Melbourne
Auto Added by WPeMatico
Airwallex raises $200M at a $4B valuation to double down on business banking
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.
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.
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.
Powered by WPeMatico
Investors cozy up to LA-based ettitude’s bamboo bedding and sleep wear with $1.6 million
Ettitude, the Los Angeles-based, direct-to-consumer startup making sustainable bedding and sleepwear from bamboo fibers, has raised a sustainably sized round that should keep the company going even in the face of an economic recession.
Co-founded by the Melbourne, Australia native Phoebe Yu and serial entrepreneur Kat Dey, ettitude sells high-end bamboo bedding made using a process she first heard about in her old job working as an exporter helping chain stores source textiles in China.
Sourced from a factory in Zhejiang, China, near Shanghai, the bamboo textiles are made using non-toxic solvents and a closed-loop system that reuses water for the process, according to Yu.
Yu started selling the cleanBamboo-branded bedding under the ettitude label in Melbourne first, but when she saw the orders begin to pick up from the U.S. she relocated and took her company with her.
Upon arrival, Yu realized she’d need a strong co-founder with experience in branding to help her navigate the massive market in the U.S. So Yu turned to AngelList, which is where she found Dey.
A serial entrepreneur with a background in retail, whose first company TryTheWorld was acquired by EarthBox in 2017, Dey was looking for her next project.
“Phoebe sent me a sample and I had the best night of sleep in my life,” Dey said. From then on the two co-founders began the long, hard slog of marketing their business.
Sales are growing, according to the two women, and the company’s chances have certainly been improved by the capital infusion from Drumbeat Ventures and TA Ventures, a European female-founded fund focusing on technology innovation.
The $1.6 million financing will be used to boost sales and marketing as the company expands beyond bedding — with an average price of $178 for a queen-sized sheet set — and into sleepwear and other categories.
“Phoebe, Kat and their brand, ettitude, are as genuine a combination of passion, purpose, and proprietary product that I’ve seen in the marketplace in my 20 years,” said Drumbeat Ventures founder, Adam Burgoon, in a statement. “They are perfectly positioned to bring their mission of sustainability and comfort to a broader audience.”
Powered by WPeMatico
Replacing plastic with plant pulp for sustainable packaging attracts a billionaire backer
In a small suburb of Melbourne, two entrepreneurs are developing a technology that could mean big changes for the packaging industry.
Stuart Gordon and Mark Appleford are the co-founders of Varden, a company that has developed a process to take the waste material from sugarcane and convert it into a paper-like packaging product with the functional attributes of plastic.
Their technology managed to grab the attention of — and $2.2 million in funding from — Horizons Ventures, the venture capital fund managing the money of Li Ka-shing, one of the world’s wealthiest men.
It’s an opportune time to launch a novel packaging technology, as the European Union has already instituted a ban on single-use plastic items, which will go into effect in 2021. Taking their lead, companies like Nestlé and Walmart have pledged to use only sustainable packaging for products beginning in 2025.
The environmental toll that packaging takes on the earth’s habitats is already a concern for many, and the urgency to find a solution is only mounting with consumers and businesses actually producing more waste in the rush to change consumer behavior and socially distance as a result of the COVID-19 global pandemic.
“I like technologies that focus on carbon reductions,” said Chris Liu, Horizons Ventures’ representative in Australia.
A longtime tech and product executive who had stints at Intel and Fjord, a digital design studio, Liu relocated to Australia recently and has actually taken himself off the grid.
Living in Western Australia, the climate emergency was brought directly to the top of Liu’s mind when the wildfires, which raged through the country, came within two kilometers of his new home.
For Mark Appleford, it wasn’t so much the fires as it was the garbage that kept washing up on the shores of his beloved beaches.
Over beers at a barbecue he began talking to his eventual co-founder, Stuart Gordon, about the environmental problem they’d solve if they had the ability to change things. They settled on plastics.
Working in Appleford’s laundry room they started developing the technology that would become Varden. That early laundry room-work in 2015 led to a small seed round and the company’s long slog to get an initial product in the hands of test customers.
Finagling some time with the New Zealand manufacturer Fisher and Paykel, the two co-founders put together an early prototype of their coffee pods made from sugarcane bagasse, a waste byproduct of the sugar feedstock.
“We worked backwards through customers to supply chain, which led us to material selection, which was something that would allow us to create a product that people understood,” said Gordon.
The production process has evolved to fit inside a 40-foot container that holds the firm’s machine, which takes agricultural waste and converts that waste into packaging.
Instead of using rollers like a paper mill, Varden’s technology uses a thermoform to mold the plant waste into a product that has the same properties as plastic.
It removes a complicated step that’s been essential to the current crop of bioplastics, which use bacteria to convert plant waste into plastic substitutes that are then sold to the industry.
“It looks like paper… you can tear it in half and it sounds like paper when you rip it, and you can throw it in the bin,” said Appleford.
Gordon said that the company’s containers are outperforming commodity based plastics. And the first target for replacement, the founders said, is coffee capsules.
“We went for coffee because it’s the hardest,” said Appleford.
It’s also a huge market, according to the company. Varden estimates there are more than 20 billion coffee pods consumed every year.
With the new money, Varden will begin manufacturing at scale to meet initial demand from pilot customers and is hoping to expand its product line to include medical blister packs in addition to the coffee pods.
“A pilot plant on the products we’re looking at is a pilot plant that can generate 20 million units a year,” said Gordon.
Both men are hoping that their product — and others like it — can usher in a generation of new sustainable packaging materials that are better for the environment at every stage of their life cycle.
“The next generation of packaging will be better… there are plant-based flexibles for your salads, for your potato chips… [But] the next generation of molded packaging is us… bioplastic will ultimately go.”
Powered by WPeMatico