Airwallex raises $200M at a $4B valuation to double down on business banking

Published September 20, 2021

Business, now more than ever before, is going digital, and today a startup that’s building a vertically integrated solution to meet business banking needs is announcing a big round of funding to tap into the opportunity. Airwallex — which provides business banking services directly to businesses themselves as well as via a set of APIs that power other companies’ fintech products — has raised $200 million, a Series E round of funding that values the Australian startup at $4 billion.

Lone Pine Capital is leading the round, with new backers G Squared and Vetamer Capital Management, and previous backers 1835i Ventures (formerly ANZi), DST Global, Salesforce Ventures and Sequoia Capital China also participating.

The funding brings the total raised by Airwallex — which has head offices in Hong Kong and Melbourne, Australia — to $700 million, including a $100 million injection that closed out its Series D just six months ago.

Cross-border fintech Airwallex raises $100M Series D extension at new valuation of $2.6B

Airwallex will be using the funding both to continue investing in its product and technology as well as to continue its geographical expansion and to focus on some larger business targets. The company has started to make some headway into Europe and the U.K. and that will be one big focus, along with the U.S.

The quick succession of funding and rising valuation underscore Airwallex’s traction to date around what CEO and co-founder Jack Zhang describes as a vertically integrated strategy.

That involves two parts. First, Airwallex has built all the infrastructure for the business banking services that it provides directly to businesses with a focus on small and medium enterprise customers. Second, it has packaged up that infrastructure into a set of APIs that a variety of other companies use to provide financial services directly to their customers without needing to build those services themselves — the so-called “embedded finance” approach.

“We want to own the whole ecosystem,” Zhang said to me. “We want to be like the Apple of business finance.”

That seems to be working out so far for Airwallex. Revenues were up almost 150% for the first half of 2021 compared to a year before, with the company processing more than US$20 billion for a global client portfolio that has quadrupled in size. In addition to tens of thousands of SMEs, it also, via APIs, powers financial services for other companies like GOAT, Papaya Global and Stake.

Airwallex got its start like many of the strongest startups do: It was built to solve a problem that the founders encountered themselves. In the case of Airwallex, Zhang tells me he had actually been working on a previous startup idea. He wanted to build the “Blue Bottle Coffee” of Asia Pacific out of Australia, and it involved buying and importing a lot of different materials, packaging and, of course, coffee from all around the world.

“We found that making payments as a small business was slow and expensive,” he said, since it involved banks in different countries and different banking systems, manual efforts to transfer money between them and many days to clear the payments. “But that was also my background — payments and trading — and so I decided that it was a much more fascinating problem for me to work on and resolve.”

Eventually one of his co-founders in the coffee effort came along, with the four co-founders of Airwallex ultimately including Zhang, along with Xijing Dai, Lucy Liu and Max Li.

It was 2014, and Airwallex got attention from VCs early on in part for being in the right place at the right time. A wave of startups building financial services for SMBs were definitely gaining ground in North America and Europe, filling a long-neglected hole in the technology universe, but there was almost nothing of the sort in the Asia Pacific region, and in those earlier days solutions were highly regionalized.

From there it was a no-brainer that starting with cross-border payments, the first thing Airwallex tackled, would soon grow into a wider suite of banking services involving payments and other cross-border banking services.

“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,” he added, with 43 of those offering real-time transactions. 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.

Airwallex has tens of thousands of customers using its financial services directly, and they make up about 40% of its revenues today. The rest is the interesting turn the company decided to take to expand its business.

Airwallex had built all of its technology from the ground up itself, and it found that — given the wave of new companies looking for more ways to engage customers and become their one-stop shop — there was an opportunity to package that tech up in a set of APIs and sell that on to a different set of customers, those who also provided services for small businesses. That part of the business now accounts for 60% of Airwallex’s business, Zhang said, and is growing faster in terms of revenues. (The SMB business is growing faster in terms of customers, he said.)

A lot of embedded finance startups that base their business around building tech to power other businesses tend to stay at arm’s length from offering financial services directly to consumers. The explanation I have heard is that they do not wish to compete against their customers. Zhang said that Airwallex takes a different approach, by being selective about the customers they partner with, so that the financial services they offer would not be in direct competition with those of its customers. The GOAT marketplace for sneakers, or Papaya Global’s HR platform are classic examples of this.

Checkout is the key to frictionless B2B e-commerce

However, as Airwallex continues to grow, you can’t help but wonder whether one of those partners might like to gobble up all of Airwallex and take on some of that service provision role itself. In that context, it’s very interesting to see Salesforce Ventures returning to invest even more in the company in this round, given how widely the company has expanded from its early roots in software for salespeople into a massive platform providing a huge range of cloud services to help people run their businesses.

For now, it’s been the combination of its unique roots in Asia Pacific, plus its vertical approach of building its tech from the ground up, plus its retail acumen that has impressed investors and may well see Airwallex stay independent and grow for some time to come.

“Airwallex has a clear competitive advantage in the digital payments market,” said David Craver, MD at Lone Pine Capital, in a statement. “Its unique Asia-Pacific roots, coupled with its innovative infrastructure, products and services, speak volumes about the business’ global growth opportunities and its impressive expansion in the competitive payment providers space. We are excited to invest in Airwallex at this dynamic time, and look forward to helping drive the company’s expansion and success worldwide.”

Updated to note that the coffee business was in Australia, not Hong Kong.

Hydrate, intoxicate, caffeinate, repeat: Meet the startups pouring the future

Published July 2, 2018

Joanna Glasner
Contributor

Hydrate

Venture investors and startup entrepreneurs are betting there are highly scalable businesses to be built in doling out more exotic varieties of water, coconut-based beverages and other drinks to hydrate calorie-conscious consumers.

An analysis of Crunchbase data unearthed at least a dozen companies developing new varieties of water and fitness drinks that have raised funding in recent quarters.

Funding data reveals that investors still see the potential for significant returns from coconut water. The largest round in the hydration category went to Harmless Harvest, a seller of fair trade, organic coconut water and probiotic drinks that recently raised $30 million. The funding comes as the sector is on a tear, with the U.S. spending alone on coconut water projected to reach $2 billion next year.

We also saw a couple of deals involving startups offering alternatives to bottled or tap water. The most heavily capitalized one to receive funding in the past couple of years appears to be FloWater, a Denver-based startup that provides pure water refill stations and has raised about $8 million to date. Meanwhile, bottled water is still generating attention, too, as evidenced by the $5.5 million round late last year for Kona Deep, a bottler of deep ocean water.

Intoxicate

You may need water to survive, but if you’re looking to secure venture capital, it helps to throw in a bit of alcohol.

Since last year, venture investors have poured more than $300 million into an assortment of companies providing alcoholic beverages, drinking gadgetry and services to connect consumers with booze. Crunchbase News highlighted about a dozen that raised sizable rounds, along with one hangover cure startup.

Some of the larger funding rounds are for companies that don’t make alcohol; instead, these startups offer easier ways to select and buy it. These include Vivino, a popular wine rating app, as well as Drizly and Saucey, two ordering and delivery services.

There are emerging brands in the mix, too, including BeatBox Beverages, a purveyor of party punch in portable packages; Milestone Brands, a producer of organic tequilas and other spirits; and Plum, which has a gadget for dispensing good wine by the glass.

Caffeinate

If too much drinking makes you sleepy, let caffeine come to the rescue. Venture investors, known to be heavy consumers of caffeine, also seem to like investing in the stuff.

Using Crunchbase data, we highlighted more than a dozen companies in the coffee and tea space that have secured good-sized rounds in roughly the past year. They range from fast-growing chains, like China’s Hey Tea, to packaged drinks, like non-dairy blended drink maker Willow Cup, to instant beverage innovators, like Sudden Coffee. We even found a blockchain company in the mix, Crypto N Kafe, which aims to connect coffee farmers and consumers directly.

It’s not a bad area for exits, either. The most recent significant exit was Blue Bottle Coffee, a venture-backed brand known for really, really strong brews that sold a majority stake to Nestlé last September at a valuation of over $700 million.

Nourish

One additional beverage category in which we saw a high level of activity was in meal-replacement and nutrition drinks. Overall, we found at least a half-dozen companies developing nutritional drinks that have raised funding in recent quarters.

In this sector, probably the best-known startup name is Soylent, which has raised over $70 million for a line of drinks marketed to consumers who don’t have the time or inclination to sit down for a traditional meal. We also found a potential rival, meal-replacement beverage maker Ample, which secured angel funding last month.

The biggest round in the past couple of months for the space, however, went to REBBL, a startup that raised $20 million in May for its line of bottled drinks featuring health-promoting herbs, protein and coconut.

Mix it all up: Caffeinated, full and buzzed

Beverage investments, like everything else, aren’t always a home run for VCs. The demise of juicer startup Juicero last year offers a cautionary tale that large rounds don’t always translate into compelling business models.

That said, beverage purveyors don’t have to worry much about demand drying up. People will always be thirsty. And while we typically quench our thirst with simple tap or filtered water, where’s the fun (or the massive exit potential) in that?

Methodology

Our analysis focused primarily on companies that have secured funding in the past year; however, we also included some rounds outside those parameters that were exceptionally large or noteworthy in other ways.

These cities in California’s East Bay are raking in venture capital

Published July 1, 2017

San Francisco Bay Area companies raise so much venture capital relative to other places that a lot of little-known cities in the region outrank major metropolises in total funding. In this two-part series, we’ll look at nine under-the-radar places in the Bay Area that punch above their weight class when it comes to attracting startup funding. For today, we’ll focus on the East Bay. Read More