Inside Flat Capital, the little-known investment company founded by Klarna CEO Sebastian Siemiatkowski

Sebastian Siemiatkowski certainly knows how to make investors swoon. With an eye-popping $45.6 billion valuation, Klarna is Europe’s most valuable fintech firm and is the biggest player in the market for buy now pay later (BNPL) — a checkout credit option where users can delay payment or split payments interest-free.

But what does he know about investment himself — particularly in high-growth companies and assets? In 2013, Siemiatkowski and his wife Nina quietly set up an investment firm, initially named Rockwood AB.

This evolved into what is known today as Flat Capital. It most recently invested close to $2 million into chat platform Discord and currently boasts a net asset value of $35.9 million. 

“At its founding, it wasn't a professional investment process from what I understand,” explains Flat Capital CEO Hanna Wachtmeister in her first English-language interview since joining in July. “It was 100% owned by Nina and Sebastian — more like a shelf to put their investments into a structured portfolio.” 

The Siemiatkowskis were and continue to be the primary shareholders of Flat Capital. Sebastian owns 15.8% of the share capital personally and 29.1% through a company named Double Sunday IV AB, while his wife Nina owns 16.8%.

Yet Wachtmeister wouldn’t class it as a family office akin to the one recently set up by fintech founder Nikolay Storonsky, CEO of Revolut. 

“It's not like what Sebastian feels like doing,” she explains. “It's much more professional than that.”

She admits, however, that it does fulfill the definition of a family office in that it looks after the wealth of high net worth individuals: the Siemiatkowskis. 

Crypto? No thank you 

Family offices are increasingly warming towards digital assets. Last month, a BNY Mellon Wealth Management survey found that more than three-quarters of surveyed family offices see the benefit of crypto as an investment opportunity. 

But judging by Siemiatkowski’s comments during a Flat Capital shareholder livestream on March 8 attended by The Block, it isn’t looking to get in on the crypto hype anytime soon. 

“I've tried to give it a chance but I'm not a big fan,” he said. “We attempted to apply the technology within Klarna as well but it's just not solving a real problem for consumers at this point in time.” 

Alongside citing bitcoin’s electricity consumption and the “regulatory twilight zone” that he believes has allowed it to prosper through avoiding AML and KYC restrictions, Siemiatkowski also criticized how it could potentially be used to avoid sanctions in the Russia-Ukraine conflict.  

“How can this religious sect that has supported cryptocurrencies defend the fact that it could be potentially used to avoid the sanctions against Russia?” he asked. “That’s my question: what are the actions that they’re going to take to make sure to curb that?”

Cryptocurrency exchanges have been widely criticized for continuing to operate in Russia. Binance founder Changpeng Zhao, for example, has so far refused a blanket ban on Russian transactions — despite the fact that Russian Ruble trading pair volumes increased in the aftermath of the invasion, according to findings from The Block Research.

Whilst most crypto founders are complying with sanctions on individuals, many say a country-wide ban would undermine the very reason that crypto exists.

But their arguments leave a bitter taste in Siemiatkowski’s mouth. “[Crypto] is not my flavor,” he said. “I’d rather hold stock or a painting of Rembrandt.” 

His latest comments on crypto arguably make him an outlier in fintech, a sector that’s slowly coming around to a future underpinned by crypto. 

Monzo founder Tom Blomfield recently admitted to The Block that he regrets not exploring crypto before stepping down as CEO. 

A look into the numbers behind Flat

Flat’s performance thus far has been typical of an early-stage investor.

According to a pre-IPO investor teaser, it made a 19.1 times return on its $63,000 investment in TrueCaller and a 24.6 times return on its $289,000 stake in logistics tech Budbee — but it’s also had some misfires. Three companies — which Wachtmeister refused to name — that it invested a total of approximately $159,000 in have since folded.

“We basically wrote down these companies to zero,” she says.

There were also some that the Siemiatkowskis wanted to hold on to for longer — a stake in fashion resale app Depop, for instance. 

“Sebastian said that they were actually a bit disappointed it was acquired as they really liked the company,” says Wachtmeister, saying that they only made close to a $1 million return. “Depop was part of the previous portfolio when it was 100% owned by Nina and Sebastian.”

Flat has since transformed into an entity with multiple shareholders which appears to have been a catalyst for it to up the ante. 

Now, Flat is investing in companies into which VCs have already poured millions. Later this quarter, the company is set to invest $4.9 million into Turkey’s Getir, the buzzy ten-minute delivery app that is said to be seeking a $12 billion valuation. 

It’s also not a coincidence that Flat finds itself on the same cap table as Klarna’s chairman Michael Moritz, Sequoia partner and investor in Getir. Wachtmeister says that much of Flat’s deal-flow is sourced via the Siemiatkowskis’ strong network of entrepreneurs and VCs, including Moritz.

The public family

Another quirk of Flat’s is that it became public late last year — an unusual move for a company with founders who are worth billions. Access to capital clearly shouldn’t be an issue, then. 

Wachtmeister, who was brought in to steer the listing, says that the primary reason for going public was to raise capital to meet a busy pipeline of investments, as well as to enable retail investors to get access to deals that are usually the domain of private investors. 

But being public also means the Swedish public can indirectly get exposure to Flat’s portfolio companies, which include Klarna. Flat owns approximately an $8 million stake in the BNPL company. By proxy, Swedish investors can therefore gain exposure to Europe’s most valuable fintech firm. 

Klarna is reportedly chasing fresh funding at a $60 billion valuation and is ultimately expected to go public itself. 

Flat’s Wachtmeister and Siemiatkowski both declined to confirm whether the investment company serves as a way for the Klarna boss to experiment with running a public company ahead of the BNPL giant’s own listing. Watchtmeister acknowledged, though, that “he has learned a lot through its listing, we all have.” 

A difference in opinion 

Apart from fending off questions about Klarna’s long-awaited IPO — ”the most common question I get is what's your view on the timing of the Klarna IPO? Is it gonna be listed in Sweden or in the US? Blah, blah, blah” — Wachtmeister is currently focusing on raising. 

Flat recently wrapped up the trading period for a $20 million rights issue to finance its upcoming investments. The outcome will be announced on March 21. 

Whilst she declined to share which startups the fresh funds would go to, Wachtmeister appears more open to web3 than Flat’s founder. 

“My view is that I really believe in the technology behind crypto and I think it's here to stay,” she says. “But we don't have that expertise to really make the right bet. And I think there will be some sort of regulation put in place that might wipe out a lot of players.” 

“So as of today, I'm not looking at crypto but that might change in the future, who knows?” 

All currency conversions from SEK to USD have been done at the rate available on March 16, 2022.  

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