COVID-19 has completely terraformed the world’s economic landscape, erasing age-old consumer habits while introducing and supporting newer practices. As a result, industries are experiencing digital transformation at an accelerated pace to keep up with new spending trends.
In light of this, we have seen fintech companies step up to support this transformation, playing a bigger role in our lives than ever before.
One fintech startup in the UAE that has been a key player in this shift is Sarwa, a robo-advisor firm that makes investing easier and simpler, lowering the barrier to entry for owning your own portfolio to a mere $500. In fact, Sarwa witnessed fivefold growth in 2020, during the peak of lockdowns and closures.
Sarwa’s core service, Sarwa Invest, makes the process of passive, long-term investing seamless and simple, combining complex algorithms and human expertise to offer their users a rewarding and personalized investing experience.
On the other hand, their recently-introduced service Sarwa Trade expands the company’s product offering and now allows users to engage in zero-commission trades of global stocks and ETFs.
Mark Chahwan, co-founder of Sarwa, tells the Abu Dhabi SME Hub that Sarwa Trade came about after the startup’s users asked for access to additional financial activities to partake in. Having to turn them away, Sarwa soon learned from these users that there were many hurdles for MENA residents hoping to use international investing platforms. And thus, Sarwa Trade was born.
“We’ve now expanded our mission not just to help with investing, but with many financial products, and [to] start scaling [them] while not losing our focus of offering something simple, transparent, and affordable,” Chahwan said.
Mark Chahwan, co-founder of Sarwa
Sarwa’s raison d’etre
For Sarwa, the goal has always been to make investing simple, personalized, and rewarding. Prior to launching the company in 2017, Chahwan and his co-founders noticed a significant need in the market for such a service.
“We found that the main issue with investing here for people that live in the Middle East was that, first of all, you don’t have a culture to save, you’re not really taught to invest in school, we don’t really know why we should do it - there was a big gap in getting people to invest,” he explained.
The second problem they noticed was that even with people that wanted to invest, there was a general lack of education on the culture of investing.
“We [discussed back then] that a startup would be the right player to completely change how investing is done,” he noted.
A “naive bold bet” that paid off
For Chahwan and his co-founders, this was a “naive bold bet,” taking on such a massive industry. Fortunately for them, the UAE government also wanted fintech to succeed as it had been busy undertaking measures to diversify [its economy away from oil], and “fintech was a key theme that they wanted to back.”
“We aligned on what we were good at as a team, what the world needed, and what we were excited about as a society and we launched it [as a] quick MVP (minimum viable product) to see if people really wanted to invest, and there was a great reception. From then, it was milestone after milestone.”
Some of the key factors that helped Sarwa succeed was that they significantly lowered the barrier to entry when it comes to investing, democratizing the act itself.
“Typically, if you don’t have a million - sometimes ten million dollars - a wealth manager won’t look at you. So, we drove the minimum [to start investing on Sarwa] to as low as $500,” Chahwan explained. “But the reality is that [users] end up putting 50+ times more than that on average once they start investing. So it’s not that they don’t have the capital - it’s just that they want to get started and then [increase their investment gradually as opposed to] making this big decision.”
The Sarwa fouding team
When you start a fintech, you’re at minus one
Transforming the investing experience was never going to be easy, and challenges abound for Sarwa.
“In our industry, you have to get a license to do what you do,” Chahwan highlighted. “You have to go through quite a lot of steps to obtain a license [and] do the financial activity you want to do.
“So, you start at a minus. I always say this to my cofounder: when you start a fintech, you’re at minus one, not at zero. The minus one to zero is just getting your regulatory license, then you can have fun with marketing it, and everything.”
“You need to be excited and comfortable with the fact that you are going to be managing people’s life savings that depend on you. It’s not an easy challenge to take on, and you need to do that very ethically, stay consistent, and [cost-efficiently] make the best decisions for them, and protect their wealth.”
Setting up in the UAE: Exceptional speed to market
Opting to be registered at ADGM and DIFC proved a boon for Sarwa, boosting their speed to market.
“Putting fintech aside, in both Abu Dhabi and Dubai, we received the licenses in about 2 months from [when we first started discussions with them],” Chahwan said. “That’s really powerful - a very strong timeline. Typically, it takes a year to get a license.
“If you’re serious about what you’re doing, they’re going to treat your application in a very professional manner, assign really strong relationship managers, and just give you a ton of support to work on an aggressive timeline.
“There are a lot of incentives at the moment… both these centers are inviting a ton of startups to build their companies there, create a community, so I think it’s just a really nice place to be, especially today. There’s a ton of startup founders already walking and being present at these spaces, so you end up meeting people, making contacts, and introductions to VCs. It’s still early… but it’s evolving in the right direction.”
Learning from others
As an entrepreneur, Chahwan and his team saved a lot of time when they realized that many of the problems they were facing on their journey were hurdles many other entrepreneurs around the world had faced and solved, often documenting their solutions. As such, Chahwan recommends learning from those experiences.
“Find whatever data you can consume, whether it’s podcasts, [books], etc. because a lot of [entrepreneurial challenges] have already been solved. Instead of going through it yourself, [you will realize that] almost every problem you face has been solved by another founder [somewhere in the world].”
The GameStop saga, and the rise of retail investors
The GameStop stock rally at the start of the year rocked the world of investing, bringing mainstream attention to the act of buying and selling stocks. With apps like Robinhood on the market simplifying the investing process, and many more people stuck at home with higher disposable income, many in the world turned to the stock market to try and make their money work for them.
When asked if this spilled over to Sarwa and the MENA region, Chahwan noted that this new wave in retail investing had actually started in early 2020, soon after COVID-19 had struck. In his opinion, the GameStop rally was just “the next big wave,'' finally pushing MENA onlookers to take the plunge into the world of investing.
“Everybody is at home, they’re saving more, they have extra cash. It was just a very favorable environment. And obviously, banks [have always been] more closed-off - they were never really doing a decent job at catering to younger investors.”
Chahwan noted that more than half of their customers were actually first-time investors, while the other segment of their consumers prefers passive investing to put their money to work over the long term.
Developing a one-stop-shop for financial services
Last year, Sarwa raised $8.4 million in a Series A funding round. This year, it received a fintech experimental permit from Saudi Arabia’s Capital Market Authority (CMA), allowing the company to begin operating in the kingdom.
As for what comes next, Chahwan said: “Our immediate goals are now to go from one market and one product into becoming a one-stop shop for financial products, starting with trading as our first product expansion.”
The expansion into Saudi, therefore, is among the startup’s top priorities at the moment, in addition to hiring and expanding the team.
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