How Did Afterpay Start? Melbourne to a US$29B Block Deal

Afterpay started in 2014 as an idea between two neighbours, Nick Molnar and Anthony Eisen. It grew because retailers paid for it, not shoppers. Merchants paid a fee of about 4% of each sale, shoppers paid nothing if they paid on time, and every retailer that signed up showed Afterpay to its own customers at checkout.

For a founder, the curve is the reason to study it. Afterpay processed A$0.27 million of sales in June 2015. Six years later Square agreed to buy it for about US$29 billion in stock. It did that from Melbourne, as an ASX-listed company, without moving its parent to Delaware.

Download the data

• Afterpay growth timeline (CSV): 29 dated milestones (sales, customers, funding, expansion, the exit), each with its primary source.
• Afterpay growth dataset and scorecard (XLSX): the timeline, the growth maths below, and a scorecard where you rate your own startup 0 to 3 on Afterpay’s eight levers.

Sources checked on 4 November 2026. Figures come from Afterpay’s ASX announcements, Square and Block filings with the SEC, and Afterpay’s own site. Afterpay’s financial year ended on 30 June, and its dollar figures are Australian dollars (A$) unless marked US$.

Afterpay’s growth in numbers

“Active” means a customer who used Afterpay at least once in the previous 12 months. “Underlying sales” is the total value of purchases paid for with Afterpay, not Afterpay’s revenue.

The growth maths

• Sales, about 566x in five years. A$37.3M in FY16 to A$21.1B in FY21 works out to (21,100 ÷ 37.3)^(1/5) − 1 ≈ 255% a year. Even the last two years, from A$5.2B to A$21.1B, came to roughly 100% a year.
• Spend per customer. A$21.1B across 16.2M active customers is about A$1,300 per customer in FY21. At a fee of about 4% of sales, that is roughly A$50 of merchant fees per customer a year. Afterpay needed volume more than it needed a high price.
• The exit multiple. A$39B is about 1.8x FY21 underlying sales and about 42x FY21 total income (A$924.7M). Square was paying for the growth rate and the customer network, not for profits.

How Afterpay grew: 8 levers

1. The party with the margin paid

Afterpay charged retailers, not shoppers. In FY18 merchant revenue was 4.0% of underlying sales. Square’s announcement describes the shopper’s side: pay in four instalments, “always interest-free”, and “completely free for customers who pay on time.”

The trade was simple. A retailer gives up about 4% of a sale to win a customer who might not have bought at all. Afterpay’s own 2020 release claimed merchants saw conversion rise by over 20% and order values by over 25%. Treat those as the company’s figures, but they explain why retailers said yes.

Copy this: look for the party in your market with the biggest margin and the most to gain from your product. Charge them, and make it free or cheap for the user who brings the volume.

2. Every retailer became a distribution channel

Each retailer that signed up showed Afterpay to its own shoppers, so Afterpay didn’t have to buy most of them. Then it sent shoppers back. In April 2020 its US Shop Directory sent nearly 10 million lead referrals to retailers, and by H2 FY21 Afterpay was driving about 1 million customer referrals a day to its retailers. Square’s deck called the result consumer and merchant bases “designed to reinforce one another.”

Copy this: if you sell to businesses, give them a reason to show your brand to their customers, then send traffic back so they keep doing it.

3. It outsourced the hard tech, then bought the supplier

Afterpay didn’t build its first platform in house. The prospectus says Touchcorp, a listed payments company, built the system on Afterpay’s behalf in early 2015, and Touchcorp owned about 36% of Afterpay before the IPO. Two years later the two companies merged. The merger was announced in February 2017 and completed in July 2017, with Afterpay shareholders owning about 64% of the combined group. Eisen said the deal would let Afterpay “be fully integrated from a technology perspective.”

Copy this: renting your core technology gets you to launch fast. Once it becomes the thing that limits your growth, own it.

4. It went public early

Afterpay listed on the ASX in May 2016, less than a year after its commercial launch, raising A$25M at A$1.00 a share. That was a small IPO, not a celebration. The prospectus is plain about the model: “Afterpay pays the retail merchant upfront” and collects from the shopper in instalments, so every dollar of sales growth needs funding. Public markets gave it that money years before a typical venture-backed startup would list.

Copy this: choose the funding source that fits how cash moves through your business, not the one that looks best in a press release.

5. It entered the US with a US investor and one big retailer

Afterpay didn’t fly into the US cold. In January 2018 Matrix Partners invested US$15M, a Matrix general partner was invited onto the board, and Afterpay set up Afterpay US, Inc. as a fully owned subsidiary of the Australian parent. Its anchor retailer at launch, Urban Outfitters, had US sales of about US$3B. Afterpay noted that was roughly the size of the entire Australian online fashion market.

The US then moved faster than home had. Over A$11M of sales went through in the first full US month (June 2018), a total that took Afterpay about 16 months to reach in Australia. It was on track for 1 million US active customers within 11 months, passed 5 million by May 2020, and in FY21 North America (A$9.8B in sales) overtook Australia and New Zealand (A$9.4B).

The structure is worth noting for Australian founders. Afterpay kept its Australian listed parent and added a US subsidiary. It didn’t do a Delaware flip. If you are weighing that choice, read how to set up a US company as an Australian founder.

Copy this: enter your second market with a local investor who knows it and one named customer bigger than your entire home niche.

6. It measured repeat use, not sign-ups

About 90% of monthly sales in FY20 came from repeat customers, rising to about 93% of FY21 sales. Afterpay’s FY20 results said customers “are transacting more frequently the longer they remain on the platform,” and Square’s deck put the earliest Australian and New Zealand cohorts at about 29 purchases a year.

Copy this: track how much revenue comes from customers who return. If most of it comes from new sign-ups, you have a marketing machine, not a habit.

7. It created its own shopping days

On 16 August 2018 Afterpay ran a coordinated retail event, “AfterYAY” day, which was the biggest underlying sales day in its history to that point. It later ran Afterpay Day, a sale held twice a year. Sales during the August 2020 event were 68% higher than during the March 2020 one.

Copy this: once you have a network, give it a date. A shared event gives your partners a reason to promote you all at once.

8. It weaned itself off late fees

Late fees were the obvious target for critics of buy now, pay later. Afterpay introduced late fee caps in FY18. By FY21 late fees were under 10% of total income, down from 14% in FY20 and 19% in FY19. That kept the “free if you pay on time” promise believable as the company grew.

Copy this: if one revenue line is what regulators or the press would attack first, shrink your dependence on it before they make you.

What didn’t work, and the risk in an all-stock exit

The second row is the one founders forget. Square offered 0.375 of its shares for each Afterpay share. That ratio was fixed, so when Block’s share price fell between August 2021 and January 2022, the value of the deal fell with it. Afterpay shareholders were expected to own about 18.5% of the combined company, which is the point of taking stock. But “US$29 billion” was a value on one day, not a cheque.

Who should copy Afterpay’s playbook

It fits if you sell to businesses that can afford a fee because you bring them customers, your product shows up in front of their customers, and those customers come back often.

It’s a poor fit if your buyer has a thin margin, your product is invisible to end users, or you can’t fund the gap between paying out and getting paid. In that case Afterpay’s model is mostly a funding problem.

Score your startup on all eight levers in the scorecard sheet. For another Australian company that went global, but through free search traffic rather than retail partners, read how Canva grew so fast. For a venture-funded AI version, read how Cursor grew so fast. For a company that grew by winning developers one at a time, read how Stripe grew so fast. More case studies live in Startup Stories.

This article describes public filings and statements about Afterpay and Block. It isn’t investment advice.