Asian fintech is trumping the rest of the world right now. It plays host to a whopping 62 unicorns which have a combined worth of $238.5 billion. China, with its 731 million internet users, is leading the way with 42 of those unicorns.
So why do Asian giants like Tencent(owners of WeChat) want anything to do with the littler fish in Australia? After securing $13m US from Chinese investors in May for Airwallex, Jack Zhang, Airwallex’s CEO, should know. He spoke at Innovation Aus’ China Markets, China Money meetup in Sydney last week to try to answer the 13 million-dollar question.
Why are Asian Investors looking at Australia?
Australia is now fifth in the world for fintech adoption (as shown in a recent report by EY) – it’s become a world leader, and it continues to build blocks for large-scale growth and innovation.
Sydney is about to build a technology mega-hub, and Melbourne is creating a specifically fintech hub, while ASIC continue to build new relationships in Asia, most recently with Hong Kong, Malaysia and Japan.
It’s no wonder that the big investment giants such as Ali Baba, Tencent and Sequoia (to name a few) are looking to build business relationships across the pacific. Australia is becoming a hub for innovation, and the rest of the world is starting to notice.
Airwallex has had global intentions as a business from the start, having had offices in two locations within three months of its initiation, so it’s no surprise that Jack looked internationally for investment. Since Airwallex has access to an RMB license and to a cost-effective route for money to travel from Australia to China, and since China has some of the most exciting tech companies in the world, looking to Chinese investors fitted well with Airwallex’s business model.
Jack prioritised the four investors who he believed would complement Airwallex’s specialities the best. Typically investors have an industry or a field that they have a keen interest in – Jack knew Tencent, Sequoia Capital China, Mastercard and Gobi Partners as Airwallex’s select four – because of their monumental developments in tech and their shared passion for innovation.
What are they looking for?
Jack made it clear throughout his talk in Sydney that there is no specific way to attract Chinese investors. He commented that "I don't think the language and cultural barriers exist in raising capital". Many Chinese investors went to American universities, and work internationally. Nonetheless, he found four key aspects that investors were looking for: scalability, attention to detail, building good relationships, and passion.
Jack’s investors were not only looking for a company with a passionate team, but also a strong business plan. During the Series A, Jack had to prove how Airwallex had developed from the Seed Round. They wanted to know that what the Airwallex team was creating could actually make revenue, and on a large scale. He added that "the most important part is strategy and showing you have a plan for the long term." Jack had to show that the technology he had made could be put to use and where the numbers would come from.
But it’s not just about the numbers and figures, Jack added. Investors will make sure they know everything about your business, including every detail from a legal and commercial perspective as well.
Jack admitted to his Sydey audience that during the pitches, there was no room for error. In China, business people tend to be a bit more forward and detail-oriented with their questions - don’t expect them to hold back from asking every kind of question. He said: "You’ve got to learn to think on your feet as well as be prepared for everything."
He found that throughout the process, he became a pro at thinking on his feet, which was helped by lots of coffee.
3. Building a good relationship
In China particularly, business relationships are very important - they are as important as friendships and involve many personal interactions, dinners, and lunches. There is even a term for it, ‘Guanxi’.
While Jack stressed that there were few cultural differences in the VC world, clearly, building a relationship with his investors was a crucial step in the fundraising process.
But you have to show your willingness to listen and co-operate, too.
Jack noted: "Investors want to see your ability to negotiate - you don't want a lawyer to talk to them.”
Believe in the power of social media. Jack stressed that LinkedIn and WeChat were ideal for reaching out to connections, noting that the VC world is "smaller than you think". Once he got in front of the right people, the process sped up.
For Jack, passion and persistence go hand in hand. In order to attract Airwallex’s investors, Jack was up all night preparing, waking up 4.30am to fly to pitches – he added ‘if you don’t have passion, you won’t get too far with raising funds.’
Jack admitted that had to endure a number of rejections before he got his first handshake ‘yes.’
In China, business is very hierarchical and it is very rare that you will get to the big boss straight away, so this can be a setback in your fundraising. But Jack was persistent, and he kept asking to talk to the people at the top – finally it paid off.
When dealing with Asian investors, you have to be prepared for a lot of ‘nos’, and it is very hard to get to the top of the foodchain. But passion and persistence can reap rewards.
Global investment became a reality
Jack stressed that he can’t speak for every Australian startup or every Asian investor, highlighting the point that “every situation is unique”. But the Airwallex success story has demonstrated that there are Asian companies with an appetite for Australian startups – it's about whether you have the ability to tickle their tastebuds.
Jack Zhang at the InnovationAus meetup in Sydney