Episode Summary: The Twenty Minute VC (20VC) – Airwallex’s Journey from $1M Angel Investment to $1B Revenue
Introduction
In this compelling episode of The Twenty Minute VC (20VC), host Harry Stebbings delves deep into the extraordinary journey of Jack Zhang, co-founder and CEO of Airwallex. Titled “The Most Insane Story in Startups: Airwallex: The Angel That Turned $1M into $1BN,” the episode chronicles Airwallex’s meteoric rise, pivotal decisions, near-death experiences, and the relentless drive that fueled its growth from a modest startup to a billion-dollar enterprise.
Early Life and Entrepreneurial Beginnings ([05:26]-[12:35])
Jack Zhang begins by sharing his challenging upbringing. Moving to Australia at the age of 15, Jack faced significant financial hardships after his family lost most of their money. At just 16, he had to fend for himself, taking on grueling jobs in lemon factories and restaurants to support his education.
Jack Zhang ([05:26]): "I had to basically figure out how to survive in a foreign country by myself... I have to do my part, just really work as many jobs as possible to figure out how to live on my own."
These early experiences instilled in Jack a profound sense of resilience and a strong work ethic, laying the foundation for his entrepreneurial spirit.
First Entrepreneurial Ventures ([09:49]-[19:31])
Jack recounts his first foray into entrepreneurship during high school when he co-founded a magazine called Urban Exploration. Despite limited resources, the magazine gained significant traction by featuring engaging stories and securing 8,000 merchant advertisements, ultimately raising funds for his school.
Jack Zhang ([09:49]): "We wrote really interesting stories and that magazine just got viral because we printed out of the school for free and we didn't have any costs."
This early success highlighted Jack’s innate ability to identify opportunities and leverage creativity to achieve financial goals.
Founding Airwallex: Vision and Challenges ([19:31]-[31:56])
Transitioning from various side businesses—including importing olive oil and wine, real estate development, and architecture—Jack sought a venture that aligned with his passion for technology and financial security. This led to the inception of Airwallex, aimed at revolutionizing cross-border payments by creating an alternative to the outdated SWIFT network.
Jack Zhang ([23:36]): "Why money is not? Essentially it's data, it's a ledger."
Despite a bold vision, the early days of Airwallex were fraught with challenges, including securing initial funding. Jack narrates how Lucy, an angel investor he met serendipitously, invested $2 million on the spot, a move that significantly bolstered the nascent company's prospects.
Fundraising and Near-Death Moments ([31:56]-[51:22])
As Airwallex began developing its product, Jack encountered critical setbacks. After raising an initial $3 million from Lucy and Gobi VC, a renowned VC firm in Hong Kong, another major investor—Matrix Partners—pulled their term sheet, posing a potential loss of $1 billion in valuation.
Jack Zhang ([31:34]): "They signed the term sheet, and they took it back... so that's a $1 billion pullback."
In response, Squarepack stepped in with a $6.2 billion investment, saving Airwallex from imminent closure. This period underscored the volatile nature of startup funding and the importance of resilience in the face of adversity.
Scaling the Company: Lessons Learned ([51:22]-[62:32])
With fresh capital, Jack embarked on aggressive expansion, scaling Airwallex from 100 to 700 employees within a year. However, this rapid growth uncovered a lack of financial discipline, leading to another near-death experience as revenue growth couldn't keep pace with operational expenses.
Jack Zhang ([61:18]): "I didn't have a budget, I'm just like hire as fast as possible, blow it all out. And then I realized at one point that we're running out of money."
Recognizing the misstep, Jack emphasizes the critical lesson of maintaining financial discipline even amidst rapid scaling.
Overcoming Further Funding Challenges ([62:32]-[73:56])
Despite previous hurdles, Jack persevered, raising additional funds from prominent investors like DST and Hedosophia. The onset of the COVID-19 pandemic presented new challenges, but strategic fundraising and pivoting allowed Airwallex to maintain momentum. By 2023, Airwallex achieved profitability and sustained over 100% year-on-year growth for eight consecutive years.
Jack Zhang ([71:52]): "We never grow below 100% from 2015 to 2023."
Advice to Founders ([73:56]-[81:09])
Reflecting on his journey, Jack offers invaluable advice to aspiring founders:
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Hiring Early: Jack admits that hiring the initial 100 employees himself was inefficient and suggests employing professional recruiters to streamline the process.
Jack Zhang ([76:50]): "Get a good recruiter early on that can make the hiring a lot more efficient."
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Focused Expansion: Avoid over-investing in international markets without achieving product-market fit.
Jack Zhang ([77:41]): "Don’t over invest in international expansion when you don’t have product market fit."
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Cultural Investment: Building and maintaining a strong company culture from the outset is crucial for long-term success.
Jack Zhang ([78:36]): "Invest in the culture early."
Additionally, Jack discusses the strategic use of secondaries for founders to secure personal financial stability without diverting focus from their business.
Future Vision and Closing Thoughts ([81:09]-[83:03])
Looking ahead, Jack envisions Airwallex as a leading global payments and banking platform, surpassing traditional giants like Citi and HSBC to empower millions of businesses worldwide. He expresses a commitment to long-term growth and innovation, inspired by visionary leaders like Elon Musk.
Jack Zhang ([82:38]): "I hope we have built one of the largest global payments and banking platforms to power modern businesses around the world."
Notable Quotes
- Jack Zhang ([05:26]): "I had to basically figure out how to survive in a foreign country by myself... I have to do my part, just really work as many jobs as possible to figure out how to live on my own."
- Jack Zhang ([09:49]): "We wrote really interesting stories and that magazine just got viral because we printed out of the school for free and we didn't have any costs."
- Jack Zhang ([23:36]): "Why money is not? Essentially it's data, it's a ledger."
- Jack Zhang ([31:34]): "They signed the term sheet, and they took it back... so that's a $1 billion pullback."
- Jack Zhang ([61:18]): "I didn't have a budget, I'm just like hire as fast as possible, blow it all out. And then I realized at one point that we're running out of money."
- Jack Zhang ([71:52]): "We never grow below 100% from 2015 to 2023."
- Jack Zhang ([76:50]): "Get a good recruiter early on that can make the hiring a lot more efficient."
- Jack Zhang ([82:38]): "I hope we have built one of the largest global payments and banking platforms to power modern businesses around the world."
Conclusion
This episode of The Twenty Minute VC offers an unfiltered glimpse into the highs and lows of building a billion-dollar startup. Jack Zhang’s candid reflections on his entrepreneurial journey, strategic decisions, and unyielding determination provide invaluable insights for aspiring founders and venture capitalists alike. Airwallex’s story is a testament to the power of resilience, vision, and the relentless pursuit of innovation in the dynamic world of startups.