Klarna, the Swedish eCommerce payment platform that counts Mike Moritz and Klaus Hommels as board members is one of the burgeoning European companies that is turning its attention to Israel. Thanks to a recent financing round of $155 million led by Yuri Milner’s DST, the company is determined to spread its wings to new territories.
Yuval Samet, head of product at Klarna Israel took us on a tour of the company’s R&D base in the swanky new Electra Building in Tel Aviv, where Google also sits on three floors. We find out why the Scandinavian company turned its attentions to Israel, the importance of shared parties and the main differences between Israelis and Swedes…
So tell us how Klarna became involved in Israel?
My partner [older brother Ohed Samet] owned a company called Analyzd, which dealt with risk management and fraud prevention in eCommerce. Previously Ohed headed up risk management and new ventures within PayPal and we decided to start consulting various companies in this area.
Klarna approached us about an acquisition and we found that we had an amazing synergy with them, not only in terms of expertise, but also in terms of product development. I came on board as CPO while Ohed is CRO (Chief Risk Officer).
When we joined we started to establish an engineering centre in Israel. We have a lot of talent here in this field in Israel and that was something the company was lacking. we’ve already grown the team from four to 32. We have very talented engineers from the Intelligence Unit in the Israeli army.
Nearly everyone we’ve spoken to in the startup scene has been part of this unit in the Israeli army – is this the most important place for business networking?
Well, this is the Israeli market! Everybody knows everyone and people move in tribes. The army is by far the most important recruitment channel. The Intelligence Unit itself is quite big – and generally speaking, yes, most of the people in the startup scene has served in this unit in some capacity.
What goes on here at Klarna Israel?
Mainly R&D. Klarna has been extremely successful in establishing the whole buy first, pay later, experience. But the relationship and engagement with our end consumer and with the merchant were not at the same level. What we do here is establish teams that work on relationship management – from the onboarding process, to starting the service with Klarna as a merchant and very soon more end-consumer products that will help you better extend the experience – choose your payment methods easily, understand the settlement, etc. We also have a product analytics team here that supports the whole R&D process.
Did it jar with you go from founder of your own company to CPO when you were acquired?
With most acquisitions under $200m, I think it’s all about the relationship between the founders and how they will work to push the business forward. Professionally, but also personally, we felt a very good connection to Sebastian [Siemiatkowski], Niklas [Adalberth] and Victor [Jacobsson]. It was obvious that together we’d be able to scale the business to take over Europe… and the world.
What links do you have to the Swedish mothership?
I think this office is a good example – there’s graffiti on the walls, we don’t have any monuments to industry or to having the Klarna brand everywhere.
But we invest a lot in our culture – every employee flies twice a year at least to Sweden, and everyone goes to the Kickoff Party in September, that’s important to have people party together. We try to maintain this close relationship throughout our structure – it’s quite a flat management style – I don’t have an office, there are no separate offices in Stockholm either.
Is there enough of a talent pool here in Israel, given the number of R&D centres here – Google, IBM, Apple, etc…
I suspect that the biggest threat isn’t other big companies’ R&D, but other Israeli startups – like Berlin, I guess. I hear of lots of German developers that leave big companies to become part of a startup. We experience the same thing. But we try to be very competitive, not only in terms of payment, but in terms of experience and culture. We also offer to train developers in Ruby on Rails if they don’t know how to work with it.
For example, we wanted to make a statement by getting the very best head of engineering that we could find. Uri [Nativ, previously of VMware, above] came to us highly recommended from VCs, especially Sequoia and we knew we needed someone who could scale our centre quickly.
What are the main differences between Israeli and Swedish business practices?
I think there’s something that complements the Swedish and Israeli cultures. The Swedes are amazing engineers. Everything is structured, everything is a process. Every discussion is open and the consensus is very significant. Israelis are much more agile and direct and while there is an open discussion culture, but there is always someone willing to take a decision. Israelis don’t plan that well for the long run, and Swedes do – so our differences do us favours.
But this isn’t simply an Israeli office with a Klarna sign on its wall. Mainly because we don’t have a Klarna sign yet! But the point is that we see ourselves as the “Mediterranean Klarna”…