Airwallex raises $100M to power cross-border business banking, valuation unchanged at $5.5B • TechCrunch

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 these transactions is announcing some funding. Airwallex, the Hong Kong/Australia start-up 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 expenses management — and for M&A.

The funding comes in the form of Airwallex’s Series E expansion — technically Series E-2, following a $100 million expansion in November 2021 and an initial $200 million in September 2021. It’s a mostly 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 — CEO of Airwallex, who co-founded the company with Xijing Dai, Lucy Liu, and Max Li — told TechCrunch that business has been up over the past year. The company’s revenue grew 184%, ARR exceeded $200 million in September and it processes nearly $50 billion in transactions annually, he said. The number of customers has doubled, although the figure is described only as a vague “tens of thousands” of companies (these include Papaya Global, HubSpot, Plum, GOAT and others).

Still, given the current economic climate, this round was not without its struggles. Namely, it comes with a fixed valuation of $5.5 billion, which is equal to what Airwallex achieved a year ago, when the valuation catapulted $1.5 billion within 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 around the corner earlier in the year, he added, and although Airwallex still had significant cash in the bank — $600 million of a total of $900 million raised by the end of September, when Zhang and I talked – the startup chose to raise more, just in case.

“Last year it took two weeks to raise $100 million,” he said of the previous fundraiser. “This year it took four months. We think it was a good result that we were able to raise the money at all.” The last time we covered the company, I noted that Airwallex was entering its Series E expansion after fending off two acquisition offers from fast-growing fintechs. I wonder if the investors (or Airwallex itself) are questioning whether choosing to remain independent is the right choice.

Meanwhile, the company continues to develop its own platform under its own steam. Currently, Airwallex’s main focus is on two areas. Business banking covers bank accounts, money transfers, payment cards, expense management and B2B payment links. And its platform product is a set of embedded financial services that customers integrate into their own platforms or websites via APIs to provide experiences for themselves and their own customers. These include online payments, treasury services to store and manage funds internationally, foreign currency to drive international pricing, payouts and card issuance.

Airwallex, as we’ve written before, made a splash when it was first founded by doing the right thing at the right time: doing the hard work of integrating with many banks and building complex financial services, and then making them easy to use (relying APIs) so that companies doing business across country borders can rapidly establish banking and money transfer services, initially outside the Asia-Pacific region and eventually globally.

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

This business has seen a huge spike in demand (and valuation) in the midst of the COVID-19 pandemic, when — in the absence of in-person activity and people doing more aspects of their work and leisure online — businesses that were already digital saw transactions pass through the roof; and those who were more focused on the offline world before the pandemic found themselves having to make a sharp digital turn.

The big question lately – both for Airwallex and many other companies like it such as Stripe, PayPal, Revolut and many others – has been whether these changes will stick as the world slowly returns to pre-pandemic habits and processes. Airwallex’s growth seems to point to more opportunities in the future, though not at the pace they would have predicted a year ago.

Its most active markets today are China, the United Kingdom and North America, Zhang said, and the plan is to continue expanding in certain countries with particularly strong addressable markets. Israel is one of those countries, as almost every business there with a digital angle has international operations to expand beyond its small domestic market – “Every single startup has a potential customer!” Zhang exclaimed, adding that it’s also a hotbed for potential targets to acquire, especially right now as it has become much more challenging for smaller companies to raise rounds.

One area, for example, where Israel is strong and Airwallex does not currently have its own solution is in the area of ​​fraud protection.

“I’m extremely interested in this space from an M&A perspective,” Zhang said.

Apart from building their own business and pursuing acquisitions for inorganic expansion, the founders of Airwallex are also building another venture to fuel the growth of the business, an investment fund. Capital 49, as it is called, was launched back in July 2021. Unlike other funds aimed at expanding a product’s ecosystem, such as Amazon’s Alexa Fund or the Slack Fund, Capital 49 is not managed by Airwallex’s balance sheet, but instead this uses a number of Airwallex investor funds as LPs, but using Airwallex’s knowledge of the market to guide it.

“We have built up deep knowledge of fintech and SaaS,” Zhang said, and supporting interesting startups in these categories, powered by Airwallex’s infrastructure, “is the main goal of the fund.”

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