Airwallex CEO Jack Zhang says the fintech runs a software-infused global digital bank for SMBs, with transfers costing under 10% of SWIFT correspondent banking.
Zhang says turning down Stripe's $1.2bn acquisition offer after about two weeks was probably the wrong call in hindsight.
Airwallex's valuation multiple compressed from about 100 times revenue to 13 to 14 times gross profit, and payments and cards now make up most of gross profit.
Airwallex's founder rejected Stripe and built a cash-positive global bank
Airwallex wants to be the global bank for businesses, moving money at a fraction of the cost of SWIFT. Jack Zhang got there through failed products, punishing work and a willingness to turn down large offers, including Stripe's. A payments and card business for SMBs now carries a company with over $500m in recurring revenue.
Takeaways
Airwallex is large, profitable and cheap. Airwallex has over 1,600 people in about 23 offices, more than $500m in annual recurring revenue, and $100bn in payments volume last month. It has been cash flow positive since the end of 2023 and claims transfers cost under 10% of SWIFT.
Rejecting Stripe's $1.2bn offer was probably wrong. Stripe made the offer at the end of 2018 and Zhang declined after about two weeks. Sequoia Capital had invested at a $450m valuation months earlier and did not want a sale. Zhang now says declining was probably the wrong call.
Valuations peaked in 2021, then multiples collapsed. Later rounds reached valuations of up to $5.6bn in 2021, and Zhang also turned down an $8bn offer. The multiple then compressed from 100 times revenue to 13 to 14 times gross profit. Airwallex has raised about $1bn in total.
Payments and cards now drive the business. Airwallex shifted to a payments and card business, which now makes up most of gross profit. SMB customers rose from under 5% of the business to about 80%. Zhang calls it a software-infused global digital bank with accounts in close to 70 countries.
Splitting engineering by region ended culture clashes. Australian and Chinese teams clashed culturally. Zhang resolved it by putting engineering in Australia and infrastructure in China. He says China excels at engineering at scale and execution intensity, so global founders should use Chinese engineers.
Hardship and overwork shaped Zhang's drive. Zhang moved alone to Australia at 15 and worked in restaurants and a lemon factory after his parents lost financial support at 16. He worked 110 to 120 hour weeks, and now says 70 to 80 is more sustainable.
Next goal is a $100bn business. Zhang plans to build a $100bn business, with a focus on brand and relationships. In 2021 he raised a venture fund, Capital49, to invest in early-stage founders.
How Airwallex found its footing
The first product was a peer-to-peer foreign exchange model. It would have needed multiple billions of dollars of trading volume in one concentrated corridor, and it failed.
A second product, invoicing for Australian merchants, also failed.
Friend Lucy wired $1m to Zhang's personal account before he resigned from his job.
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On this episode 2
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Tencent founder Pony said no in September 2016, until James Mitchell persuaded him in early 2017. Tencent and Sequoia Capital then joined Mastercard in a $13m round.
An API product won customers such as HaiGuide and Easy Transfer, and volume rose from zero to $1bn in 2018.