Why Airwallex Is Betting Against SWIFT and Stripe | CEO Jack Zhang

25:38Did you have any time to go out with friends and do anything like that? Or no, you're just like working with them? No, I didn't really do much. My college life sucks. Yeah, there wasn't like a full college experience or going out to parties, like none of that. I was talking to my friend. I mean, if you, you know, ask me to kind of give up everything I have today and travel back in time to college and I just have a normal college life, I would just do it no brainer. Oh, really? Yeah. Interesting. Tell me more about that. I just feel like there's just like a, there's like a 10 years of life gone missing between my sort of, when I was 16 to 26, I didn't do anything fun.

26:14All I do is work, work, work. And it wasn't even like fun work, right? Yeah, no, nothing fun. It was like shit work. Surviving. Yeah. Yeah. Yeah, well, that definitely built character, right? Yeah, I think I would definitely not do what I do today without going through that 10 years of struggle. Okay. So you got out of college. What did you do? What's the first thing? I interned at Goldman. Then GFC happened. So you were able to get an internship at Goldman. Yeah, but I didn't get a job after the GFC, right? So then I then went to London, worked for this insurance company called Viva in the investment side, basically building the investment strategies, investment platforms for the money that Viva managed, which is about$500 billion.

27:02Wow. And then what was the job exactly? Like, what did you do day to day? I've brought code to allow, you know, the investment managers or the traders to trade assets, different assets and pricing sort of work for the insurance premiums. Basically, it's engineer. Then later on, I've become an algo trader in the investment bank. How do you think that your kind of like Chinese background and Australian background kind of, you know, went in your success or culture, you know, at this point? And like, you know, obviously it seemed there's like a hard work and focused concentration that you learned in China.

27:38What did you learn in Australia that you think like? The life I grew up is, you know, academically, you know, very competitive. So you learn this very competitive personality. So you always want to win. I think that's a very strong character. And you see people working so hard and including my parents, you know, my mom and, you know, resign from a full-time job and just to, you know, start building a business when she's like 40 or something. So you just learn a lot of grit from that. And in Australia, people are very kind of curious and always ask the question. And you kind of get a lot of this curiosity and mindset.

28:14And also in Australia, there's a lot of space to do stuff. And the study was not that intense. Then you have a lot of time to kind of think. And I don't know. I mean, naturally, I was very focused on building relationship when I was in college, even though I was very busy at this work. And I think I was always hanging out with the best student in college. And, you know, mostly like, you know, a couple of them become a co-founder in Airwall. So I think that's super helpful. Okay. So you went to this insurance company to write software. Then you became a trader. And then what did you do after that?

28:51On the side, I was starting businesses. I think I was in Morgan Stanley in Hong Kong for a bit. So that was after the insurance company? Yeah, after the insurance company, I went to Hong Kong. So you're in back, you know, Hong Kong's not exactly China, but, you know, kind of. I've never been to Hong Kong at that time. Okay. It's like, they tax is low, make a lot of money. So you just went because you found a job there, not because of anything else? Yeah. As a trader. I started as sort of, yeah, in front office, essentially like doing market risk and trading at the same time. Got it. And I built a software called Currency Overlay in my job that we made a bunch of money for the bank.

29:35And I basically thought I will be able to lead that business because I created a part out with another guys on the trading desk. But they then later on moved someone from New York to lead that business. And I was pretty pissed. So I was like, okay, I'm going to resign and start a company doing that. And I think I didn't know why people are buying the product. I think mostly because the brand of the bank instead of the product itself. And when I build the product, I try to sell the product myself to those mutual funds and hedge funds and I just couldn't sell the product. And I realized people are buying the product not because of the product itself, it's because it's Morgan Stanley.

30:19And then I thought maybe entrepreneur is not my thing. I went back to Australia and then just like found a job in one of the big four banks in Australia and become like this front office algorithmic trader and engineers. Were you making good money at this point? Not a lot. I was making like$250 ,000. It's not a lot. How old are you? I was 25. I mean, 250K in Australia at 25, like that was, seemed like a lot, I imagine, right? When you're going through it compared to like what you had before. Yeah. I guess it's not bad. How many other kids your age you knew they were making? I mean, I would definitely consider doing a decent job.

31:03But I started multiple businesses on the side when I went back to Australia. I started a real estate development business. How did that work? I mean, just really buying land and building properties. How did you learn how to do that? I don't think it's that hard. I mean, you're just buying land and then do like a - land do you buy? Are you overpaying? Are you underpaying? What do you build? Yeah, I guess you're just developing. You just go check our houses every weekend and see the auction price and try to understand the price in that suburb and try to figure out the console rules of what the lander can do.

31:42Can you subdivide to, can you combine the land and to build multiple properties, build apartments and stuff? So no one was teaching you this? You're kind of learning by yourself? Yeah. And I partnered with a friend, Max, who is architect. So he knows a little bit of a design, but he doesn't know the developer part. And we sort of just learning together. And how do you have the money to buy the first land? Yeah. So I think in 20, when I worked in my first insurance job in 2008, I made$30 ,000. And - Like a bonus? No, just savings from my salary. And then the GFC happened, so global financial crisis.

32:24And the house price went down massively. I leveraged 90 % to borrow a loan. And I used that money to purchase the first property. In Australia? And that property appreciated 30 % within Tomos in 2009. And so that kind of made$150-ish. thousand dollars. Then I refinanced the property. So I got more than$150 ,000 out. And I just keep doing the same thing again and again. I'm just buying a bunch of properties and price going up again. I leveraged ridiculously. And this is on the side of your job. Yeah. If anything happened, I will basically bankrupt because I was leveraging so much. At the peak, I was making$200 ,000, dollars,$200 something thousand dollars, I borrowed more than$10 million from the bank.

33:13No, really? Yeah. And the banks are totally fine doing it. Yeah, because it's a property-backed finance. Oh, like in the US, it's hard to get 90 % of that. Yeah, I don't think you can do that in the US. And I can get 95 % leveraged finance when I was an employee of the bank. Wow. Oh, so that's like a reason why you also kept the job, because you can get better leverage. Yes. Ah, so interesting. Yeah. And at one point, I was making a couple million dollars on the side from my real estate business. I started a burger chain. I started a coffee chain. Burger chain? Tell me more about that. What's the burger chain story?

33:48No, it's called Tuck and Co. So it's kind of together with my coffee business. Coffee. We didn't talk about that. Let's talk about the coffee business too. Yeah. So we started sort of residential development. We were like, oh, how do we get into commercial real estate? That's an area that we never really touched. And at the same time, I'm also reading what they call a Telstra, which is a large telecom in Australia. This is like a Telstra of fast 50 companies. It's like the fast-growing 50 companies in Australia. And I look at the 50 list, about a third of them is in retail. It's like in food, F &B, retail businesses.

34:24I'm like, okay, it seems like that's a very good business to be making money. And let's just get into that. And then maybe we can look at how to do commercial real estate at the same time. Yeah, we started like a build the first shop and we built the coffee business. And that's kind of how we started Airwallex effectively. And it's because we were importing beans from Brazil, from Indonesia. Like how do you even like know who to import beans from? You know, like how do you find a supplier at that time? We just go to different coffee shop to ask, just make friends. Oh, really? So you just went to like different coffee shops and were like, where do you get your beans?

35:01I want to start a competitor. I mean, the barista working in the coffee shop is not owner, right? You just be friends with the barista. Then you go to these competitions. You just make friends with the most famous barista. So when we opened the coffee shop, our barista is actually a world champion. World champion? Of making coffee. Really? Yes, it's a competition. There's a whole kind of very big industry there. And I've become friends with the most famous baristas in Melbourne, which is considered probably the best coffee in the world. Then, you know, we were importing bins and stuff and packages from China.

35:37We were making payments using Western Union and banks and were charging us 4.5%, you know, more than$500 for a$15 ,000 transaction. We're like, this is a ripoff. And my co-founder's name is Max Lee. And then his name is on the Kofax Blacklist, the same name. But because how the Swift works is, you know, It doesn't reduce the false positive because the middle bank doesn't have the name and address, sorry, the name and address and the date of birth and all that. So they can't really reduce false positive. So they think he's like a terrorist called Max Slater or something like that. And every time he's sending money to Brazil, it goes through multiple correspondent banks, his money has just gone missing for a month and bounced back.

36:18And he kind of keeps complaining to me. He's like, hey, this is terrible. You're working in a bank. Can you do something about it? And the whole time you're still working in the bank? Yeah. But like it just didn't take a lot of time from you? You can do all this. I didn't work very hard. Yeah. And you're making like, so okay, so you had a real estate development business, a coffee shop business, and then a burger business. I also have a trading business, trading wines and olive oil. Trading wines and olive oil. Yeah. And you just started all this. And I said, did you have people working for you?

36:49Like how do you have time to manage all these businesses? I just work harder. I work every day, 15 hours a day. I basically worked more than 15 hours a day from the age of 16 until last year. So how much money were you making at that point in time? A couple million Aussie a year. A year? And then you split up your co-founder? Myself. I was making a few million dollars myself. Just yourself? Yeah. Wow, that's crazy. And this is like what? How old were you when you started Airwallex? I was 30. 30. so this is from 23 or something after college 24 until 30 you're like 30 year old making a couple million dollars a year life is good yeah life is not bad you know eventually we start building you know 50 million dollar Aussie project which is considered decent but I want to build you know 5 billion dollar projects you know what I mean I want to build the highest building in Australia I was like okay this is my project where do you even think you could do that like you know where did that ambition come from do you think like wow how I, yeah, I'm going to be the guy that's going to like build a$5 billion tower in Australia.

37:55I don't know where that come from. I remember when my, um, my ex-wife, her father wanted to build a hotel, like, you know, going into the hotel business. And then he's like, oh, why don't we just buy a hotel? And I basically was like, hey, why, why do you want to buy a hotel? I, you know, we can build one from scratch. And he sort of laughed at me. He's like, how do you know even how to build a hotel? I'm like, super simple. I mean, you can just figure out things, you know, just go to like 20 different hotels and try to understand how they operate and you can build a hotel. I don't know. I just always have this mentality like nothing's that hard on me.

38:28You can always figure it out. You always learn stuff. Yeah, I built like a house myself by my own hand. I was a carpenter. I was a plaster. I was the one who built the foundation of the house. When? When I was working in a bank. So I want to get into real estate, like getting serious about real estate. I was like, okay, I really need to understand how to build stuff and how to do construction. So I basically just started sort of demolishing my own house while I was living in there. I basically demolished 75 % of the house and then kind of built it, like just contracting people to teach me how to do it.

39:01And I built my own house like over three years. Interesting. Okay. So you have all these businesses and then when did Airwallis come along? So you're at 30? Yeah. So I had my daughter back then. And I remember I look at her when she was born. I was like, oh, I wasn't really doing anything to make you proud. That's kind of the moment I realized even though the life is comfortable, I deeply feel unpleasant about my achievement. But what does that mean? Like, you're like, I'm not achieving enough? Yeah, I'm like, I look at my daughter. It's like, what did I do to make you proud? I mean, I'm doing real estate development, I'm doing like burger stuff, I'm doing coffee shop.

39:48What does that even mean? I mean, I'm not leveraging my core skill set, which is product engineering, is writing code. I'm not doing any scale of the business. I'm not impacting any people's life. I'm not creating any scaled impact because, you know, real estate, it's not, I mean, building coffee shop is not a skill set. But did you have any role model that you were looking to even compare yourself? Because I imagine comparing yourself to like your college friends who are doing great. Not really. No? So I lost peer pressure as well at the time. So there's very few Chinese students in my college and everyone become entrepreneur.

40:20Oh, really? Yeah. There's a guy who we were close with and later on tried to steal my girlfriend and the relationship broke up. But he was an algorithmic trader as well. He built the first Huffington Trading House in China and made 120x in the first year. The first what? Sorry? He made 120x of the phone. So he started with$5 million and made 120x of that$5 million just doing high frequency trading. Doing algorithmic trading? Yeah, high frequency trading, like basic arbitrage. Oh, high frequency trading. Yeah. That's crazy. Yeah, then that's one guy. Another guy, also in real estate, but he's got family money.

41:00So he built like more than 100 million projects. So at this time, like you were looking at your friends and you didn't feel the most success with your friends. You feel like the worst. I'm probably the least successful among my closest friends. That's so interesting. You know, like, I actually had the same experience that, like, you know, when I was growing up, I had so many friends that were doing such amazing things. They were getting into, like, Harvard and MIT and, like, Stanford and all these schools. You know, this is, like, when I'm applying to college and I was, like, and winning math Olympics and physics Olympics and building robots and doing all this.

41:33And I was like, oh, shit, like, I'm so unachieved compared to these people. I need to go more and more. Yeah. you know, the kind of like more successful your friends are, the more successful you want to be too in comparison to them, right? Like even though if you compare yourself to the general public, you're like hyper successful, right? I'm the same in a college because I didn't study that much. And, you know, I used to be this very good student academically and I just become a average student in college. And all my friends around me, like it just, they're writing better code. They study better.

42:03I just feel a lot of pressure throughout the college. And then also later on, all these people starting businesses. And one guy that did computer science with, he did like four degrees in five years. And then he found a fashion business after graduation. Wow. And now he's also a billion dollar company and you have a lot of people like this around you. And these are also Chinese or no? Yeah. So it's interesting too. I also had my crew with people who were Brazilian but applying to colleges in the US. That was like my, you were like the Chinese immigrants in Australia. Yeah. and you created a community from that.

42:38Yeah. And so, okay, so you look at your daughter and you're like, I haven't done enough to make you proud. So what came after that? I basically, at that time, my co-founder Max was complaining about this money gone missing type of stuff. And I said, maybe I should just resign and get about all this business, try to go into technology, which is I always wanted to do. And were you reading about startups and stuff like that? I was talking about startup for a decade at that time, right? So from age of 20 to 30, I'm always figuring out ideas to do startup. But were you aware of TechCrunch and Facebook and Google and venture capital and all that stuff?

43:16I wasn't super close to venture capital. Every time I'm reading the news, I feel this is so far away when I'm reading Facebook. At that time, before Facebook, there's like transfer, that type of stuff. And I haven't really understand, like, what is technology company and how do you build a technology company? I never even think about building a technology company. Just over the years, I'm obsessed with reading these stories and always try to do something. And my co-founder, Jacob, started multiple startups in China at the time and all failed. He failed, like, five different startups. And I was from, you know, graduation, I was pitching to Jacob.

43:58was like, hey, let's start business together because he's considered the best engineer of my college. And I know I'm not the best. From a coding perspective, I always want to partner with the best to do something together. But he always wanted to do his own thing with other friends. And only until I was 30 that he failed five startups and he finally said yes. And then you decided to start a company with him. Yeah. I think in 2012, I wanted to, so I remember NFC came out. I was a trader at that time. And I feel like the speed of moving to cashless society is going to speed up because NFC, you know, the people can do NFC payments.

44:38And was Alipay and WePay like you already at this point? No, it was still pretty small. And I was like, I was upset with NFC. I wanted to start like a point of sales business, like a payment business in 2012. I did a prototype with Max, which is another co-founder. And we do everything together. Jacob, my CTO, just said, no, he thinks the idea is a shit. I mean, QR is taking over the world. And that's he thinks the QR is the future because that's when sort of Ali and VTAP started really getting popular. And he doesn't really believe in NFC payments. You know, we could build a bigger business if we started in 2012.

45:16Wow. And so you decided, nope, NFC, let's move on from that. Well, yeah. Well, I, you know, I couldn't do it myself. off. So he didn't want to join me so that we basically give up the idea and just keep doing real estate. Oh, interesting. So then that wasn't the start of Aerowallax. No. Interesting. I waited for another four years before I started Aerowallax. And just doing real estate, coffee shop, etc. Yeah. This episode of HD and HD is brought to you by a brand that's close to my heart, Brex. When we started Brex, it wasn't just about creating another financial product. It was about solving the real gritty challenges that founders and startups face every day.

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46:28How did Arrowline start? Yes, after I'm my daughter, we talk about this money movement issue. And then we had difficulty paying suppliers in these countries around the world. And we're paying very expensive fees to the banks and Western Union to pay packages to China. And then we were like, let's just start a payments business to solve this problem instead. Because we hate coffee business. At that time, retail is like a heavy human operational business. And you just work with a lot of people that are not super responsible. You come in, you want to open a shop, and the receptionist has disappeared.

47:10You try to call them, they don't respond. And you literally worry about them, are they safe or anything? And after a couple of days, you saw them posting party pictures on Facebook. You'd be like, what the hell is going on? I just don't want to work with those type of people anymore. Yeah, so you're like, look, I can't do this retail situation. I want to go into a more white-collar business. Did Airwallet start in parallel to all these businesses? Or what happened? No, Airwallet is probably the first business I basically give up all the other businesses. How did you give them up? Did you just sell them?

47:42Did you just give them? No, it's operational. I don't need to do anything about it. So you just kept them? Yeah, just kept them and just generating cash flow. Makes sense. Yeah, but I stopped doing any new real estate project. I'm just like maintaining the existing ones. And at this point, you didn't have any financial worry either. You knew you could like always have monies from these businesses and, you know, it's okay to quit your job. Yeah. So quitting a job was not that hard, but I feel deeply insecure because I wasn't achieving anything. That's so interesting. And so then you started. Airwall likes to solve the problem you're having in these businesses.

48:17Exactly. So how do you meet your co-founders? College. My co-founder, Max and Jacob, all are... How many co-founders do you have? I have three. Well, actually four, technically. So four including you or excluding you? Excluding me. Okay, so five founders still. Five founders. There's Max, who is like our head of product design, who I started a coffee shop, the real estate, you know, everything together. We've just been just working together. And Jacob, my CTO. That was a guy that - That was a guy that failed five times in China and moved to Australia when I started Airwallex. And there's another guy called K-Lock, who is an Aussie that I met at work.

49:01So he's like the smallest co-founder. We gave him 5 % of the company we started. Was it hard to decide how much each kept, you know, in percentage? I didn't know anything about how to run a business. But the thing I know is that from my grow up is like you always need to share a fair amount of interest and upside with people you work with. I don't know how I understand it. I just naturally like intuitive about it. And I just share half the company with my co-founder. So I basically, when I started the company with, you know, Max and Jacob was like, OK, you guys, 25 % each. Then we dilute it together to give Keylock 5%.

49:42So he's more like the first employee, so he's lost co-founder. And Lucy is actually a very interesting story. So when we started a coffee shop, I was working in a bank. The coffee shop was literally downstairs from my bank. So I can come down to drink coffee. And that's kind of why we started in a location because I know the location so well. So I know there's underserved population, especially coffee, and I know the traffic. Because you're working there. Yeah, I work there. I know the location. I know it's a very good place. And we were drinking coffee one day on the Friday afternoon and this girl called Lucy just showed up in a coffee shop and resigned from her investment banking job in Hong Kong and China and wanted to return to Australia.

50:25And that was the first time I met her and she asked me what I do. I said, I work in a bank and blah, blah, blah. It's like, oh, why don't we just have dinner? So she's friends with Max. and we just went to have dinner the first time. And during the dinner, she asked me, you know, what are you doing? And blah, blah, blah. Are you going to expand the coffee shop? I was like, actually, we're going to resign to start a company called Aerolix to do global money movement. And she just, oh, tell me more about it. And then we'll just talk about it. And then she's like, how are you going to do it? I was like, oh, we're going to go back to Hong Kong and raising venture capital.

50:58And she's like, how much money are you raising? I was like, oh, I'm going to raise, you know, one or two million dollars and maybe start with a million. And then she's like, why don't I give you$2 million for 40 % of the company that you don't need to raise anymore? I mean, this is like a 23, 24-year-old girl that you met the first time. And you had money from family? I didn't know at that time, right? So basically, this is on Friday. And then she just keep talking about it and getting a bit serious. She's like, hey, why don't we just meet up in law school back in Melbourne Uni tomorrow morning, 8 o 'clock.

51:35And we talk about this seriously. So she basically had a few million dollars from her parents and her husband's parents. And they want to buy a property in Melbourne. So this is the money that they want to use to buy in properties. And we basically talked from 8 o 'clock to 11-ish. And even her husband really against her investing us. And we basically got a verbal term sheet agreed. She will invest a million dollar at$5 million post for 20 % of the company. And on Monday, this is all before I even started a company. I haven't even resigned. On Monday, 11 o 'clock, I got a million US dollar wire to my personal bank account.

52:15That's crazy. There was nothing signed. No company incorporated. That's crazy. It's like a girl I met the first time. Insane. And that wasn't your first million though, right? Because none of that was your money. It was company money. But you had made more than a million at this point. Yeah, I made a lot more than a million. But number one, I don't think I can take the money out because my relationship with my ex. And also, it's a lot risky, right? The probability of the money is going to disappear. So I wasn't prepared to putting up like a million US dollars into the business. That's crazy. So she invested, but did she come work for the company?

52:50How did that work? Yeah, because I feel kind of bad that I took her money. Then I was like, what about if this goes to zero? and like maybe I can invite her to work for the company so that even went to the zero and which is 99 % of the chance and she at least knows that we worked like 200 % so that we're not like wasting her money. And did you actually believe it kind of, you know, more likely than I was going to go to zero or in your heart you thought it was going to work? 99 % of the chance it's going to go to zero. Interesting. Yeah. Interesting. Because I have no idea how to do this thing, you know?

53:26Yeah. Okay. So, you know, you raise the money and you're going to go And what was the first product or first insight? The first product has completely failed. Essentially, to do global money movement, we have to solve FX first. And then to solve FX, we have to get the best price. And the idea was to do peer-to-peer. So, for example, if I have a bunch of people in Australia paying people in Brazil, and I have a similar amount of people in Brazil paying Australia, I can net it off. I can match the, you know, I can market making. But in reality, when we do the algorithm in simulating, you know, I think, you know, when you have more countries, right, you have multiple dimensions that increasing the number of matching in an order, make more attitude.

54:11But when we actually, why the code did that simulation, this is after we raised like money from Lucy and we started raising a$2 million more from venture capital in Hong Kong. And we realized algorithms are never going to work. To get to like the trading volume that we needed to actually do matching within a day so that the payment's not so late, we need like multiple billions of dollars of trading volume in this very concentrated corridor, which we're just never going to get to work. But we're still leveraging the idea to raise an extra$2 million at$10 million post while knowing the idea doesn't work.

54:46And why did you move to Hong Kong? This is after I raised the$3 million, so$1 million from Lucy and$2 million from the city investor called Gobi Partners. And they are Hong Kong-based VC. And they basically told us, you know, that the opportunity in China is quite big. There's a lot of companies exporting from China and doing e-commerce. And maybe there's opportunities there. You guys should check it out. And that's kind of how we were sort of moving to Hong Kong. And because the company also failed the first prototype, which is a peer-to-peer. But did you actually build it or just the models?

55:23already. We built the core algorithm and we do the simulation and we just realized the simulation from the simulation result we realized the algorithm is never going to work. So we have to do something new. But did you spend any of the money at that point or very little? We spent probably a quarter of the money. Oh wow. Yeah. And at this point you're saying you're raising the money. You kind of knew it was not working but like you know let's just keep going. Yeah. Well we kind of know it doesn't work but we still want to raise money so that we can keep building the new idea that are going to make it work.

55:53Yeah. So the second idea is, okay, so we're just going to get interbank liquidity from a bank. Then build like a few payment corridors and Australia and China being the first corridor, Australia and Hong Kong and Australia and China being the first corridor. We hope there's enough trading volume to kind of get us to survive. What was the customer product? Like what were they seeing? So we built an invoicing product. Invoicing. So basically any merchant in Australia is sold to China. and at that time, you know, China's sort of middle class is booming and they're buying a lot of products from Australia like cosmetic products, you know, house products and honey and all that type of, like milk powders.

56:33And, you know, a lot of people from Australia, you know, selling e-commerce products to China and we basically want to build an invoicing product to help the merchant in Australia to get paid. And that's also failed. We just couldn't get enough merchant because the SMBs are very less profitable. we don't have enough. At that time, we raised$3 million. We couldn't get product market fit at scale. There's just not enough people want to get paid from Australia to China. Interesting. So the two first products failed completely. But we're leveraging the second product to raise more money. Okay. So we're leveraging the first failed product to raise three.

57:10And then we're leveraging the second failed product to raise from Sequoia and Tencent and MasterCard, which is the tangent point. Oh, interesting. So, you know, at this point, you're already raising like a Series A from Sequoia, Tencent. And like, I guess, why do you think they invested? I think because the vision I was talking about is building the largest money movement network in the world to completely displacing Swift. So the infrastructure vision is very big. Even though I was building a part, I don't even know whether it's going to work or not, actually getting the volume. because you can keep building infrastructure, but still you need, like, infrastructure is like the railways.

57:45You still need a train, you know, to carry stuff on the rails to making money. Yeah. Right? So just at that time, we know it's a big idea to build a railway, but we just don't know what product you can carry on the train. And how do you meet Sequoia and all of them? One of the city investors, Gobi Partners, knows Steven, who is a partner of Sequoia China, leaving Melbourne. So that's kind of a coincidence that he just happened to be leaving Melbourne, and that's kind of how we got introduced to him. And then Tencent was, you know, also, that also came together. And then, you know. Tencent was just a friends of friends introduction, and we also got a meeting.

58:31And how much money did you raise in this round? I think we're raising about$13 million from Tencent, Sequoia, and MasterCard in that round. And that was a turning point. You're like, okay, now I've raised like$16 million. We should maybe be able to make a product that works. Yeah, there's a lot of story in that$16 million or the$13 million because there's no product market fit. And we know the product doesn't have product market fit. We really need the money from Tencent and Sequoia to keep building this infrastructure business. to find part of MarketFit. And then we passed the investment committee of Tencent in September 2016.

59:11But when they actually, this is like a small check, like a$6 million from Tencent, a very small check, and the investment committee passed and everything. Then when they actually submitted approval for Pony, the founder of Tencent, to sign off, Pony said no. And they basically asked the team, why can't we build it to ourselves? self. And the team didn't know how to respond. And this is September 2016. And when I talked to Sequoia, the idea I sold to Sequoia is Tencent is going to lead the investment. And when Tencent invests, we're going to be able to power the WeChat Pay global money movement.

59:47So Sequoia is like, we're only going to invest if Tencent invests. Yeah, because if you're going to have Tencent's global business, that sounds like a great business. Yeah, but in fact, I know that Sequoia doesn't know, I actually got rejected by a pony. So the whole thing can fall apart. Yeah, the whole thing can fall apart. This is September 2016. I was having so much anxiety. And the Tencent guy is like, there's only one or two person in Tencent can change a pony's mind. It's either Martin or James Mitchell, the president or the chief strategy officer. I basically just waiting for a meeting for three months.

1:00:24I couldn't get a meeting with either of them. And by sort of December, 2017, 2016, James Mitchell having a holiday in Melbourne in a winery in the peninsula. And I basically just tried to get a meeting to meet with James while he's on holiday for three weeks. I couldn't sleep for every single day in that three weeks because James, I'm just checking and was like, can James meet today? No, no, no, no, no. It's because he's on holiday. Throughout the entire Christmas of 2016, I didn't be able to meet James even in Melbourne. But I finally meet James and subsequently Martin on the 5th of January in 2017 in Hong Kong.

1:01:05And that's where we had the meeting. And I was able to convince James to invest. I think James just have a sort of picture of memory. So he remembers when he did the IPO for PayPal back in the day is when he's a Goldman. I think more than 40 % of the revenue of PayPal coming from FX. cross-border transaction. He just felt that's this very big market. And it seems like I have the background because I was a trader and I've built FX technology before to have the right skill set to tackle this problem. And he asked for a demo at the end of the meeting. We did a demo. And this is the invoicing product actually going to fail.

1:01:48And then when we actually do the pay button, there's a page called 404. There's an underlying bug. in a cold because our payment partner in China is a very bad technology company. And I just made up a reason like, oh, maybe it's the five or 10 cent blocked us. Oh, wow. But yeah, so Jams was able to convince Pony to proceed with the investment in February. At that time, we had six weeks of money in the bank. Wow. So you're almost going under. Yeah. I leveraged 10 cent to go Sequoia. Did you have a plan B? No. No. There's no plan B. Plan A or plan A? I was trying to have plan B. But think about it.

1:02:33It's like a part of pre-revenue. You want to raise$30 million and you have this best investor in the world that's so close to you. Are you really going to settle for less? Yeah. I was just all in on this three investor and leveraging MasterCard on the side. So, and then did you eventually get, did you get the Tencent global business? Not until three years later. Oh, really? And we make no money. Oh, wow. That was a story that we sold at Sequoia. Got it, got it, got it. So Sequoia invested and Tencent invested. You raised this round. And then how did it build from that? What was the next product?

1:03:10Well, the P2P failed and the invoicing product failed. But finally raised this money. We were like, let's build an API product to helping larger internet company to moving money globally. So travel companies paying like tourist guide drivers, marketplaces paying sellers around the world. And that business took off. And it's like an API-based FX and payout product globally. It's a mass payout product. And we got like a large customer like High Guide, which is from the largest sort of travel OTA in Asia. Then we got Easy Transfer, which is one of the largest tuition payment companies. And who were your competitors at this time?

1:03:52Like, who was... There was not much competition in APAC, which is really the only competitor is banks, the Citibank. Got it. But there wasn't any global platform or anything at this time? No. Wise was a consumer business back then. Yeah. Neum hadn't even started. So we're an early mover in that sense. Got it. And then how fast did it grow? Like, how long did it take to get the first$10 million in revenue? I mean, we don't even think about revenue for the first couple of years. is that the whole benchmark is volume. So we spent 2017 to build out a product. The first customer we onboarded is MasterCard, who also invested and promised they're going to give us more than a billion dollar volume to power MasterCard Scent.

1:04:33They call it HomeScent at the time, which is a cross-border remittance product. Instead of the billion dollar volume they promised, we spent the whole year building product for them. We got less than a million dollar volume a month. And it's all high-risk transactions, because it's like aggregator of aggregator. And we essentially have to take the product to sell to somebody. And we thought we're going to sell to Mastercard, but that completely fell apart. But what we actually able to achieve success is from January 2018, we got a tuition company, we got a few travel companies, then the volume from zero to a billion in that year.

1:05:11So we had 100 times the volume in a year. Then we made 2.2 million in revenue that year. and we got an acquisition offer from Stripe at the end of 2018. So it's like in one year, we went from zero to process 100x volume. And in the middle of 2018, we raised another$80 million from Sequoia and Tencent again, plus a bunch of other really big investors like Hugh House and Horizon Ventures and blah, blah, blah. blah, blah, blah. And the end of 2018, we were kind of growing like, you know, almost 100 % month on month. And Stripe made us acquisition offer. Wow. How did you meet Stripe? They reached out to us.

1:05:55So we were the CFO at the time and reached out through Sequoia. So how much was the offer? It's 1.2 billion total. So about 800 million on the cap table and 400 million on the site. And how much was Stripe worth at the time? $9 billion. $9 billion. So this is almost 10 % of Stripe. I think they try to do equity swap at$20 billion. I think they are signing a term sheet with Tiger and DST for a$20 billion offer at a time. Wow, crazy. So this is not even three years in, and you get a billion-dollar acquisition offer. Yes. That's crazy. What was going through your mind? I feel this is a bit unreal.

1:06:37Because at that time, the first two products all failed. I mean, what we've been really building is only building for two years, right? 2017, 2018. And we only have business for a year. And the business is not that big. We just built this bunch of rails around the world. A lot of the rails that haven't even materialized yet. I mean, we haven't got, we built integration with all these banks around the world, but we haven't had a volume gone through these banks. so it's like I feel it's almost like a lack of confidence like you know number one why we're worth a billion plus dollars number two is like I only started to taste the scale the success of the fun part of building a startup it's only two years of in like feeling winning yeah like you feel when you're winning you know it's only three years in the business like 2016, 2017, 2018 how it's kind of real like you know and I want to keep building.

1:07:32You know what I mean? Like it just feels so short if I sell the business. And why do you think they wanted to buy it? I think StrapBuild is, you know, the most successful payment business in the U.S. and a bit of a Europe. I mean, 90 % was U.S. at the time. And most, I mean, 90 % of our business is in Asia Pacific. So from a market point of view, there's no overlap. And they were going to build the money movement business. And at that time, Airwallis built a money movement business. But we also started building the payments business and the issuing business, which are going to lay out the foundation for us to become a global digital bank for businesses.

1:08:06And Stripe also thinking that global banking business is kind of interesting. So it's like a 100 % sort of synergy on product and a future product roadmap. And also market doesn't have any overlap. So tell me about that. You got the offer. How was the process even to get the offer? The process was quite straightforward. So we, you know, they invited us to San Francisco with my entire co-founder and leadership team. We spent like a week there. I spent a lot of personal time with Patrick and Marco Mars. And I, later on that, they went to Melbourne to did like a whole week of due diligence. I actually started Patrick visiting Shanghai.

1:08:47So I actually met Patrick the first time in Shanghai and he met me and my co-founder Jacob and he really liked us. And then we traveled to San Francisco. Then they did DD in Melbourne. Then he also invited me to Singapore to spend a lot of time with him personally. He was traveling there. Then he invited me again to San Francisco. And that's when he made the offer on the term sheet. And Will is the guy who negotiated the term sheet with us. And did your investors think you should sell? Sequoia China didn't think I should sell because the business was growing very fast. And I think the main reason they didn't want to sell is not because of the businesses, because they're getting the 800 million.

1:09:32And they only just invested it at 450, like a few months ago. So it's going to be just 2x, kind of thing. It's like a 2x. It's not a big thing, you know? Yeah. Yeah. So they didn't think you were going to sell about Tencent and other investors. Tencent basically saying it's kind of up to you. Where about Lucy? Lucy didn't want to sell because, you know, She likes the job. She likes the job. So no one wanted to sell, really? Max actually said he wanted to sell, but he's not the core decision maker in the founding team. And my CTO didn't really want to sell because he's not the most commercial savage co-founder.

1:10:16He's a technologist, and he just feels that we're still very young as a startup. Wow. So you said no in the end? Yeah, after two weeks, I was... Was it a hard decision? Very hard. I basically couldn't sleep well for two weeks, just walking around the San Francisco park on the street for two weeks. Didn't work that much. And then I fly back to Melbourne. I made my decision when I actually back to Melbourne. I was like, OK, that number one, that, you know, I don't know if I'm going to able to fully vest the five years in Stripe. I don't know if I'm going to last that long. Number two, there's just so much happening in this company that I want to see through.

1:10:59Looking back, was it the right decision? Knowing how hard it's going to be for the next five, six years, I probably think is not the right decision. But since we are already kind of going through this tough period, it's probably the right decision. If you knew how hard it was going to be, maybe not. But even though you've already been through it, now it's great. Yeah. I think that's true for a lot of entrepreneurship, right? If you just knew how hard it was going to be, you probably wouldn't have done it. But the ignorance is a bliss in a lot of times like that. Airwallex and Amazon were way over$5 billion and obviously it will also be a great financial outcome for everyone.

1:11:41Okay. So you got this acquisition offer really early on and said no. And at this point, the business was APIs for large merchants to move money around in APAC? Around the world. Around the world. Yeah. I mean, 50 % of the money movement is still in the US and Europe. Okay. Yeah. Got it. Got it. So, and then you had this issue of China and you're like, okay, I need to build a real global business because like I can't, this is too volatile. Yeah. You know, at that time, 90 % is Hong Kong, China. You know, fast forward into today, Hong Kong, China is less than 50 % and China is less than 5 % of our business.

1:12:16Makes sense. And what were the main customers at this point? Like what were the... We also kind of started with sort of the API for large enterprise or platforms. But in 2019, we started building this SMB product, which is kind of a software and infrastructure layer on top of our own money movement rails. Then we started building kind of card issuing as well and also started building payments, which is start competing with Stripe. And that payments and issuing business went from zero in 2019 to now more than 50 % of our gross profit in 24 and more than 60, 70 % of our revenue. And the SMB business used to be like less than 5 % of our business and now become 80 % of our business.

1:13:02So you went from having this like API business for platforms and now having like direct relationships with the merchants. Yes. Wow. That's so interesting. So tell us about the funding. So you raised this money from Civquia 450. So you kept raising money. What was the history of fundraising in the company? We leveraged the Strap acquisition offer to raise money from DST at a billion, 1.1 billion in end of 2018. We got a lot of term sheet at the time because people were like, oh, who is this company that Strap tried to buy? Goldman gave us term sheet and Q House gave us term sheet. Eventually, we picked up DST because we were already thinking about going global.

1:13:42We want to have a global fund leading our round. And the next one is sort of Hedosophia led the next round at 1.7. Then Grand Oaks led another round at 2.6. Then Lone Pie led another round at$4 billion and$5.5 billion. So we kind of overall now raised about a billion now. So where are your employees at this point? My employee was in Melbourne and Shanghai to get started, but now really spread around the world, right? So about 200 people in UK, Europe, 200 something in Singapore, 300 in Australia, 150 in US, 100 something in Hong Kong, so really sort of spread around. So I'm curious, what was the experience like managing people?

1:14:29What's the cultural differences between US, UK, Australia, China? Like how is managing, you know, what's different about hiring and managing people in these different geographies? Yeah, the biggest sort of conflict is coming from Australia and China, right? Because Australia is quite a relaxed country and where China is very intense. And that's kind of, you know, Shanghai and Melbourne was where we started the business. It's very kind of high contrast in terms of the intensity we're operating and some of the mindset we're operating. How does it manifest, you know, day to day? It was very challenging.

1:15:02There's a lot of firefighting. There's a lot of culture crash. And there's a lot of stuff turnover. I was used to joke to my friend. And I'm really scared of getting a long-haul flight because every time I get off the plane, there's like three people telling me they're resigning. Yeah, culture was a real issue for the first six, seven years of building the business. Huge amount of turnover. But why did the turnover happen? Just because they did? We have a very high requirement on work intensity. And then we just couldn't get the workforce in Australia working the intensity we wanted. So what did you do?

1:15:46We eventually just realized that is the wrong strategy to try to build a Chinese way of working in Australia. It just doesn't work. You basically have to look at what the Australian workforce are good at and try to leverage in their strengths rather than their weakness. So what does the Australian workforce get at? They're good at building software. So we end up putting all these 100 engineers in Australia building on a software product rather than the infrastructure product. And then China built the infrastructure. Yeah, then we later on sort of expanded that infrastructure team to Singapore and Netherlands as well.

1:16:19Oh, wow. In the beginning, you had this thing around the motivation was, was, hey, I want to get my daughter to be proud, right? How do you think the motivation kind of evolved over just different stages of the company? I think the early days was so hard because I built a business at Australia, which have no mentor, no one tell me how to build a startup. I have this culture clash between China and Australia workforce. Just nothing really worked. Things always broken down. I have to fix it. It's just so difficult. And kind of later on, it's almost become like the early employees have put so much blood and sweat into this company.

1:17:04I just cannot let them down. The investors, we raised, failed to part out the investors still believing in me to give me money to build it towards this vision of the best money movement and payments financial platform in the world. I really need to deliver for them. So there's a lot of this obligation become my motivation. And how did the money aspect play into it over the years? Did you feel motivated by it, not motivated by it? You obviously made money along the way. How did it all happen? Do you think about that? The money wasn't really a motivation factor until I met you.

1:17:45Tell me more. So you think that until you just didn't care about it for the longest time? Yeah. I mean, I always had enough money. and I didn't, I live in a very sort of simple and basic life and until 2022. What changed besides us meeting? Yeah, I mean, really the only thing that changes is us meeting. Oh, wow, okay. And, you know, but how did it impact you? Well, I feel like, oh, you know, there's the entrepreneurs in the US live a very different lifestyle. I could have lived a better lifestyle and that's something kind of really a fresh perspective for me. Oh, interesting. So you're like, look, you know, I'm working so hard, like, you know, I might as well, whenever I'm not working, enjoy a little bit more.

1:18:27Yeah. And, you know, it tells us about the future. Like when you think about now, how old are you now? 39. 39. So you're getting into your 40s soon. Like, what do you want your 40s to be that was different from your 30s? Well, first, we're going to celebrate my birthday in Antarctica. Yes, I'm very excited about that. That's very cool. One thing I started doing is investment. So I raised a VC fund in 2021 called Capital 49. And I'm kind of spending a bit more time with the early stage entrepreneurs and figured out how to give back to this, my knowledge and how I'm building, the experience how I'm building a startup back to the early stage founder.

1:19:09and also try to kind of get energy from those early stage founders to get more motivation and also learning from the latest technology, right? AI and all this cool stuff that these early stage founders are building. I'm still trying to figure out if I'm actually a good investor or not. It's been really hard to deploy capital in the last couple of years. And, you know, the only thing that is hard is AI and the valuation is insane, right? So it's very difficult. So I haven't really figured out how to scale that business yet. And I'm not spending a huge amount of time either. And all the last three years, it was very tough from a microenvironment point of view.

1:19:46So I focused a lot of my energy on getting more efficiency out of the business, how to turn cash flow positive, how to kind of managing, you know, like a more streamlined sort of process to scale the company further in a sort of cost-effective way. These are the things that are necessary for the company, but not the most exciting stuff for a founder like me. You know, I wanted to figure out how to build, you know, the$100 billion business in the next decade of, you know, what are the new product we're going to innovate in? Are we going to, you know, get into merchant record? Are we going to get into tax?

1:20:21You know, this is like, you know, are we going to get into lending? All this new product is something I'm excited to build. And I've also been sort of travel crazy in the last 10 years. And now I'm thinking about how to settle down. Do I, you know, want a family again? I don't want to leave 200 days on the planet anymore. So that's kind of, and I need to focus on my house because it's not a spring, it's a marathon now. A lot of things are going to be for the next decade, I think it's going to be focused on my family, my life, my house, my friends, and also kind of focus on building brand. I realized, you know, first decade of building a business is probably product market fit at scale.

1:21:06The next decade is probably just really increasing the brand equity and then try to build this brand that people trust and businesses and entrepreneurs trust to be partnered with. And then, you know, there are very few things in life can create compounding value over a decade longer. I think relationship and brands are two sort of most important part of that. And also your relationship, including your life partner as well. and hopefully that you can find your true life partner that build a very strong relationship for the rest of your life. So kind of like, you know, the first decade of Airwallex was this like massive sprint to get it off the ground, right?

1:21:47And now it's in a path to compound. So I think a lot of the questions for you from what I understand is like, okay, how can I compound this for a long time? And how can I keep doing this job for a long time, right? In a way that, you know, if it keeps compounding for the next 10 years, it's obviously become like massive, right? Like if it's come out even at 20, 30, 40 % a year. That's super interesting. And you know, you talked about 2021 and I'm curious, you know, the Zerp era, how did that feel for you? And like tell us a little bit about that experience and how did it change till today? I think all of us went through it, so.

1:22:18Yeah, it's very unreal, right? So in January, we did around at 2.6. In mid of the year, we did around at 4. and in September, we did a round at 5.6. And in December, we got an offer at 8. It's like, it's kind of ridiculous. I mean, and I actually didn't accept the$8 billion offer because I thought, you know, the company going to grow triple next year. You know, we're going to be a$15 business. Why would I take an offer for eight? But then obviously didn't know that the market going to crash. The multiple is not real. So, you know, we went from 100x of revenue in terms of our multiple to, you know, 13, 14x of gross profit.

1:23:05That's not like, that's not like, it's like a more than 95 % compression in terms of multiple in the last couple of years. Right. But that's the reality, you know, that's every company has gone through. And as I said, we just have to have the resilience and build efficiency and heads down, keep scaling. When you were going through, did you believe you were worth$8 billion? Yeah. At that time, I thought I actually were small. Yeah. It's crazy, right? Like how to go through these things. It's like, it's that kind of thing when you like adjust a certain lifestyle or mindset, you know, it's very hard to come down versus like you've never came.

1:23:43If someone told you 10 years ago that Airwallex is going to be, I don't know,$5 billion business or$6 billion,$7 billion after 10 years, you would have probably been really happy, right? Yeah, the best outcome of my initial idea, I thought about building Airwallex is$100 million. I actually told all my co-founders it would be great if we can get to$100 million in three years' time when we started the business. But we obviously got acquisition offer at a billion after three years, which we were, feel like, just shocked. You know what I mean? But then like, because of 2021, you'd be like, oh, even that's kind of how every business is valued.

1:24:21I mean, you should be worth like multiple billions and which is not the reality. No, totally. And, you know, now, obviously, having to come down from that is always hard, right? Like, and thinking, hey, you know, as you said, like multiple compression and all that, you say, we grew so much. and you did the business that's so well, but because of multiple compression, you know, it's still you're anchoring yourself to the benchmark of the eight that you had the offer or whatever it was. We're not even there yet. We, we, we barely growing out of our 5.6 and hopefully we'll get to eight sometime next year.

1:24:57Yeah, exactly, exactly. And, you know, now almost a decade in, right? Like, you know, you hire people and build things around the world. Like what are, what do you think are some of the lessons that you think you learned from the Chinese world that you think there were, you know, other entrepreneurs around the world should learn? And what do you think are some of the lessons you learned from around the world you think the Chinese entrepreneur should know? I think what China is really good at is engineering at scale and at the execution intensity and velocity that no other economy I've seen, right?

1:25:28So I think for global entrepreneurs, especially in Silicon Valley, you know, figure out a way to leveraging these great engineers in China would be kind of a huge advantage, right? I think Zoom did that and, you know, we did that. I mean, you know, Snap had a team in China and a lot of, you know, Microsoft have more than 10 ,000 engineers in China. Not many people talk about it, but that kind of become like a huge sort of productivity boost in all of these global companies. And the key to operating is that, you know, you hire the engineering leadership in the US or Australia, then you kind of relocate them back to China to you have the kind of a consistent culture.

1:26:11And then just try to, the Chinese engineer are very good at execution, but not the best sort of innovators. And just try to leverage in the strengths, not the weakness. I think just the overall, I've been seeing a lot of the Chinese entrepreneurs, they're just working extremely hard. To the extent that it's almost not much of a lifestyle. And that was kind of how I've been operating for a long time. But until I've been hanging out with entrepreneurs in the US, everybody has a lot of family, a lot of life, a lot of focus on their health, building a sustainable lifestyle while you're doing this business, which I think is probably a better or more sustainable way of building a business.

1:26:53It's not right or wrong. It's just that your life shouldn't be just about work and just about intensity and execution. So now I'm probably in the middle of like, Obviously, you need to work hard and, you know, executing with intensity, but also you need a more balanced sort of lifestyle and you need relationship and friends. I think for Chinese entrepreneurs, what they wanted to do is always try to enforce that Chinese culture, work culture, intensity to the West and globally, which is what I tried to do in Australia early on. Actually, it doesn't work because fundamentally, the culture is different.

1:27:29You cannot build a culture in a country which is fundamentally have a crashed value. If you tried to do the opposite, it wouldn't work either. Yeah. So what you really try to do is try to hire local people and empower them to build a local culture. And I figured out an effective framework to communicating between the engineers and the team in China with the rest of the world. I think as the geopolitical situation getting worse, I think a lot of the people are thinking about just completely decouple China and the US or the rest of the world. I don't think that's kind of the right way of building business.

1:28:07I think there's still a lot of great engineers in China that people in the US can leverage. There's still great entrepreneurs in China that there's a lot of global opportunities they can pursue. Makes sense. And you're talking about the hard work and the balance, but just so people know what you mean, right? Like what you think, where are you at, you know, kind of in the Chinese way of hard work? Where do you think a lot of U.S. people are and kind of what's the middle look like in terms of like, I don't know, work hours or lifestyle? Like how do you materialize kind of that transition? You know, I used to like, you know, work till like three, four in the morning or five in the morning and get up at like eight and nine and just start work again.

1:28:49And I did that for seven, eight years. Oh, wow. no weekends at all, probably putting like 110, 120 hours a week. I don't think that's sustainable. And obviously, I had the anxiety issue I told you about last year. And maybe it's just because you cannot just run that intensity forever. Your body just cannot cope for it because I also don't exercise. I think to build a business for a decade and beyond, I think you need to put a bit more time on your personal relationship, your health and exercise and just building a more balance. I don't think like 110, 120 hours makes sense. Probably like 70, 80 hours still kind of workable.

1:29:34Yeah, you can do a much longer time. Yeah, yeah, yeah. Well, we'll wrap it up here. But it was really awesome hearing your story and learning more about it. I knew some of it already, but it was a lot of details I didn't. So it was great to spend some time together. And I'm sure everyone's going to enjoy the episode. Thanks, Enrique. Thanks to our friends at Atomic Growth for helping with production and distribution.