The economy may be showing many signs of contraction right now, but many companies still need to do business internationally. Now a startup that provides the tools to make and manage those transactions is announcing some funding. Airwallex, the Hong Kong/Australian startup that provides cross-border banking and other financial services to businesses, has raised $100 million, which it will use to continue expanding its business in terms of operations, geography and products new in areas such as credit and spending. management; and for M&A.
The funding comes in the form of an extension to Airwallex’s Series E — technically a Series E-2, following a $100 million extension in November 2021 and an original $200 million in September 2021. It’s primarily a domestic round with previous backers Square Peg, Salesforce Ventures, Sequoia Capital China, Lone Pine Capital, Hermitage Capital, 1835i Ventures and Tencent all participating; Australian fund HostPlus and an unnamed “major North American pension fund” also invested.
Jack Zhang — CEO of Airwallex who co-founded the company with Xijing Dai, Lucy Liu and Max Li — told TechCrunch that the business has been growing for the past year. The company’s revenue is up 184%, ARR surpassed $200 million in September, and it’s processing close to $50 billion in annual transactions, he said. Client numbers have doubled, though he only describes the figure as a vague “tens of thousands” of businesses (they include Papaya Global, HubSpot, Plum, GOAT and others).
And yet, given the current economic climate, this round was not without difficulties. Namely, it’s coming in at a flat $5.5 billion valuation, on par with what Airwallex achieved a year ago, when the valuation catapulted $1.5 billion in the space of a few weeks.
“It’s been a more challenging environment to raise money,” Zhang said. He and others on the team could see what was happening at the beginning of the year, he added, and although Airwallex still had significant cash in the bank — $600 million of the $900 million total raised in late September, when Zhang and I spoke – the startup chose to raise more, just in case.
“Last year it took two weeks to raise $100 million,” he said of the previous fundraiser. “This year it took four months. We think it was a good result that we were able to raise the money at all.” The last time we covered the company, I noted that Airwallex was entering Series E expansion after fending off two acquisition offers from fast-growing fintechs. I wonder if the investors (or Airwallex itself) wonder if choosing to stay independent was the right choice.
Meanwhile, the company continues to grow its platform on its own steam. Airwallex’s main focus is currently on two areas. Business banking covers bank accounts, money transfer, payment cards, expense management and B2B payment connections. And its platform product is a set of integrated financial services that customers integrate into their platforms or websites via APIs to power experiences for themselves and their customers. These include online payments, treasury services for the safekeeping and management of funds internationally, internationally valid foreign exchange rates, payments and card issuance.
Airwallex, as we’ve written before, made waves when it was first founded by doing the right thing at the right time: it did the hard work of integrating with multiple banks and building complex financial services, and then made them easy to use. (relying on APIs) so that companies doing business across country borders can build banking and money transfer services quickly, first outside Asia Pacific and eventually globally.
“In the past six years, we have built more than 50 bank integrations and now offer payments in 95 countries, payments through a partner network,” Zhang told me in 2021. Since then, he has moved into bank accounts and “ other primitive things” with card issuance and more, he said, eventually building an end-to-end payments suite.
That business saw a huge surge in demand (and valuation) amid the Covid-19 pandemic, when – in the absence of in-person activity and people conducting more aspects of their work and leisure lives online – businesses that were already digital saw transactions go through the roof; and those more focused on the offline pre-pandemic world found themselves needing to take a sharp digital turn.
The big question lately — both for Airwallex and many other companies like it such as Stripe, PayPal, Revolut and many others — has been whether those shifts would stick as the world slowly returned to pre-pandemic habits and processes. Airwallex’s growth seems to point to more opportunities ahead, though not at the pace it would have predicted a year ago.
Its most active markets today are China, the UK and North America, Zhang said, and the plan is to continue expanding into specific countries with particularly strong addressable markets. Israel is one of those countries, as almost every business there with a digital angle has international operations to expand outside of their small home market – “Every single startup has a potential customer!” Zhang exclaimed, adding that it’s also a hotbed for potential takeover targets, especially now that it’s become much more challenging for smaller companies to raise rounds.
One area, for example, where Israel is strong and Airwallex currently does not have a native solution, is in the area of fraud protection.
“I’m very interested in that space from an M&A perspective,” Zhang said.
In addition to building its own business and pursuing acquisitions to expand inorganically, Airwallex’s founders have also built another venture to fuel its business growth, an investment fund. Capital 49, as it is called, was launched in July 2021. Unlike other funds that aim to expand the ecosystem of a product such as Amazon’s Alexa Fund or the Slack Fund, Capital 49 is not operated by Airwallex’s balance sheet, but rather by leveraging an Airwallex number investors as LPs, but using Airwallex’s knowledge of the market to guide it.
“We’ve accumulated a deep knowledge of fintech and SaaS,” Zhang said, and supporting interesting startups in those categories enabled by Airwallex’s infrastructure “is the main goal of the fund.”
