Airwallex raises $141 million to become latest Aussie unicorn

Cross-border payments startup Airwallex has secured $US100 million ($141 million) in Series C funding, valuing the company at over $US1 billion and making it Australia’s third-ever unicorn.

The startup has reached the heralded unicorn status just three-and-a-half years after it was founded by Jack Zhang, Lucy Liu, Max Li and Xijing Dai.

In that time, it has raised more than $US200 million, including a $109 million round closed in June last year.

Airwallex follows in the footsteps of Aussie startup darlings Atlassian, which is now listed on the Nasdaq with a market cap of $US23 billion, and Canva, which reached unicorn status when it raised $50.9 million in January 2018.

The news follows a prediction from startup research firm CB Insights and The New York Times, pegging Airwallex as a future unicorn, alongside fellow Aussie startup Deputy, just last month.

The round was led by US venture capital firm DST Global, which has previously backed the likes of Facebook, Airbnb and Spotify, as well as fintechs Robinhood and Stripe.

Speaking to StartupSmart, Airwallex co-founder and chief Jack Zhang says despite this major milestone, he doesn’t measure Airwallex’s success in terms of funding or valuation.

“It’s just a status that people recognise in the industry,” he says.

“We’ve got such a large vision — we want to be the number one brand when people talk about cross-border payment … we want to represent a success story of our customers,” he explains.

What is more exciting to Zhang is the number of customers served, the volumes processed, the talent recruited and the products built.

The funding “just gives us an opportunity to build those products, to hire those people, to continue to chase our vision”, he adds.

However, it also represents more pressure to continue on its growth trajectory.

Currently, Airwallex is projecting 500% revenue growth for 2019, and Zhang expects that to continue in 2020, and beyond.

The startup currently 257 staff members, globally. Of these, 61 are in Australia, but that team is expected to increase by 50% by the end of this year.

Expanding aggressively

Following its mammoth Series B raise, Airwallex had “a number of funds that were interested” in the Series C round.

However, the founders chose DST to lead the round, “mainly because they have backed a lot of companies that have synergy with Airwallex”, Zhang says.

As well as investments into big-name companies such as Facebook, Spotify and Airbnb, DST Global has backed fintech success stories Stripe and Robinhood.

The decision was also related to DST’s focus on the US and Europe, in light of Airwallex’s expansion plans.

“We wanted to take some money that is not from an Asian background, I guess,” Zhang says.

Existing investors Sequoia Capital China, Tencent, Hillhouse Capital, Gobi Partners, Horizons Ventures and SquarePeg Capital also contributed to the round.

While these partners have helped Airwallex to grow locally, Zhang says at this stage the startup isn’t necessarily looking for support.

“At this stage, it’s more about the financial side,” he says. “We’re not an angel or Series A-stage company.”

DST Global may be able to open doors to bigger clients, but it was more important to Airwallex that they were supported by a large fund.

“They’re not just able to support us now, they will be able to support us for the next five to 10 years,” Zhang says.

The funding will largely be used for product development, Zhang says. Airwallex will be working on building new, innovative payments products for its customers, on top of the existing infrastructure.

The startup is also “expanding aggressively”.

It already has licences in the UK and the EU, and within 12 months Zhang hopes it will be licensed in all 50 states in the US.

“Basically having decent revenue and volumes processed in those markets is what we’re aiming for,” he says.

Finally, it’s doubling down on small business and e-commerce clients, Zhang says.

He has a “vision to help businesses of all sizes to expand and scale globally”, he explains.

“A lot of businesses are moving from offline to online, and the nature of online business is that it’s a global business,” he adds.

“We want to provide the product and infrastructure to help those small businesses scale.”

The plan is to onboard more than 20,000 SMEs in 2019.

“We launched the product in one market for two weeks, and acquired close to 1,000 clients,” Zhang says.

“I think our product is very very different to any sort of traditional players,” he adds.

“We can help businesses do not just one thing, we can help them do everything.”

A significant sacrifice

When asked for any advice as to how to grow a unicorn, Zhang quotes Sequoia Capital partner Michael Moritz, who he says once told him “the first five engineers you hire will decide the future of the company”.

This has rung true for Airwallex, Zhang says.

“That gives you a benchmark in hiring people. What sort of people do you want to come on board for the company?”

“We only want to hire the best and develop the best.

“That will magnify when you’re a much larger size.”

Hiring the wrong people can set a startup back six months, he says, adding that Airwallex has “made many mistakes like that”.

However, now the chief says he doesn’t “do management”, he says.

“The way I manage is I give people a goal, I hire the best people, and make them all work towards a goal,” he explains.

“I don’t look at what they’re doing on a day-to-day basis, I look at the end result.”

If a chief executive feels they have to monitor their teams closely, on a daily basis, “that’s a sign of failure”, Zhang says.

He also advises startups to be quick to bring a product to market, to speak to customers “and let the market tell you what needs to be done”.

On the other hand, however, he says it’s important to launch an MVP that has the basic features and product-market fit. If this is a complex space like enterprise payments, this can take time.

“Sometimes a larger ambition takes longer to build,” Zhang says.

“You could have zero revenue for two or three years.”

With enterprise products, founders have to consider security, scalability, approvals, and the fact that changing the API could be disruptive to customers.

“It requires you to look at all the different scenarios, and that’s hard because different scenarios come from the customer feedback,” he explains.

“You have to do a lot of research,” he adds.

“That’s why enterprise products generally take a lot longer to succeed, and it takes a lot longer to generate revenue.”

This is not an easy balance to get right.

“It’s hard. There’s a lot of instinct involved … there’s a bunch of luck as well,” Zhang admits.

Ultimately, to found and grow a unicorn takes a solid understanding of the market and the opportunity, a lot of hard work, and “a bunch of luck”, he says.

“It’s a significant sacrifice, of your life, your family, your house,” he adds.

“It’s not like everyone can deliver this.”

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