How did Airwallex raise US$160 million during the COVID-19 pandemic?

Written by || April 28 2020

In every crisis, there are opportunities. While many investors are tightening their belts during the coronavirus pandemic, some are opening their wallets. Now is the time to double down on certain investments. Take Australia's Airwallex as an example. The Melbourne-based cross-border payments platform closed a mammoth US$160 million (A$250 million) funding round in April, bringing its valuation to US$1.8 billion from US$1 billion. Less than half of the capital was raised in January, according to Australian Financial Review. Airwallex managed to raise the rest amid the pandemic's surge.

Airwallex's Series D round is one of the largest equity raises ever by an Australian startup. Only neobank Xinja's US$ 277 million (A$433 million) round closed in March is bigger. But that capital injection from Emirates World Investments will be delivered in installments, not as a lump sum.

A key part of Airwallex's business comes from China, where clients such as Tencent's WeChat and e-commerce giant use its platform to receive payments from overseas in renminbi. Clients can also use Airwallex to open foreign currency accounts in Australia, the U.S. and Europe. Besides Tencent, Airwallex has two other key backers from China, Sequoia Capital China and Shanghai-based Gobi Partners.

In terms of transactions numbers, China's cross-border payments rose 30.6% in 2019 to RMB 34 trillion (US$4.8 trillion), according to the People's Bank of China. Cross-border payments are rising in tandem with cross-border e-commerce. From 2015-2018 China's cross-border e-commerce grew at a compound annual rate of 76%, according to a report published in late 2019 by consultancy Deloitte, the China International Chamber of Commerce and Alibaba's AliResearch.

Cross-border e-commerce will be a key driver of China's consumption growth in the future. As the segment makes up just 2.2% of China's overall online retail market, "there is significant runway for long-term growth for brands and retailers," AliResearch head Gao Hongbing said in a November post on the Alizila site.

Nevertheless, Airwallex's business has not escaped from the pandemic unscathed. Revenue and processing volume have fallen 15-20%, CEO Jack Zhang told AFR. Airwallex was not profitable before the coronavirus outbreak, so that means it's now deeper in the red. Fortunately, its Series D funding round gives the company some breathing room. According to AFR, Airwallex needs to reach US$100 million in revenue to "have the ability to be cash-flow positive if it chooses." Zhang expects it will not take Airwallex long to reach its target, although he did not say when. With the global economy in recession, Airwallex is unlikely this year to match its reported 500% revenue increase in 2019. 

 In February, Airwallex and Visa announced they would partner on B2B cross-border payments with the Airwallex Borderless Card. The card will allow Airwallex's corporate customers to instantly generate a multi-currency virtual Visa payment account that can be used to pay suppliers. The card will first be launched in Australia and later in the United Kingdom and Hong Kong.