The economy may be showing many signs of contraction now, but many companies still need to do business internationally. Now a startup that provides tools to create and manage those transactions is announcing some funding. Airwallex, a Hong Kong/Australian startup that provides cross-border banking and other financial services for businesses, has raised $100 million, money it will use to continue expanding its business operationally, geographically and with new products in areas such as credit and expense management — and for Ma.
The funding comes in the form of an extension to Airwallex’s Series E — technically Series E-2, after a $100 million extension in November 2021, and an original $200 million in September 2021. It’s mostly an internal round with previous backers Square Peg, Salesforce Ventures, China’s Sequoia Capital , Lone Pine Capital, Hermitage Capital, 1835i Ventures and Tencent all participated; Australian fund HostPlus and an unnamed “leading North American pension fund” also invested.
Jack Zhang — the CEO of Airwallex who co-founded the company with Xijing Dai, Lucy Liu and Max Li — told TechCrunch that business has picked up in the last year. The company’s revenue has grown by 184%, ARR surpassed $200 million in September, and it processes nearly $50 billion in annual transactions, he said. The number of customers has doubled, although it only describes the figure as “tens of thousands” of vague businesses (it includes Papaya Global, HubSpot, Plum, GOAT and others).
However, given the current economic climate, this round is not without its struggles. That is, it comes at a flat valuation of $5.5 billion, similar to what Airwallex achieved a year ago, when the valuation jumped $1.5 billion in a matter of weeks.
“It has become a more challenging environment to raise money,” Zhang said. He and others on the team could see what was coming early this year, he added, and although Airwallex still has a lot of money in the bank — $600 million of the $900 million raised in late September, when Zhang and I spoke — the company beginners choose to collect more, just in case.
“Last year it took two weeks to raise $100 million,” he said of previous fundraisers. “This year it took four months. We think it’s a good result that we were able to raise money at all.” The last time we covered the company, I noted that Airwallex would enter its Series E extension after fending off two acquisition offers from fast-growing fintechs. I wonder the same some investors (or Airwallex themselves) are asking themselves whether choosing to remain independent is the right choice.
For now, investors believe the right choice is to hold on to the company as it is showing all the right signals, despite the broader market.
“Since investing in Airwallex in 2017, the company has continued to grow from strength to strength,” said Paul Bassat, co-founder of Square Peg Capital, in a statement. “Despite the current market conditions, we wholeheartedly believe in the team’s vision and mission which is why we are doubling our investment. We look forward to seeing what Jack Zhang and the rest of the Airwallex team achieve and will continue to support them on their journey.”
In the meantime, the company continues to develop its own platform on its own steam. Airwallex’s core focus is currently on two areas. Business banking covers bank accounts, money transfers, payment cards, expense management and B2B payment links. And its platform products are a set of embeddable financial services that clients integrate into their own platforms or websites via APIs to power the experience for themselves and their own clients. These include online payments, treasury services to store and manage funds internationally, foreign exchange to power pricing internationally, payments and card issuance.
Airwallex, as we have written before, made a surprise when it was first founded by doing the right thing at the right time: it did the hard work of integrating with many banks and building complex financial services and then making it easy to use (based on APIs) so that companies doing business across national borders can quickly provide banking and money transfer services, initially out of 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 network of partners,” Zhang told me in 2021. From there, it moved to bank accounts and “other primitive goods” with card issuance and more, he said, eventually building an end-to-end payment stack.
The business saw a huge surge in demand (and valuation) amid the COVID-19 pandemic, when — in the absence of face-to-face activities and people conducting more aspects of their work and leisure lives online — businesses that had already digitally saw transactions through the roof; and those more focused on the pre-pandemic offline world find themselves having to take a sharp digital turn.
The big question recently – both for Airwallex and many other companies like it such as Stripe, PayPal, Revolut and more – is whether the shift will last as the world slowly returns to pre-pandemic habits and processes. Airwallex’s growth appears to indicate more opportunities ahead, although not at the rate expected a year ago.
Its most active markets today are China, the UK and North America, Zhang said, and the plan is to continue to expand in certain countries with strong addressable markets. Israel is one of those countries, as almost every business there with a digital angle has international operations to expand beyond their small home market — “Every startup has potential customers!” Zhang exclaims, adding that it’s also a hotbed for potential acquisition targets, especially now, as it’s becoming more challenging for smaller companies to raise rounds.
One area, for example, where Israel is strong, and Airwallex does not currently have a native solution, is in the area of fraud protection.
“I’m very interested in the space shaping the M&A perspective,” Zhang said.
Separately to building his own business and pursuing acquisitions to grow organically, the founder of Airwallex has also built another venture to drive his business growth, an investment fund. Capital 49, as the name suggests, was launched in July 2021. Unlike other funds that aim to expand the product ecosystem such as Amazon’s Alexa Fund or the Slack Fund, Capital 49 is not operated off Airwallex’s balance sheet, but instead taps a certain amount of Airwallex investors’ money as LP but uses Airwallex’s market knowledge to guide it.
“We have accumulated deep knowledge of fintech and SaaS,” Zhang said, and supporting exciting startups in categories powered by Airwallex’s infrastructure “is the main goal of the fund.”