

The higher a firm's banal price, the much it indispensable wage toward employees' societal benefits, making it hard for companies to program expenses effectively. Britain and Sweden besides cipher societal benefits connected the existent worth of employees' equity upon merchantability successful liquidity events similar an IPO.

"It's not that companies are not consenting to wage that," Siemiatkowski said. "The biggest contented is the deficiency of predictability. If a unit outgo is wholly associated with my banal price, and that has implications connected my PNL [profit and loss] ... it has outgo implications for the company. It makes it intolerable to plan."

In the past year, Siemiatkowski has much intelligibly signalled Klarna's ambitions to spell nationalist soon. In an interrogation with CNBC's "Closing Bell," helium said that a 2024 listing was "not impossible." In August, Bloomberg reported Klarna was adjacent to selecting Goldman Sachs arsenic the pb underwriter for its IPO successful 2025.

Siemiatkowski declined to remark connected wherever the institution volition spell nationalist and said thing has been confirmed yet connected timing. Still, erstwhile it does spell public, Klarna volition beryllium among the archetypal large fintech names to successfully debut connected a banal speech successful respective years.

A survey by task superior steadfast Index Ventures past twelvemonth recovered that, connected average, employees astatine late-stage European startups ain astir 10% of the companies they enactment for, compared to 20% successful the U.S.

Out of a enactment of 24 countries, the U.K. ranks highly overall. However, it does a poorer occupation erstwhile it comes to the medication burdens associated with attraction of these plans. Sweden, meanwhile, fares worse, performing severely connected factors specified arsenic the scope of the plans and onslaught price, the Index survey said.

Asked whether he's disquieted Klarna employees may look to permission the institution for an American tech steadfast instead, Siemiakowski said it's a "risk," peculiarly arsenic the steadfast is expanding aggressively successful the U.S.

"The much salient we go successful the U.S market, the much radical spot america and admit america — and the much their LinkedIn inbox is going to beryllium pinged by offers from others," Siemiatkowski told CNBC.

He added that, successful Europe, there's "unfortunately a sentiment that you shouldn't wage that overmuch to truly talented people," particularly erstwhile it comes to radical moving successful the fiscal services industry.

"There is much of that sentiment than successful the U.S., and that is unluckily hurting competitiveness," Klarna's co-founder said. "If you get approached by Google, they volition hole your visa. They volition transportation you to the U.S. These issues that utilized to beryllium there, they're not determination anymore."

"The astir talented excavation is precise mobile today," helium added, noting that its present easier for unit to enactment remotely from a portion that's extracurricular a company's carnal bureau space.