The economy may be showing signs of contraction these days, but many companies still need to do business globally. Now a startup that offers tools to perform and manage those transactions is announcing some funding. Airwallex, a Hong Kong/Australian startup that provides cross-border banking and other financial services to businesses, has raised $100 million. Management – and for M&A.
The funding comes for Airwallex’ Series E – technically Series E-2 – after a $100 million extension in November 2021, and the first $200 million in September 2021. This is mostly an inside round with previous supporters squared off. Peg, Salesforce Ventures, Sequoia Capital China, Lone Pine Capital, Hermitage Capital, 1835i Ventures and Tencent all participated; Australian fund HostPlus and an unnamed “leading North American pension fund” invested.
Jack Zhang – CEO of Airwallex, who co-founded the company with Xijing Dai, Lucy Liu and Max Li – told TechCrunch that business has been growing over the past year. The company said its revenue grew 184 percent, with ARR surpassing $200 million in September, and handling nearly $50 billion in annual transactions. The number of customers has more than doubled, although they put the number vaguely in the “tens of thousands” of businesses (which include Papaya Global, HubSpot, Plum, Goat and others).
However, given the current economic climate, this round was not without a fight. Namely, it’s coming in at a flat $5.5 billion valuation, which is similar to what AirWallex acquired a year ago, which valued it at $1.5 billion in just a few weeks.
“It was a more challenging environment to raise money,” Zhang said. He and others on the team could see what was coming at the beginning of the year, and even though AirVlex still had a lot of money in the bank—about $600 million of the $900 million raised by the end of September, Zhang and I said—the startup chose to raise more if it did. .
“Last year, it took two weeks to raise $100 million,” he said of previous fundraising. “It’s taken four months this year. We think it’s a good result that we were able to raise the money overall. When we covered the company last time, I noted that Airwallex was entering a Series E extension after rejecting acquisition offers from two fast-growing fintechs. The right choice for investors (or Airwallex itself) is to remain independent.” I wonder if they ask themselves if it is a choice.
Meanwhile, the company continues to grow its platform on Steam. Airwallex’s main focus is on two areas. Business Bank covers bank accounts, money transfers, payment cards, expense management and B2B payment links. And the platform product is a set of embeddable financial services that customers can integrate into their own platforms or websites through APIs to enhance the experience for themselves and their customers. These include online payments, treasury services to store and manage funds globally, foreign exchange for energy prices globally, payments and card issuance.
Airwallex, as we have written before, was founded by doing the right thing at the right time, partnering with several banks and building complex financial services that are then easy to use. (By relying on APIs) companies that trade across national borders can rapidly establish banking and money transfer services, 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 our partner network,” Zhang replied to me in 2021. From there it moves on to bank accounts and “other primitives” through card issuance and more, eventually building an end-to-end payment stack.
That business has seen a surge in demand (and valuation) amid the Covid-19 pandemic, with physical inactivity and people conducting more aspects of their work and leisure lives online — businesses that already exist. Digital saw transactions go through the roof; And the offline world, more focused on the pre-pandemic, has found itself in need of a sharp digital turn.
The big question lately — both for Airwallex and for companies like Stripe, PayPal, Revolut and many others — is whether those changes will continue as the world slowly returns to pre-pandemic practices and processes. Airwallex’s growth, while not at the rate that could have been predicted a year ago, seems to point to more opportunities in the future.
Currently, the most active markets are China, England and North America, Zhang said, and the plan will continue to expand in countries with particularly strong accessible markets. Israel is one of those countries, because every business there with a digital angle has international operations to expand beyond their small home market – “every startup has a customer!” Zhang chimed in, especially these days, as it’s becoming more challenging for smaller companies to raise a round, which is also a starting point for potential buyout targets.
One area, for example, where Israel is strong, and AirLex currently does not have a native solution, is the area of fraud protection.
“I’m very interested in the M&A perspective of that space,” Zhang said.
The founders of Airwallex have been building another venture with an investment fund to accelerate the growth of the business as opposed to building its own business and expanding acquisitions. Capital 49, as it is called, returns in July 2021. Unlike other funds like Amazon’s Alexa Fund or Slack Fund to expand the product ecosystem, Capital 49 does not operate on Airwallex balance, but instead taps multiple Airwallex. Investors like LPs but using Airwallex’s market expertise to guide it.
“We have accumulated deep knowledge of fintech and SaaS,” Zhang said, and supporting exciting startups in those categories is the main goal of the fund.