This Swedish fintech founder could have been a billionaire right now. Instead, he spent nearly all his equity on philanthropy and impact investing.

Niklas Adalberth

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Four weeks ago, Swedish fintech darling Klarna raised $1 billion at a $31 billion valuation, giving two of its cofounders – CEO Sebastian Siemiatkowski and former CFO Victor Jacobsson – fortunes of more than $2 billion each, per Forbes.

Niklas Adalberth, the third cofounder, could have been a billionaire too. He owned 8% of Klarna when he departed the “buy now, pay later” firm in 2015, which allows consumers to pay for items in installments. That equity would be worth nearly $2.5 billion today. Instead, he has sold down his stake over the years to fund his philanthropy and impact investing. His remaining stake of 0.75% is worth some $230 million.

Adalberth, 39, had mixed feelings when he first heard about the massive round. He was happy for his colleagues but couldn’t help but wonder how much more he could have raised for his non-profit if he held onto his equity longer. Klarna, founded in 2005, has surged in value by nearly 1,300% since Adalberth left his post as deputy CEO.

But he doesn’t regret his decision. Adalberth has spent 140 million euros (about $165 million) to fund the Norrsken Foundation, a non-profit he founded in 2016. He wants to inspire European entrepreneurs to give while they live and invest in companies that tackle social issues such as climate change and mental health.

“People talk about the compound interest being the eighth wonder of the world. I think the same goes for impact. The earlier you start trying to create impact, that could also have a snowball effect for the future,” Adalberth told Insider from his home in Stockholm. “Should I have stayed at Klarna to try to grow my equity? Or did it actually make sense to spend my money now when the world needs it the most? The decision is quite easy.”

‘I’ve created something net-positive.’

Adalbert was 24 when he founded Klarna with two friends, Siemiatkowski and Jacobsson.

“When I started Klarna, I had this belief that money correlated with happiness,” he said. “It was really egotistic from a start in that sense.”

In 2012, the trio was able to sell off shares in Klarna for the first time after a fundraising round. Overnight, Adalberth had $10 million in his bank account. He decided to celebrate by stopping by Las Vegas while flying from Stockholm to San Francisco for a conference. He splurged on a business class flight, a hotel suite overlooking the Strip, fine dining, and a designer shopping spree.

“But living this dream, I started to get this bad feeling that, ‘Hey, I can’t really taste the difference between this wine and the s— wine I have at home. I don’t sleep better in this panorama suite compared to my IKEA bed at home,'” he said. “I started to look at these [shopping] bags, and they looked back at me as if they had some kind of message. And that message was, ‘You’re so pathetic. How could you believe that all of this consumption or stuff could in any way buy happiness or meaningfulness?'”

After the trip, he started therapy and went on retreats. He began to reevaluate his priorities, which led to his decision to leave Klarna in 2015.

“I think Klarna does a lot of great things. But we also enable people to pay for purchases in installments. Is that really what the world needs, to buy stuff that they might not need at a certain interest that they’re gonna pay off in the future?” he said. “I have all this luck in life, and more money doesn’t make sense. And I really want to be able to look myself in the mirror and see that I’ve created something net-positive.”

‘Maybe we can get the top talent chasing real problems’

Adalberth started the Norrsken Foundation, a “tech for good” non-profit with a early-stage venture capital arm, one year after leaving Klarna, with $20 million from selling some of his shares. He brought on a former Klarna colleague, Erik Engellau-Nilsson, to be CEO of the foundation. Its motto: “Get good s— done.”

Adalberth chose a chic, 2,400-square-meter office in downtown Stockholm for Norrsken’s headquarters. He realized it was far too large for his staff, and decided to make Norrsken House into a subsidized workspace for people working at impact-driven companies. He thought the hip startup hub, with a meditation room, event space, and photo studio, could bring a certain cachet to social entrepreneurship. It now boasts 450 employees.

“In Sweden, it is quite popular now to try to become a unicorn founder. A lot of media is around the most successful entrepreneurs, as well as Instagram celebrities, and sports stars,” he said. “What I’m trying to do with the foundation is see if we can make impact entrepreneurs the next role models. Maybe we can get the top talent chasing real problems, and not create the next addictive computer game or yet another online casino.”

The foundation is 100% funded by Adalberth and supports initiatives with a low chance of return but high social impact with the hope of breaking even over time.

Norrsken’s VC arm, which has external investors, is where Adalberth wants to prove that impact investing can generate financial returns as well as social good. Norrsken put its “blueprint,” documents ranging from term sheet templates to its portfolio strategy criteria, online in order to inspire others.

Most of the 21 portfolio companies are based in Sweden and are dedicated to environmental causes. Mobile app Karma, for instance, reduces food waste by connecting customers to retailers with excess supply, saving 4 million meals. It’s just the beginning, as Norrsken closed on its 125 million euro ($149 million) fund for early-stage impact startups last month.

If any of these investments are financially successful, the upside won’t go to Adalberth. His carried interest – share of future profits if a portfolio company goes public or is acquired – will go back to Norrsken, according to the fund terms. Between giving up this interest and whittling down his Klarna equity, Adalberth has missed out on a tremendous amount of wealth. Yet, he says the only compromise he has really made is going vegetarian.

“I loved eating meat. It’s the only area of my life where I’m actually sacrificing something,” he said. “But apart from that, I’m living the dream life now.”

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Source: businessinsider
This Swedish fintech founder could have been a billionaire right now. Instead, he spent nearly all his equity on philanthropy and impact investing.