Benevolent Disruptors
00:06:47 · Jack Zhang
[00:06:47] S1: I mean, if you think about it, when we started the business in in Melbourne, Australia a decade ago, there was no unicorn in in Melbourne or in entire Victoria. And there's only one venture capital investor out of, you know, in the whole Australia, there's only three VC investors and and raising money is impossible. It's impossible to get mentorship, to understand how to build a company. So we made so many mistakes early on and we completely failed our product twice and have to pivot to, you know, the product today. If we were in Silicon Valley, we probably have already kind of died and then building something quite different to what people are building in The US. They really focus on product market fit, really focus on getting the product out to the customer as soon as we can. You know, I just talk about the Passive Max Resistance. You know, we went on a journey of getting licenses in over 70 markets around the world, with more than 80 banks around the world to, you know, and the central banks and local payment systems that one by one, country by country, doing the kind of the most difficult things and, you know, engaging in regulatory, legal, engaging compliance, rather than taking the pause of just getting the product out there to get product market fit initially without doing this really hardcore regulatory and financial infrastructure work. And we probably wouldn't have the time to do that in the valley either. But, you know, being outside of the valley, being in a small sort of startup ecosystem that gives us the time to really figuring out how to creating this business for the long term winning. And how do we thinking about programmatically building our business started with global money movement, they extended to, you know, payment to compete with Stripe, then later on also expanded to corporate card and spend management, competing with Ramp and other sort of spend management company. But also more important, our core business evolved into a global bank that we started building essentially the tech forward version of HSBC or Citibank. And now we're building that kind of AI layer on top of that to empower entrepreneurs and businesses who want to grow globally. And that kind of past and past experiences almost become a DNA or philosophy of how we're building the business.
00:09:07 · Jack Zhang
And also being in a sort of starting from a small country, give us leverage to getting the best talent in that country, right? So if we are in, even today, in San Francisco, we really sort of struggle to get the best talent. You were competing with the big AI labs, you were competing with so many brilliant founders out there, where in Australia or in APAC, you just become, you know, the company that people want to work for. And, you know, you have the best culture, you have the most innovative product, and you have the best talent density, so that kind of attracting more and more sort of talent into joining the company. So that it is almost like a benefit to not to be in the valley initially to build a strong kind of talent base to do what we do. And we also have enough time and patience to make mistakes, but also more importantly, build towards a long term value. And because the competition is a lot less than The US, which is a single biggest market in the world. And then we only went to The US after we already kind of dominated Asia Pacific from a global banking perspective and payments perspective. Then we later on extended to Europe and North America. And because we have such a profitable cash cow in Asia Pacific, and we can leverage that profitability to keep investing in Europe and North America now, within three years of expanding there, North America and Europe has already accounted for close to 40 of revenue from like zero, three years ago. So that's kind of a tremendous development for the company. But, you know, we couldn't achieve what we did without, you know, six, seven years of building the infrastructure, getting regulatory approval, having a great culture of attracting talent, coming from a first principle perspective of building the product.
00:10:55 · Chris Corbishley
[00:10:55] S0: It's fascinating. Were actually in Boston yesterday with Sebastian Mallaby in conversation with Demise Asavas, used the exact same rationale as to why actually staying in London and not having the distraction or the competition of moving DeepMind, for example, into the valley where you're up against stiff competition, but also terrible distraction from the core mission. And so it's fascinating that kind this of profit engine is what's driven your success now in Europe, in The US, and your retention of talent. And I think one of the most impressive journeys, because I remember in 2019 when we invested, it was it was still in that early days. You'd really proven some incredible product market fit in payment corridors that otherwise were very difficult to execute in. I had moved into things like corporate cards, moved into payments. And, you know, what what was fascinating was just the speed of execution on the product and how quickly you were unlocking enormous TAM, enormous new product areas by just pure innovation. And again, I'd just be curious to know how you created that culture internally and been able to innovate on the product side so quickly. What's driven that?
00:12:03 · Jack Zhang
[00:12:03] S1: Yeah. I think partly it's driven by customer demand, right? So that when we build the infrastructure, when we build the business account on top of that, that we have customers asking, oh, you know, if you already help us managing banking and financial operation globally, can you also help us to managing my corporate card and managing my expenses and procurement reimbursement and all that? And, you know, we see a lot of our customers using Strive or Audient to process online payment, but when they're doing cross border online payments processing, they're 2%, 3% of that GMV on FX and then cross border settlement. And it doesn't make a lot of sense from a first principle point of view. So we kind of really see the problem. There's a demand of having a single platform to managing sort of the money in, money out, and also where the money is sitting and how they're managing the cash flow and treasury of that. Right? So there's like, there's obviously a first principle element, there's also sort of customer demand side. And also that we, you know, we talk about pivotal moment that it's very sort of important for the company. In 2019, we decided to obsolete, early twenty nineteen, we decided not to go down the path of setting the company to strive. And that is a very hard decision for us. Then we're basically thinking like if we decline this decision, we need to build a $1,000,000,000 company, right, to make the journey worthwhile. Otherwise, you know, we could just sell the business. And we need to think really big or nothing. And we raised a $100,000,000 on the back of that from DST. And it's really kind of invested about 80% of that capital into building new product, which is payments, merchant acquiring and corporate card and spend management. And we also took a very different approach as in we build that merchant acquiring infrastructure, become a principal acquirer everywhere we operate. And we become a principal issuer of everywhere we operate, so that we do not have any third party in the dependency that we can deliver a multicurrency product from the ground up that which no one have the capability to provide in the underlying processor or infrastructure at all, that across APAC and Europe and North America as well.
00:14:17 · Jack Zhang
So I think that is also a very big decision because we know these new products are not going to get generating any revenue for the next three years. Imagine, right, in 2019, we had 12,000,000 revenue and you deploy 80% of the money you raise to building two new products that basically are not going to give you any revenue for the next two years. And at the same time, you are starving your core product because we've been keep recruiting and most of the new people recruited goes to new product, that the core kind of money movement infrastructure that kind of almost like expanding slower. We even kind of try very hard to keep up with the customer demand as we're growing. But we know that the world from a first principle perspective, that makes sense to have a single platform to handle all the customers' money, especially for mid market and SMBs, right? So you don't want it to If you need like one market that you have one provider for processing your payment, another provider for your banking, and maybe another provider for corporate card, fine. But if you think about it, if you operate in 20 countries, you're not going to have three providers in each of the country. And at that time, you know, there's really not much of an alternative for those companies to operate globally. We think it makes a lot of sense to have a single platform to do that. And then we decided to betting all our future that vision, which is driving kind of mostly first principle, but also kind of validated by customer demand. And now this new product generating about 60% of the company's revenue. And the product only went live in sort of 2022. And within sort of four years of sort of expanding that essentially 90% of our customers' acquisition still own the kind of the global business account. But then we upsell the payments product, we upsell the corporate card and spend management product. Now more than half of our customers are using two or more product. About 80% of our revenue are generated from people using two or more product. So the customer that using more product of Airwallet is a lot more profitable than the customer that only using one product. It's a lot more sticky as well.
00:16:28 · Jack Zhang
And now sort of with AI democratizing the vertical discipline in sort of office of the CFO, gives us even more advantages to tackling, we call it the entire financial operating system of the corporate finance team, right? You know, the financial operating system for a startup or for a global company. And kind of thinking about like, you know, coming, tell us sort of the reason we kind of bet on that multi product vision. But if you're thinking about AI, you know, you have to go multiparta from day one almost because the nature of AI is disrupting this vertical discipline that because the agent can all work in together to create an outcome, you don't really need everything staying in their own line anymore. There used to be like twenty, thirty winners in the office of CFO that you have, you know, expense management, procurement, accounting and revenue recognition at P and A, so that you have like twenty, thirty winners, all multi billion dollar companies sharing this a few $100,000,000,000 sort of market cap or revenue pool. But now the addressable market become not only that, but also plus the 10,000,000,000,000 plus sort of finance knowledge worker. And the vendor is not going to be twenty, thirty company anymore. It's going to be two, three company, all kind of doing everything, which is the nature of how AI operates, that the addressable market is also kind of 10x, right? So it's less inclusive, right? So you have less winners, so more competitive. The market size is also 10x more. So the price to win has also become a lot bigger. So that all these things we built in Airwallex in the last decade, taking the pulse of Max Resistant become the best decision for us to able to win in the world of AI finance. Because now we have controlled infrastructure for banking, money in on the payments and money out on corporate card and also transfer and spend management. We also kind of have the workflow of this company that we've seen in a very good position, not only to just deal with the infrastructure side, but also kind of give them the agent to help them to managing the finance team autonomously that ultimately become this agenic finance layer or financial operating system sitting on top of the infrastructure we built over the last decade to creating even bigger component value in the next decade.