20VC Klarna Founder Sebastian Siemiatkowski on Scaling Europe's Most Valuable Private Tech Company, How To Motivate and Challenge Your Team Most Effectively & The Biggest Lessons From Working with Mike Moritz

In this episode of "20 VC," host Harry Stebbings interviews Sebastian, the founder and CEO of Klarna, Europe's most valuable private technology company specializing in online shopping payment solutions. Sebastian shares his journey from a modest upbringing with immigrant parents to raising over $2.1 billion for Klarna, now boasting 3500 employees. His candid discussion touches on the challenges of co-founding, management philosophy, the importance of creating a supportive yet challenging work environment, and Klarna's ambition to transform the retail banking industry. The episode also features endorsements of various platforms such as AngelList, Letter, and Terminal, which aid investors and companies in managing investments, banking, and building remote tech teams. Sebastian's personal story of resilience, entrepreneurial spirit, and vision for Klarna's future in a changing industry takes center stage in this insightful conversation.

• Sebastian, the founder and CEO of Klarna, is the guest on the 20vc podcast hosted by Harry Stebbings.
• Klarna is Europe's most valuable private technology company, simplifying online shopping with a "buy now, pay later" model.
• Sebastian has raised over $2.1 billion from investors including Sequoia, Silver Lake, and Blackrock.
• Klarna has experienced a 16-year journey of growth, now employing over 3500 people.

"So that was obviously super exciting for me. But then the show started and wow. Sebastian's openness, vulnerability and bluntly, humility I think makes this one of the best shows that we've done."

The host, Harry Stebbings, expresses his excitement about the show due to Sebastian's characteristics of openness, vulnerability, and humility, which he believes makes the episode particularly special.

• Sebastian has always been interested in entrepreneurship, inspired by figures like Richard Branson and Ingvar Kamprad.
• He started a radio station in high school and engaged in various projects and ideas.
• A trip around the world without flying led to a sabbatical year in Australia, followed by work at a debt company where Sebastian learned about payments.
• The experience at the debt company sparked the idea for Klarna.

"And then eventually one of the crazy things I did is I took one of my co-founders and we went together on this trip around the world without flying."

Sebastian discusses a significant experience that contributed to his entrepreneurial journey and eventually led to the founding of Klarna.

• Sebastian is an immigrant child with parents who were political and economic refugees from Poland.
• His family faced financial struggles and modest upbringing, which influenced his drive to succeed.
• The emotional desire to improve his family's financial standing and to make right what seemed unfair was a significant motivator.
• Sebastian's parents divorced when he was eight, which impacted his sense of responsibility and drive.

"So I guess it's a typical story in the sense that you grow up and you see your parents struggle, and you have an academical, intellectual background and capacity, and you just want to make right what you feel to some degree is unfair."

Sebastian shares how his family's struggles and background influenced his drive to succeed and create something meaningful.

• Growing up in a challenging environment with a father who struggled with unemployment and drinking, Sebastian felt a need to take on responsibility.
• These experiences may have led him to mature faster than his peers.
• He reflects on his childhood with the understanding that his experiences were not typical and acknowledges the relative nature of hardships.

"But now as I look back, I'm like, whoa, you know what? That kind of the things that I went through, they weren't necessarily kind of what the average kid gets, if you see what I mean."

Sebastian reflects on his childhood and realizes that his experiences were more challenging than those of the average child.

• Sebastian's management philosophy has evolved over the 16 years since founding Klarna.
• Initially, he received both poor and good advice, but always maintained a willingness to listen and learn.
• He often assumes that other companies are smarter and better, which drives him to continuously improve.
• Sebastian emphasizes the importance of focusing on what he could do differently to learn and develop faster, rather than dwelling on others' actions.

"And this is something that still frustrates some of the people around me. I always assume that all the other companies out there are much smarter, much better than us and do everything in a much better way."

Sebastian describes his approach to learning and self-improvement, which involves assuming that other companies may be doing things better, prompting him to continually seek improvement.

• Sebastian discusses his 16-year journey of learning and experimenting with management styles.
• He emphasizes the importance of keeping an organization agile and fostering a fast-learning environment.
• Accountability, encouragement, and support are key aspects of creating a productive workplace.
• He believes in the concept of the learning curve, where optimal challenge leads to the fastest learning.
• The goal is to create an environment similar to his children's swim teacher, Pietra, who pushes them to the point of almost giving up but still encourages learning.
• The ultimate aim is to have a positive impact on customers, merchants, partners, society, or the company.

"So I think that from my management style, what I've been trying to do over these 16 years is learn and test a lot of things, like as an organization, how do we keep agile? How do we keep fast moving?"

This quote summarizes Sebastian's approach to management, focusing on agility and continuous learning within the organization.

"And I've come to believe more and more in this kind of curve... That's exactly it."

Sebastian endorses the learning curve philosophy, where being challenged just enough leads to optimal learning and growth.

"But just establishing that we're going to do something good is fairly easy. How you do it is what's difficult, right?"

This quote highlights the challenge in not just setting good intentions but also finding the right methods to achieve them effectively.

• Hiring the best people is a widely accepted concept, but the challenge lies in the actual process of finding, identifying, and interviewing candidates.
• Once a successful hiring methodology is found, the next challenge is to scale this process within the organization.
• Creating a system that works repeatedly is essential for fostering and developing talent on a larger scale.

"It's not hard to conclude that I need to hire the best people. It's just a saying. But what's difficult is how do you actually do that?"

Sebastian points out that while the idea of hiring the best people is simple, the execution is much more complex.

"Once you've done it once and you learned how to do that and you found a methodology that allows you to identify great talent, to foster great talent, to challenge talent and develop talent, how do you then do that at scale?"

This quote emphasizes the need for a scalable system in talent management, which can consistently produce results as the organization grows.

• Sebastian explores what truly motivates people at work, looking beyond the concept of a higher purpose.
• He draws parallels between sports and work environments, noting the clear roles, team efforts, and rules that make sports engaging.
• In contrast, companies often lack these motivating factors, allowing for career advancement without meaningful contribution.
• Establishing essential building blocks in the workplace is crucial before adding a sense of purpose and societal contribution.

"But before you even get to that level, we have to ask ourselves, like, what is it really that makes people motivated and enjoy themselves?"

Sebastian questions the fundamental factors that drive motivation and enjoyment in the workplace.

"So there's all these things that sports have and games have that makes it motivating. And these essential building blocks have to be on place first."

The quote suggests that companies should incorporate motivating factors present in sports, such as clear objectives and fair play, before focusing on a higher purpose.

• Recognizing when an employee is at their limit is crucial to prevent burnout and maintain productivity.
• Management requires empathy, observation, and understanding individual situations.
• There is no single management technique; it's about adapting to the situation and individual needs.
• Management should be tailored, with approaches ranging from coaching to instructing based on the employee's state.

"And I think, obviously, that's one of the things that I have had to learn over time... But a lot of it is empathy. It's the ability to look at people and read them and try to understand and ask them questions and understand where they are."

Sebastian acknowledges the importance of empathy and personalized management in understanding when an employee is at their limit.

• The transition from multiple founders to a single leader can be complex and emotional.
• Sebastian shares the natural exit of one founder, Victor, and the more challenging departure of Nicholas.
• Relationship dynamics between founders can create ambiguity and affect the organization.
• Clarity and a unified direction are beneficial post-transition, as seen in Sebastian's experience.

"And the problem with that is that in an organization, if you have that situation, what ends up happening?"

Sebastian discusses the complications that arise when founders have relationship issues, affecting the entire organization.

"So it made it better. If me and Nicholas would have been able to, at that point in time, repair a relationship and get to a better place... But in this case, it happened like this."

The quote reflects on the potential for a different outcome had the relationship between the founders been repaired, but acknowledges the reality of the situation.

• Self-doubt is not inherently negative; it can signify a healthy reflection on decisions and actions.
• Continuously questioning oneself is part of ensuring that one is on the right path.

"I think self doubt is not nothing. It's not a bad thing, right? It's a very healthy thing."

Sebastian views self-doubt as a positive, reflective process that can lead to better decision-making.

• Self-doubt is seen as a positive sign of reflection and learning from actions.
• It is suggested that one should embrace self-doubt as it contributes to personal improvement.

I'm much more worried when people tell me they have no self doubt, and then I'm like, because that means that you're not really reflecting on your actions and you're not learning from them.

This quote emphasizes the importance of self-doubt in the process of self-reflection and learning, suggesting that the absence of self-doubt may indicate a lack of personal growth.

• Klarna experimented with various office perks and realized they were not effective in maintaining culture.
• A new management team led to a structured approach inspired by Netflix and Amazon.
• Klarna implemented small, cross-competent teams with clear KPIs, vision, and accountability.
• The company culture allows for flexibility and organic team changes, separating this from promotions and salaries.
• The structure was inverted to prioritize frontline teams over management, simplifying complexity for workers.

We created the idea of small startups, eight people in each team, two pizza teams with a cross competence background, preferably.

This quote describes Klarna's strategy of creating small, cross-functional teams to foster a startup-like culture within the larger company, aiming to maintain high performance and agility.

• Effective leaders can handle more direct reports, but the number varies depending on the company's phase and leadership quality.
• Managers are expected to handle complexity and support their teams.
• The company culture should encourage transparency about failures and challenges.

That's why we're getting a good salary, because we need to manage that complexity and we need to challenge these teams and we need to provide them guidance and help them be successful.

This quote highlights the role of managers in navigating the complexities of the company to support their teams, justifying their compensation based on their ability to handle these challenges.

• Creating a culture where failure is accepted but not encouraged is challenging.
• Emphasizing vulnerability and support for those who admit mistakes is important.
• The goal is to foster an environment where fast learning and emotional investment do not lead to fear of failure.

I don't think I have the perfect answer to your question. I think what we've been trying to do is trying to encourage people and highlight people who dare to challenge people who dare to share their mistakes and celebrate when people are open and frank and say, look, I did this and I think I could have done this better, and so forth.

This quote reflects on the ongoing challenge of creating a company culture that balances high ambition with the acceptance of failure, by encouraging openness and learning from mistakes.

• The relationship to money is complex and evolves with financial success.
• Financial freedom can remove certain life stresses but does not guarantee happiness.
• Money's impact on happiness is nuanced, providing freedom but not solving all problems.

But at the same point of time when I am really tired and I've had a tough work at week I don't go home and worry about my bills and if I want to I put the kids on a plane and we fly to some nice place at least before COVID And that's just so easy to forget what an immense freedom that is.

This quote reflects on the privileges that financial security can bring, such as the ability to travel and not worry about bills, acknowledging that this freedom is a significant aspect of one's relationship with money.

• Wealth can lead to a disconnection from the experiences and challenges of normal life.
• People with money may forget what life was like before their wealth.

"I don't really like when people with money say that. I think it's a little bit like they've lost their understanding of what normal life used to be."

This quote emphasizes the speaker's discomfort with wealthy individuals who seem to have lost touch with the realities of everyday life for most people.

• As a leader of a large organization, one must be careful with their words as they carry significant weight.
• Leaders need to ensure their statements are open to discussion and are not seen as absolute.

"As a leader of 3000 people your words have a lot of weight and carry a lot of significance."

The quote underlines the importance of a leader's words and the impact they can have within an organization.

• Leaders can influence the mood of their team, sometimes unintentionally due to their own emotional state.
• Being open about one's feelings can help team members understand the leader's behavior and not take it personally.

"I try to at least tell people that if I go into a meeting, I'm just like, guys, just so you know, I had a quarrel with my wife this morning, or my kids were all over me or I didn't sleep anything tonight or whatever."

This quote shows how the speaker practices vulnerability by sharing personal struggles with their team to provide context for their behavior, fostering a more understanding work environment.

• A CEO must be self-aware and open to discussing their vulnerabilities.
• Self-awareness is a trait that is appreciated and can distinguish a CEO.

"I think you're probably one of the most open and self aware ceos I've ever had on the show, which had a 2000 shows."

The quote praises the CEO for their openness and self-awareness, qualities that are recognized as valuable and somewhat rare in leaders.

• Personal favorites, such as books, can provide insight into a leader's character and inspirations.
• Leaders draw lessons and inspiration from various sources, including literature.

"The favorite book is the never ending story. I read it for my seven years old and I weeped so much."

This quote shares a personal favorite book, indicating its emotional impact on the speaker and suggesting the value they place on storytelling and perhaps imagination.

• Time management remains a challenge for leaders, even with years of experience.
• Leaders continuously learn and evolve, and there is no perfect formula for managing responsibilities.

"The hardest element today is just still managing my calendar and understanding what I'm supposed to spend most time on."

The quote reflects the ongoing struggle with time management and prioritization that persists even for experienced leaders.

• Leaders often wish for their children to strive for excellence in whatever they choose to do.
• The pursuit of excellence is seen as a source of fulfillment and happiness.

"Whatever you are, be a great one."

This quote expresses the speaker's desire for their children to excel and find success and satisfaction in their endeavors.

• Some leaders have the ability to disconnect and rest well despite the pressures of their role.
• Good sleep is considered a luxury and an advantage for leaders.

"I don't stay up at night. I sleep so extremely well."

The speaker shares their personal experience with sleep, highlighting it as a strength and contrasting it with the common narrative of leaders struggling with sleep due to stress.

• The relationship between a CEO and board members can be pivotal to a company's success.
• Trust and support from board members are crucial for a CEO's confidence and ability to lead effectively.

"Michael Moritz. Michael is amazing in so many ways that I could write a book about Michael and what he's done for me and the support he's given me."

This quote acknowledges the significant positive impact of a particular board member, Michael Moritz, on the speaker's professional journey and leadership.

• The retail banking industry is ripe for disruption due to customer dissatisfaction, legacy systems, and barriers to entry.
• The industry is expected to shrink in size but will still be substantial.
• Startups with a customer focus and innovative technology have the potential to become dominant players.

"This decade is going to be the disruption of retail banking."

The speaker predicts a significant transformation in the retail banking sector, with a shift towards more customer-centric, efficient, and technologically advanced services.

• Guests appreciate the opportunity to share their insights and experiences in interviews.
• The host and guests often express mutual gratitude for the conversation.

"Thank you so much. Great talking to you. I really enjoyed it as well."

This quote conveys the speaker's appreciation for the interview and the chance to discuss various topics in depth.

• The host values the openness and vulnerability of guests like Sebastian.
• Sharing personal journeys can be inspiring and offer unique perspectives to listeners.

"Really hearing Sebastian's story and journey to where he is today I think was a really unique one and one that I haven't heard before."

The host expresses admiration for Sebastian's willingness to share his personal story, highlighting its uniqueness and the value of such openness in a public forum.