Airalo’s bet on eSIMs pays off as it raises $60m – “we want to be available at every OTA checkout”

In 2019, during an investor’s pitch, Bahadir Ozdemir, co-founder of Airalo, which uses software-based eSIM connectivity to provide a wide range of lower-cost mobile data packages for international travellers called for a minute’s silence for the death of the physical SIM card.

“People from the industry did not believe me. There was resistance. They said the eSIM was a phase, only an experiment that Apple is doing,” the Turkish entrepreneur told WiT.

Fast forward and, according to co-founder Abraham Burak, by 2025, there will be 3.4 billion eSIM-enabled devices. “Every new phone from Apple and Samsung that are being manufactured will have eSIM capability and the iPhone 14 will only have eSIM.

Bahadir Ozedemir (left) and Abraham Burak: One’s the starter, the other the scaler. Guess who’s which.

“Our bet has definitely paid off,” said Bahadir, who now lives in Dubai, having moved from Singapore where he lived for five years.

It certainly has. The company, started in 2019, headquartered in Delaware with operational base in Singapore, just raised Series B funding of $60m, a huge jump from the previous round of $5.4m and seed funding of $2m.

What’s more interesting is who the investors are. e& Capital, the venture arm of e& (better known as the UAE-based carrier Etisalat), is leading the round with participation also from startup ‘generator’ Antler Elevate, Liberty Global, Rakuten Capital, Singtel Innov8, Surge (the early-stage fund run by Peak XV, formerly known as Sequoia Capital India and SEA), Orange, T Capital (the venture arm of Deutsche Telecom), KPN Ventures, Telefónica Ventures and I2BF Global Ventures. GO Ventures and LG Technology Ventures are two other previous backers that were in its Series A.

“They are mainly telco companies who see the future,” said Bahadir. “It took almost two years to convince telco companies to be ready for eSIM. I just came from a meeting with a major telco in Europe and my contact said to me, “I am so happy. After four years of trying, I finally convinced upper management we should start doing eSIM.”

First telcos, now consumers – investing in industry partnerships

Six million customers now. “We want to be available at every OTA checkout, whether in Korea or Mexico, everywhere where travellers are booking,”

For Airalo to take off, it needed the telcos to be ready and now “almost every telco company is ready and we have a strong supplier base,” said Bahadir.

Now it’s about bringing more customers onboard – it currently has six million customers from more than 200 origin countries. With pent-up travel demand after the pandemic, it’s been growing 20% month-on-month, with nearly one million downloads monthly for the past three months.

The US is its biggest market, with Singapore, Canada and Europe among the bigger markets. “We will double down on the pattern and maybe we will give more love to markets we have previously not paid attention to,” said Bahadir.

According to Abraham, the biggest challenge in the early days was educating consumers and trying to change decades-long user behaviour that revolved around roaming and buying SIM cards, and carrying wifi devices.

“We unified that experience to one website, one app – that you can get your connectivity before you leave for your destination and get immediate connection – and yet people were asking, why should I change my old ways?”

Armed with the new funding, Airalo wants to do three things – improve the quality of its connectivity, increase its coverage to make really good deals to provide better prices for customers and design a B2B2C game plan.

“We want to build a big partnership team so that Airalo eSIMs are served anywhere where there’s a touchpoint for travellers. That means OTAs, airlines, travel agencies, airport stores, corporates – we want to be available at every OTA checkout, whether in Korea or Mexico, everywhere where travellers are booking,” said Bahadir.

In discussions with travel partners, other than the commercial angle such as “what’s my cut”, he said, “One key concern is that their customers are well taken care of. They are used to selling flights and hotels but not a telcom product and they want to be sure of the customer service. We have 150 people globally following the sun to help customers in multiple languages.”

To date, the biggest customer requirement is “hand-holding”, said Abraham. “It’s pretty normal. People are not sure what’s the next step after they buy the card – 85% are first time users of eSIM – so it’s a new thing for millions of people.”

Pandemic was painful but tipping point as team doubled down on product

The two co-founders came upon the idea of starting a consumer eSIM business when they were both travelling and encountered connectivity, accessibility and affordability issues. “In general, it was difficult,” said Abraham. “Bahadir had the first insight – he had his own eSIM card company for the maritime industry and he saw how an eSIM could solve the problem for all travellers. So we decided to solve our own pain.”

It was a painful start. The company was only four months old when Covid-19 shut travel down and it found itself without customers. “What we did then was to perfect our game – we finessed the product, improved internal processes – to get ready for when people started travelling again,” said Abraham.

Abraham thus sees the pandemic as the tipping point for the company. “When people started travelling, they found this product readily available and scalable and that’s why we’ve seen 20% month on month growth. I think if we hadn’t had the stoppage during the pandemic, we might have created our own demise because maybe the product wouldn’t have been robust enough to handle the volumes.”

Today, it has a team of 203 inhouse and 55 outsourced, with Abraham based in Toronto and Bahadir in Dubai. “I wanted a change but I wanted a place that is as safe and clean as Singapore.”

Connectivity remains biggest issue, competitors abound

One of its challenges remain connectivity issues – personally, I have used Airalo for a few trips. It worked well in the US and parts of Europe but I encountered connectivity problems in Chiang Mai, Thailand and now for regional trips, I opt for my local provider’s Data Passport plan, which allows me to tap into my local data. I asked the co-founders how they deal with such issues.

“We take this feedback seriously. Sometimes when you’re working with a single telco – Brazil and Mexico are good examples – one telco cannot cover all and you will always find a blind spot. We try to combine connectivity with multiple telcos. There is no perfect world where one telco can take care of the whole world, even Singapore.”

While there are lots of competitors around – do a Google search and you’ll find competitors such as MobiMatter and HolaFly, who tout themselves as “Better than Airalo” and “Alternative to Airalo” respectively – Abraham sees their biggest competitor as physical SIM card stores at airports. “When we see people queuing at airports and trying to find local SIM cards – we want to become the no-brainer alternative.”

Thus far, it has relied on word of mouth and has not spent any marketing dollars acquiring customers. With the new funding, it is planning a marketing campaign.

Will funding and managing investors change the startup culture?

I asked how the step jump in funding might change their startup – given they’ve been used to bootstrapping – and whether managing so many investors might be a challenge at this stage of growth.

“We pick investors where we see culture fit. They also know we are a company with healthy unit economics, not one of those spoilt unicorns that burn money forever and hope to monetise one day. We are obsessed with unit economics, and financially disciplined,” said Bahadir.

The two co-founders also complement each other well, having known each other for “a long, long time”, laughed Abraham.

Bahadir calls himself a lifestyle entrepreneur. A college dropout, he went into shipping and then into telco which led him to developing the eSIM business for the maritime industry, which led him to Airalo.

“In all these businesses, I worked with Abraham. We are a good match. I am a zero to one personality when it comes to building businesses, I like high impact. Abraham is more like 1 to 100, he’s about sustainable operating systems.”

Abraham is a lawyer by training and took on legal consultancy work until Airalo. “This is my first ride as a startup,” he said.

Added Bahadir, “Airalo is my first successful startup that has scaled to this level and I couldn’t have done it without Abraham.”

In other words, Bahadir is the starter, Abraham, the scaler.