Airwallex raises $100M to power cross-border business banking, valuation stays flat at $5.5B • ProWellTech

The economy may be showing many signs of contraction right now, but many companies still need to do business internationally. Now a startup providing the tools to make and manage those transactions is announcing some funding. Airwallex, the Hong Kong/Australia startup that provides cross-border banking and other financial services for businesses, has raised $100 million, money that it will be using to continue expanding its business operationally, geographically and with new products in areas like credit and expense management — and for M&A.

The funding is coming in the form of an extension to Airwallex’s Series E — technically a Series E-2, after a $100 million extension in November 2021, and the original $200 million in September 2021. It is mostly an inside 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 “leading North American pension fund” also invested.

Jack Zhang — Airwallex’s CEO who co-founded the company with Xijing Dai, Lucy Liu and Max Li — told ProWellTech that business has been on the up in the last year. The company’s revenues have grown by 184%, ARR passed $200 million in September, and it’s processing close to $50 billion in annualized transactions, he said. Customer numbers have doubled, although it 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 its struggles. Namely, it is coming in at a flat valuation of $5.5 billion, level 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 coming around the corner earlier in the year, he added, and although Airwallex still had significant money in the bank — $600 million out of the total $900 million raised as of the end of 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 fundraise. “This year it took four months. We think it was a good outcome that we were able to raise the money at all.” Last time we covered the company, I noted that Airwallex was going into its Series E extension having fended off two acquisition offers from fast-growing fintechs. I wonder if investors (or Airwallex itself) ask themselves if choosing to stay independent was the right choice.

In the meantime, the company continues to grow its own platform on its own steam. Airwallex’s core focus currently is on two areas. Business banking covers banking accounts, money transfer, payment cards, expenses management and B2B payment links. And its platform product is a set of embeddable financial services that customers integrate into their own platforms or websites by way of APIs to power experiences for themselves and their own customers. These include online payments, treasury services to store and manage funds internationally, foreign exchange to power pricing internationally, payouts and card issuing.

Airwallex, as we’ve written before, made a splash when it was first founded by doing the right thing at the right time: it did the tough work of integrating with lots of banks and building complex financial services and then made them easy to use (leaning on APIs) so that companies doing business across country boundaries could set up banking and money moving services quickly, initially out of Asia Pacific and eventually globally.

“In the last six years, we’ve built more than 50 bank integrations and now offer payments across 95 countries, payments through a partner network,” Zhang told me back in 2021. From that, it moved on to bank accounts and “other primitive stuff” with card issuance and more, he said, eventually building an end-to-end payment stack.

That business saw a huge surge in demand (and valuation) in the midst of the COVID-19 pandemic, when — in the absence of in-person activity and people carrying out more aspects of their work and leisure life online — businesses that were already digital saw transactions go through the roof; and those that were more focused on the offline world pre-pandemic found themselves needing to take a sharp digital turn.

The big question more recently — both for Airwallex and the many other companies like it such as Stripe, PayPal, Revolut and many more — has been whether those shifts would remain as the world slowly reverted back to pre-pandemic habits and processes. Airwallex’s growth seems to point to more opportunity ahead, although not at the rates that it would have projected a year ago.

Its most active markets today are China, the U.K. and North America, Zhang said, and the plan is to continue expanding in specific countries with particularly strong addressable markets. Israel is one of those countries, since just about every business there with a digital angle has international operations to expand outside of their small home market — “Every single startup there is a potential customer!” Zhang exclaimed, adding that it’s also a hotbed for potential acquisition targets, especially right now, since it’s become much more challenging for smaller companies to raise rounds.

One area, for example, where Israel is strong, and Airwallex currently doesn’t have a native solution, is in the area of fraud protection.

“I’m super interested in that space form an M&A perspective,” Zhang said.

Separately to building its own business and pursuing acquisitions to expand inorganically, Airwallex’s founders have been also building out another venture to fuel its business growth, an investment fund. Capital 49, as it’s called, was launched back in July 2021. Unlike other funds aimed at expanding a product’s ecosystem like the Alexa Fund at Amazon or the Slack Fund, Capital 49 is not operated off Airwallex’s balance sheet, instead tapping a number of Airwallex’s investors as LPs but using Airwallex’s knowledge of the market to guide it.

“We have accumulated a deep knowledge of fintech and SaaS,” Zhang said, and backing interesting startups in those categories powered by Airwallex’s infrastructure “is the primary goal of the fund.”