Airwallex co-founder Jack Zhang says Stripe offered $1.2bn to acquire the company in a deal he ultimately declined.
Zhang says he walked San Francisco for two weeks verbally agreeing to the deal before deciding that leading Asia-Pacific under a five-year lockup would not make him happy.
Zhang says Airwallex hired too many experienced people from big banks and should have let them go in weeks rather than years.
Airwallex's founder refused Stripe's $1.2bn offer and kept building
Airwallex began with one lost payment and grew into a global cross-border payments company worth over $11bn. Zhang's defining choice was refusing a $1.2bn Stripe offer at about 80 times forward revenue. He judged that a five-year lockup running Asia-Pacific would not make him happy, and he bet on building independently through setbacks that included losing half the revenue in a day.
Takeaways
Zhang turned down a $1.2bn Stripe offer. The offer was about 80 times forward revenue, when Airwallex had 160 to 170 people and roughly $2.6m in 2018 revenue. Zhang decided leading Asia-Pacific under a five-year lockup would not make him happy, and his cofounders left the call to him.
Michael Morris's compounding argument nearly swayed him. Morris argued that the earlier a company starts compounding, the faster it reaches a trillion dollars. Zhang found this convincing and told Stripe's Patrick verbally he would do the deal. Back in Melbourne he reversed. Max Li favored selling, but the other founders did not.
The years after the offer were brutal. SoftBank came close to a term sheet before COVID but withdrew after the WeWork troubles. Airwallex then lost half its revenue in a day. A London investor, Hedosophia, helped lead a later funding round.
Airwallex is now a large global payments business. Revenue is close to $1.3bn and growing 85 percent, with about 2,200 people in 26 offices. Airwallex is regulated in more than 60 markets, and payments make up 40 percent of revenue.
North America and Europe grew fast against strong rivals. The two regions went from zero to close to 40 percent of revenue in three years. US business is growing over three times this year, with 500 to 600 US staff planned. Rivals include Stripe, Ramp, Citibank and HSBC.
Early hardship shaped Zhang's work ethic. His father, a regional bank chief executive, was investigated and the family lost nearly everything while Zhang studied abroad. He paid his way in Australia by washing dishes, bartending, working nights at a petrol station and picking lemons, and never considered dropping out.
Airwallex hired too many big-bank veterans. Zhang says the company brought in too many experienced people from big banks and should have let them go in weeks rather than years. He argues first principle thinking matters more than experience in early hiring.
How Airwallex got started
A payment went missing because a different person with the same name as cofounder Max Li appeared on the OFAC sanctions blacklist.
SWIFT messages carry only 140 characters and lack fields such as date of birth, so Zhang proposed a direct network between payment systems.
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On this episode 2
Show 1
Lucy invested $1m for 20 percent at a $5m post valuation, and later joined the four original cofounders as a fifth.
Airwallex won an ASIC license after Zhang wrote a pitch letter. It then pivoted away from peer-to-peer foreign exchange and from SMB invoicing toward an API business for large customers.
A cold call to Macquarie Bank led to interbank connectivity, and Macquarie became the largest customer.
Mastercard and Shein signed around 2017. Mastercard promised about $1bn and delivered almost nothing, yet volume grew more than 100 times in 2018.