The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:19:31 · Jack Zhang
[00:19:31] S0: I always knew I love technology. That's why I keep my code I keep my job writing code even though I'm making 10 times the money on the site. So I never resigned. I never thought about resigning because I need to write code every day so I feel that one day when I actually want to start a business, I can still creating something. You know, when we were running the corporate business, the idea was not really running the COVID business. The initial idea was that, Okay, we need to basically I would look at like, in Australia, there's a biggest telco called Telstra. And Telstra publishing the fastest 50 growing company every year in Australia. And more than half those companies are retail businesses, like burger chain or coffee chain or some sort of these retail chains. And I started like a burger chain, I started like a coffee chain. I mean, when I say chain, it's only just really one business at a time and was supposed to become a chain. But during that setting up process, the first problem we found is that there's no square equivalent in sort of 2013. The whole point of sales, payments, order management in the back of the kitchen, the ordering system, the delivery system, nothing was really set up. So I was like, I should start basically a square, plus the whole kind of backend order management system. And I pitched the idea to my CTO, Jacob, and I was like, Dude, let's do something together. I think this is a real opportunity. And at that time also, NFC, you know, the touch payment started sort of changing the consumer payment behavior. I was like, let's build something that can support NFC payments and let's go into build this point of sale system and payment system for offline merchants. And he's like, Oh, no, no, like I think QR is going to take over the world. I mean, because he at the time started a company in China in AI. And he just started the AI business ten years too early. And he's like, I don't believe this whole NFC thing. He's like, QR is going to take over the world. We should build a QR thing. And I was like, nobody using QR. I never heard of this thing. I mean, is a very China thing. And I don't think so. And then we kind of just debated, then we end up just can't agree on that idea, and then we let it go. I mean, that could be another billion dollar startup in 2013. And we'll just keep building the coffee business.
00:21:44 · Jack Zhang
Halfway through, and when we launched the coffee business, then we were essentially importing beans from Brazil, from Indonesia, and importing packages from China. And payment is a real issue. And my co founder's name is Max Li. The same name is on the OFAC blacklist. So whoever that he's sending a payment using his personal name, because at that time, you know, we're still using personal name to sending money around the world. And his name his payment just got blocked somewhere in the middle because it's going through the SWIFT network and bounced back after two months. And he just keep complaining to me, you know, like, why I'm sending a payment to look at Brazil and take like two months for the payment to come back? And I really look in under the holders like, what is this SWIFT thing that built in the 1970s? And how does SWIFT works, right? So if you're sending money from, say, NetWest to a bank in Brazil, like a small bank in Brazil that, you know, they're not going to have a bilateral relationship. Essentially, they go through the SWIFT network. There's a lot of intermediary, the large global banks that have dominated that kind of relationship. So essentially, NetWise will go to Barclays, Barclays go to Citi, Citi go to Itau Wu, and Itau will go to this smaller bank in Brazil. And it's like everything the smaller the country it is, the more counterparty in the middle go involved and they charge a higher fee and slow down the process. And there's a more complicated compliance process because, you know, the Swift messages only contain 140 characters. You can't really pull out information to reduce false positive. And was just like, this just doesn't make any sense. Why this thing being existed for fifty years and processing trillion dollar every day? Why can't we fundamentally build a new system to help people to moving money, just like you moving information, like in data. If the data on the internet is real time, why money is not? Essentially, it's data. It's a ledger, right?
00:23:38 · Harry Stebbings, Jack Zhang
[00:23:38] S2: Get you, Jack. But what happens then? Because as you said, SWIFT created in the 1970s one of the most concrete architectures, which we don't really question. I mean, we still send Swift payments today. [00:23:50] S0: Well, I mean, it's it's still dominating the payment world today. [00:23:52] S2: So what happens then? You're like, hey. This is broken. We should have another way. What do you do next? [00:23:58] S0: Initially, I thought, let's just do point to point. Right? If you have, like, people want to send in money from Australia to Brazil and you have, you know, people from Brazil want to send in to Australia, and you can kind of just net it off. Right? And that's the initial idea we raised our seed round. But when we actually build the algorithm and we realize the amount of volume we needed to make that take off, you know, it's like billions of billions, right? And it was just never going to work. I don't even know how to get, you know, a 100,000,000 volume. Where do I get the billings? And then end of the day, we just, we raise the money. [00:24:30] S2: So you have the idea, hey, I want to reinvent the SWIFT network. I want to change payments. And at that point, before you build products, you go and raise money?
00:24:39 · Jack Zhang
[00:24:39] S0: Well, is another funny story. So when I was doing the COVID business and I was thinking about starting AirWallox at the time, and one day I just finished work on Friday. I went to the coffee shop to catch up with Max, another co founder of AirWallox, and I said, I'm going to resign. Let's just do this seriously. And I met a girl who is a friend of Max called Lucy, who just resigned from as an investment banker and wanted to get married and have a family in Australia and just sort of heated up with her. And she's kind of curious about the coffee business. She's like, oh, I want to talk to you more about coffee business and maybe I can invest in this coffee business. And then like we said, oh, let's just grab dinner, right? So we grabbed dinner and then she's like and then, you know, blah, blah, coffee business. I was like, actually, you know what? I'm actually going to really stop keep investing in this coffee business. I'm going to start a new business that really revolutionizing cross border payments and fundamentally changing how money moves around the world. And then she's like, Oh, tell me more about it. And, you know, because I was like, Oh, I have a background in FX, and I'm an engineer, and my co founder was like a genius engineer. You know, I made a pitch. And she's like, How much money are raising? I'm like, Oh, I'm probably going to raise 1,000,000 US. And she's like, What about if I give you 2,000,000? You know, this is a girl that you met for the first time in your life, and you only talked for like less than an hour. And then she's like offering you $2,000,000 I was like, for how much of the company? She's like, I'll give you $2,000,000 for 40% of the company. Initially I was my reaction was like, should I take it serious? But then she's let's really kind of have a deeper conversation in law school tomorrow. So law school is from University of Melbourne because she also went to University of Melbourne. So all four of us went to the same college. She's like, let's meet at like 08:00 tomorrow and we'll go deep on this. I'm like, Okay. So and I feel that she's serious.
00:26:38 · Jack Zhang, Harry Stebbings
So we went to the law school and I remember Saturday, this is like the second day I met her and she basically negotiated with me for three hours by 11:00 and then we agreed that she's going to invest a million because I don't want her own 40% of the company, she's going to invest a million dollar and $5,000,000 post for 20% of the company. And her husband was there strongly against it. And then she's like, we're going to use this money to buy houses and we're going to have a family. You know, what are you doing? She's like, I'm king and I actually wanted to join these guys. And, you know, and she just pushed us through and we just end up agreed verbally that we're going to do the deal. The crazy thing is, this is before even I resigned from my full time job in ANZ, and this is before I even have a company registered. Then like by Monday, I got a text message from my bank account. Like, you got a million US dollar wire to your personal bank account. Like, obviously, I'll give her the bank account, but like I just didn't expect that she would just wire without anything signed. Wow. [00:27:41] S2: And so then you put the paperwork in place and [00:27:42] S0: Yeah. And I... You know, that took like months. Yeah. So like literally I got the money three days over the weekend after the first time I met her. And that ended up probably one of the best investment people ever made. I mean, is like a girl that, I don't know, 25 years old or 24, and never
00:27:42 · Jack Zhang, Harry Stebbings
[00:27:42] S0: Yeah. And I... You know, that took like months. Yeah. So like literally I got the money three days over the weekend after the first time I met her. And that ended up probably one of the best investment people ever made. I mean, is like a girl that, I don't know, 25 years old or 24, and never [00:28:00] S2: made any investment. This is her first investment. On a $9,000,000,000 valuation, if you assume a reasonable dilution, you're turning a $1,000,000 there into a billion. [00:28:11] S0: Yeah. I mean, it's it's crazy. And I kind of just I'm gonna [00:28:14] S2: give her some advice. Yeah. She's listening. Stop investing. You will never make such a good investment again. You've reached the high. That is insane. [00:28:23] S0: I think she made a few other investments and then didn't turn out to be good afterwards, and I think she stopped investing. [00:28:30] S2: That is insane. Oh my gosh. Okay. So you get a million wired to your personal account, which nowadays would be like, you know, a challenging compliance problem, by the way. But you have a million wider account and you get to work? What happens then? [00:28:45] S0: I resigned. I literally got the money and I resigned the same day. [00:28:53] S2: I love this. So you resign, you go to Max, and you're like, right. Let's do this. Let's get to work on our wallets.