UNICORN INCOMING: Airwallex goes big (again), taps private markets for another $US100 million
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Australian fintech Airwallex has just closed a huge Series C funding round, as it continues to plough ahead with its global expansion strategy.
The $US100 million ($140m) raise was led by DST Global, a venture capital fund founded by tech billionaire Yuri Milner.
At that price point, Airwallex is now one of the few Australian startups to reach the status of a tech unicorn — an implied valuation of more than $1 billion.
It marks a rapid ascent for the cross-border payments platform, which was co-founded in 2015 by a group of former Melbourne University students.
The company’s first capital raise dates back to 2016, when it took on $3m from a group of angel investors and the Hong Kong arm of Alibaba’s venture capital fund.
A year later, it raised another $US13m from some big players in Asian finance, including TenCent Holdings and the China investment arm of legendary tech VC fund Sequoia Capital.
Later that year, Australian VC fund Square Peg Capital came on board with an $8m investment before a big Series B round in August 2018 — a $US80 million injection as Tencent and Sequoia upped their stake further in the business.
Airwallex’s product offering includes a simplified foreign exchange service, that takes the mid-point of market rates and charges a flat transaction fee. It also provides algorithms which automate the path of least resistance for cross-border money flows, thus helping to minimise transaction fees.
The company established its initial competitive advantage in Asia — where it obtained licences to operate its transaction platform in Hong Kong and China — and it has an AFSL licence in Australia.
Then last December, it was granted an Electronic Money Institution (EMI) licence from the UK Financial Conduct Authority (FCA), which can also be passported throughout Europe.
Dave Stein, Airwallex’s head of Business Development, told Stockhead that he’s not too worried about the negative effect of Brexit.
Rather, the company’s latest funding round will be used to establish its cross-border payments network across existing financial centres in the US and UK.
“In the last three years we’ve built a global company — the business by its nature isn’t a localised operation,” Mr Stein said.
“We’ve successfully executed a strategy of establishing operations in one country, then moving onto the next jurisdiction. And right now, the big focus is London and San Francisco.”
In line with its global ambitions, Airwallex shifted its headquarters to Hong Kong towards the end of last year.
So, with major capital injections flowing in from international VC funds, will the company continue to maintain strong ties with its Melbourne roots?
“Absolutely,” Mr Stein says. “Australia was the founding office for us, and we see it as a key anchor point for the company’s operations — particularly as an engineering hub.”
“And that’s not changing, we’re doubling down on our investment in the local office and plan to increase headcount by at least 50%.”
The company currently has nine jobs advertised for its Melbourne office, the bulk of which are in engineering and product development roles.
There are 10 roles currently advertised in Hong Kong, with a further 28 job opportunities in Shanghai.
The company’s latest huge funding round comes amid a round of consolidation in the market for global payments providers. A case in point: Fidelity International’s $US35 billion takeover of UK payments platform Worldpay.
But as for Airwallex, Stein wouldn’t comment on the likelihood of a potential trade sale or public listing.
And besides, that transaction involved two companies that offer business-to-consumer payment services, whereas Airwallex operates in B2B markets.
“The market’s gone from quite sleepy to very hot in a pretty short space of time,” Mr Stein said.
“Ultimately, we’re there to help businesses grow. The B2B service is focused on funds that originate within a business, and the ability to move that money around quickly and efficiently.
“From an e-commerce perspective a lot of businesses are almost borderless, and cross-border payments is the glue that facilitates that.”