A company inspired by Melbourne's coffee scene has become Australia's newest tech unicorn, with real-time payments platform firm Airwallex, founded by university students, hitting the $1 billion valuation mark.
The inspiration for the fintech platform, which co-founders Jack Zhang and Max Li started out of a Melbourne specialty coffee shop, came in 2015 when Zhang and Li struggled to buy coffee cups and labels for their cafe Tukk & Co in Melbourne's Docklands.
"We were importing a lot of stuff from Hong Kong and China and other places because we wanted to do it really well and cost-effectively," Zhang says.
"When we were making a payment using the traditional methods of either a bank or Western Union, the cost could be through the roof, we are talking a couple of per cent and using multiple intermediaries."
That dilemma led the pair to join up with friends from Melbourne University - Xijing Dai, Ki-lok Wong and Lucy Liu - to start Airwallex.
"We wanted to be able to build something a lot more robust, a lot more real time, cost-effective and as well as transparency in pricing to other customers so we could make the life of those businesses easier," Zhang says.
"For an e-commerce seller importing from China, we can do that payment in real time and the cost is less than 0.5 per cent."
Airwallex enables customers to create international bank accounts instantly, access interbank exchange rates and send money through local and international clearing networks to more than 130 countries.
The startup is headquartered in Melbourne where there are 60 staff and it employs 250 people globally with eight offices across five continents, and has plans to increase staff in Melbourne by 100 per cent "if we can hire that fast".
Airwallex's latest funding round of $100 million was led by DST Global, which has previously backed Facebook, Airbnb and Spotify, and the round values the startup at $US1 billion ($1.4 billion) giving it 'unicorn' status.
The status is a little bit strange to be honest, but it is just giving us the credibility and reputation to service more customers.Jack Zhang
DST was joined by Sequoia Capital China, Tencent, Hillhouse Capital, Gobi Partners, Horizons Ventures and SquarePeg Capital. The total capital it has raised is now more than $US204 million.
The five founders own more than 50 per cent of Airwallex and the valuation gives them an estimated wealth of more than $100 million each.
Zhang says the latest funding raise was "relatively fast" and took less than two months.
He's still coming to terms with being the chief executive and co-founder of a so-called tech unicorn.
"The status is a little bit strange to be honest, but it is just giving us the credibility and reputation to service more customers," he says. "Security is very important to our customers and to become a unicorn, which is a company valued at over $US1 billion, gives more credibility to our customers besides the licensing around the world."
Square Peg Capital partner, Paul Bassat, says Airwallex’s ambitions were "clear from the very beginning".
"In just three years, Jack Zhang, Lucy Liu and their co-founders have assembled a highly capable, experienced and technical team who have built the global digital payment network of the future," he says.
Opportunities for growth
Despite its sky rocketing value, AirWallex's reported revenues are modest. In the most recent financial records filed with the regulator for the year ending June 30, 2017, Airwallex reported revenue of $14,803 and a loss of $806,195.
However, Zhang says this figure did not include global revenue and the business is now "tracking well beyond" its forecast of $20 million.
"For a company at our stage, revenue is not the key thing, it is all about the processing volume and we are on track to process tens of billions of dollars in 2019," he says.
Zhang says Airwallex's vision continues to grow.
"We started with payments and now we are building a global financial infrastructure, we are the Amazon Web Services (AWS) of global banking," he says. "We build a technology layer or API [Application Programming Interface] layer sitting on top of more than 50 banks around the world."
Airwallex will use the latest funding round to expand further out of the Asia Pacific region, target smaller businesses and develop new products and applications aimed at helping companies to grow internationally.
Zhang says while it took Australia's other unicorns Atlassian, Canva and Aconex several years to reach $US1 billion in valuation, Airwallex has been able to achieve this in just over three years because of the "big background" the startup is operating against, leveraging trends of digitisation and globalisation.
"A lot of businesses are moving from offline to online and the nature of online businesses are that they are globalised businesses because they don't have the physical barrier of the traditional business model," he says. "The vision of Airwallex is to become the fundamental infrastructure for online businesses to scale."