The economy may now be showing many signs of contraction, but many companies still need to operate internationally. Now, a startup that provides the tools to conduct and manage these deals is announcing some funding. Airwallex, a Hong Kong/Australian startup providing cross-border banking and other financial services to businesses, has raised $100 million, which will be used to continue expanding its business management across operations, geography and credit and fees — — and mergers and acquisitions.
The funding will come in the form of Airwallex’s Series E expansion — technically the E-2 Series, expanded by $100 million in November 2021 and an initial $200 million in September 2021. This was primarily an internal round with previous backers Square Peg, Salesforce Ventures, Sequoia Capital China, Lone Pine Capital, Hermitage Capital, 1835i Ventures and Tencent; Australian fund HostPlus and an unnamed “leading North American pension fund” Fund” also made investments.
Airwallex CEO Jack Zhang, who co-founded the company with Dai Xijing, Lucy Liu and Max Li, told TechCrunch that business has been growing over the last year. The company’s revenue rose 184%, its September ARR topped $200 million, and it was processing nearly $50 billion in annual deals, he said. The number of customers has doubled, although it only describes the number as vaguely “tens of thousands” of businesses (they include Papaya Global, HubSpot, Plum, GOAT, etc.).
However, given the current economic environment, this round has not been without its difficulties. That said, its valuation was flat at $5.5 billion, the same as Airwallex’s valuation a year ago, when it soared to $1.5 billion in a matter of weeks.
“It’s a more challenging financing environment,” Zhang said. He added that he and the rest of the team could see what was coming earlier this year, although Airwallex still had a lot of money in the bank — $600 million of the $900 million total raised by the end of September, when Zhang Talked to me – the startup chose to raise more money, just in case.
“It took two weeks to raise $100 million last year,” he said of the previous fundraiser. “It took four months this year. We think it’s a good result that we were able to raise capital.” Last time we covered the company, I noticed that Airwallex was entering its Series E expansion, which is fending off fast-growing financial Two takeover bids from tech companies. I wonder if investors (or Airwallex itself) will ask themselves if the choice to remain independent is the right choice.
Meanwhile, the company continues to grow its platform in its own way. Airwallex’s current core focus is on two areas. Commercial banking covers bank accounts, remittances, payment cards, expense management and B2B payment links. Its platform offering is a suite of embedded financial services that customers integrate into their own platforms or websites via APIs to provide experiences for themselves and their clients. These include online payments, treasury services for storing and managing funds internationally, foreign exchange for international pricing, payments and card issuance.
As we’ve written before, Airwallex made a splash in the early days by doing the right thing at the right time: it did the hard work of integrating with many banks and building complex financial services, then making them easy to use (relying on APIs ) so that companies doing business across borders can quickly set up banking and money transfer services, initially outside the Asia-Pacific region and eventually globally.
“In the past six years, we have built more than 50 bank integrations and now offer payments in 95 countries through our partner network,” Zhang told me in 2021. Since then, it has moved to bank accounts and “other he said, primitive stuff” including card issuance and more, eventually building an end-to-end payments stack.
The business’s demand (and valuation) has soared during the COVID-19 pandemic, when — in the absence of in-person events and people doing more of their work and leisure lives online — those already digitally saw a surge in transactions ; and those who were more concerned with the offline world before the pandemic found themselves in need of a major shift in digitalization.
The big question of late — for Airwallex and many others like it, Stripe, PayPal, Revolut, and more — has been whether these shifts will continue as the world slowly returns to pre-pandemic habits and processes. Airwallex’s growth appears to herald more opportunities ahead, albeit at a slower pace than expected a year ago.
Its most active markets today are China, the U.K. and North America, and it plans to continue expanding in select countries with particularly strong target markets, Zhang said. Israel is one of these countries, as almost all businesses with a digital angle there have international operations to expand beyond their small home market — “Every startup there has a potential customer!” Zhang exclaims, It’s also a hotbed of potential acquisition targets, especially now, as financing has become more challenging for smaller companies, it added.
For example, one area where Israel is strong and where Airwallex currently has no local solution is the area of fraud protection.
“From an M&A perspective, I’m very interested in that space,” Zhang said.
In addition to building his own business and seeking acquisitions for inorganic expansion, the founders of Airwallex have been building another investment fund to fuel their business growth. The so-called Capital 49 launches in July 2021. Unlike other funds that aim to expand the product ecosystem, such as Amazon’s Alexa Fund or Slack Fund, Capital 49 does not operate off Airwallex’s balance sheet, using some of Airwallex’s investors as members of Congress, but using Airwallex market knowledge to guide it.
“We have accumulated deep knowledge in fintech and SaaS,” Zhang said, and supporting interesting startups in these categories driven by Airwallex’s infrastructure “is the main goal of the fund.”