By Sally Rose for Financial Review
Having raised $5 million, from backers such as Gobi Partners, Melbourne payments technology start-up Airwallex is ready to launch. There are also plans in train to raise up to another $20 million before the end of the year.
Airwallex is a digital financial services enterprise that has developed a platform combining low-cost foreign exchange and payments technologies. Its initial target market is local small businesses looking for an easier way to transact with clients and suppliers in China and Hong Kong.
One of the first investors in the new fintech company is Gobi Partners, the Hong Kong-based investment manager of Alibaba’s venture capital fund. Other backers include Beijing-based Gravity Ventures.
Angel investors rounded out the start-up funding round of $5 million, secured over December 2015 and January 2016.
Airwallex co-founder and chief executive Jack Zhang told The Australian Financial Review that finding the seed capital he needed was easier than expected.
“I had no experience with the venture capital industry and was absolutely shocked when the first outfit I approached in Hong Kong said they wanted to invest,” he said.
An in-house development team has the Airwallex platform ready to launch as soon as the final Australian regulatory approvals are received, which is expected to be in the coming weeks.
“Right now we are just waiting on our Australian Financial Services Licence (AFSL) to come through,” Mr Zhang said.
The relevant licenses to operate in China and Hong Kong have already been secured.
After the service has been up and running for a couple of months the plan is to quickly tap the venture capital markets again to fund marketing and spur growth.
“Once the product is launched we are planning to launch a Series A fund-raising round, probably targeting $15 million to $20 million. That will probably kick-off in September,” Mr Zhang said.
Most of that money is earmarked for marketing and product development.
The first iteration of the technology platform is an adaptive desktop version, so it works on most phones and handheld devices. A dedicated mobile app is also in the pipeline.
“Long term obviously there are opportunities to go into other international markets but initially we will be focused on China and Hong Kong,” Mr Zhang said.
“Ideally we’d get a major bank involved as a backer or partner at some stage.”
Necessity is the mother of invention
Before co-founding Airwallex, Mr Zhang was working as a technology developer for the foreign exchange division at National Australia Bank. During that time he made his first foray into entrepreneurship by investing in the cafe across the road from NAB’s Dockland offices where he brought his morning coffee. It was an experience running the finances for the cafe that gave him the idea to start Airwallex.
“We had ordered a big batch of takeaway cups from China because importing them was much cheaper than buying locally, but when it came time to pay the invoice I was shocked at how badly we were getting fleeced on the foreign exchange rate and fees,” Mr Zhang said.
Airwallex was created to provide small businesses needing to make cross-border payments with a cheaper alternative to the banks or the likes of Western Union and Paypal.
“Our customers will be able to save up to 90 per cent on the cost of foreign exchange transactions,” Mr Zhang said.
Unlike most foreign exchange platforms that profit through the arbitrage between a buy and sell rate Airwallex will only transact at the mid-market rate and charge a flat transaction fee.
Mr Zhang’s partner in the cafe, Max Li, is also founding partner in Airwallex and will be responsible for coordinating the company’s marketing. Mr Li has a background in the fashion and design industry.
Airwallex’s remaining three co-founders – Lucy Liu, Jacob Dai, and Ki-Lok Wong – all knew Mr Zhang from their time as students at Melbourne University. Chief operating officer Ms Liu previously worked on foreign exchange sales desks for Barclays Bank and in China. Chief technology officer Mr Dai and Mr Wong are both developers and ex NAB employees.
Mr Zhang and Ms Liu are the largest shareholders in the company, controlling 50 per cent between them. Ms Liu is based in Hong Kong.
First appeared at AFR