June 11, 2024

AI and jobs

Hi there, 

Klarna is shrinking its number of employees by 20% per year and has stopped recruitment.

Here’s a clip of the buy now, pay later company’s CEO Sebastian Siemiatkowski describing AI’s impact on its hiring efforts:  

We are starting to see it in the headcount data on CB Insights.

June 2022: 6,917 employees

April 2024: 5,303 employees

In February, the buy now, pay later company announced its OpenAI-powered AI assistant was doing the work of 700 full-time customer service agents after being live for one month. 

The assistant is expected to deliver $40M in annual savings.

Klarna is applying this approach more broadly as it focuses on reducing costs. It cut its operating expenses by 11% year-over-year in Q1’24, which it attributed to AI. 

Beyond customer service, it's leveraging the tech for marketing purposes. The company reported last month that it cut its marketing agency spend by 25% as well as reduced its image production costs by $6M using genAI tools.

CB Insights customers can see more on genAI’s applications in financial services here.

The caveat

Klarna is preparing to IPO and so a lot of this may be marketing for that. 

Being a financial services company powered by AI is probably seen by the firm as being additive to its IPO story.

The company took an 85% haircut on its 2021 valuation in a private equity-led round in 2022, but nonetheless, it’ll be a notable European IPO when it does happen.

Heard on the street

Klarna’s rival Affirm, which went public in 2021 at an $11.9B valuation and which today has a $10.3B market cap, is also investing in AI for customer support.

CEO Max Levchin emphasized on Affirm's latest earnings call that the company has been more quiet on its AI strategy. He took a subtle dig at Klarna by saying that much of the industry is in “pure PR” mode right now.

Levchin noted Affirm has been investing “heavily in this idea that Gen Z consumers really love chatting” and “have no problem chatting with an AI.”

CB Insights customers can access the full earnings call transcript and analysis here. 

Affirm still calls the applications “early” and has not laid off any employees (so no short-term cost savings), but it anticipates savings in the coming years as it scales its base.

Both companies are still working toward annual profitability. 

Affirm’s quarterly losses have been declining, while Klarna reported an adjusted profit in the first quarter. 

I love you.

Anand

@asanwal 

P.S. Get a free databook download on Klarna and 1,200+ unicorn companies here. 

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