Social investing platform InvestSky has started operations in the GCC after raising $3.4 million in a pre-seed funding round led by Saudi venture capital company Emkan Capital.
The FinTech start-up, which is licensed by the Dubai Financial Services Authority, does not charge a commission on trades and aims to educate first-time investors in the GCC through resources on its platform and social interactions with fellow traders.
Saudi Arabia-based fund S3 Ventures, Al-Romaizan Family Office and Mishal Al Mishari, deputy chief executive of delivery platform Jahez, and other angel investors participated in the round.
“We are trying to create a trading platform where people can come on board, observe and learn from others before taking a decision,” said Nitish Mittal, founder and chief executive of InvestSky.
Retail investors are increasingly seeking access to markets with the help of technology, leading to the growing popularity of zero-commission trading apps such as Robinhood and eToro.
Demand for trading apps soared during the Covid-19 pandemic as monetary easing by the US Federal Reserve and other central banks around the world offered novice day traders more money to invest during lockdowns, according to a report by Finra Investor Education Foundation and the University of Chicago's National Opinion Research Centre.
InvestSky allows users to trade more than 5,000 stocks and exchange-traded funds on the New York Stock Exchange and tech-heavy Nasdaq index through its app, which is available on both Google Play and Apple’s App Store.
The platform is available in both English and Arabic, helping the platform to tap into the GCC’s retail investor base. Millennials, Generation Z and female investors are the platform’s target audience, Mr Mittal said.
If you look at financial inclusion within GCC markets, the retail investor base is dominated by men, according to Turki Alshaikh, co-founder and vice president of strategy and investment at InvestSky.
“Female investors only represent about 20 per cent to 25 per cent of the market, which is very low compared with advanced economies,” he said.
“Saudi Arabia scores lowest among G20 countries for financial literacy. Our aim is to help educate people and bring in first-time investors by making the investment process easier.”
The platform does not offer copy trades because it wants users to learn and decide for themselves rather than mimic another person’s investment approach.
Instead, it provides educational resources for novice investors to learn about stock markets and investment strategies.
InvestSky also offers users curated themes on its app, grouping together stocks based on a particular concept, such as the Metaverse, Web3, FinTech and environmental, social and governance.
Unlike platforms such as Reddit and Twitter, where people post anonymously, all users who create an account with InvestSky must complete know-your-customer procedures. The platform does not charge a fee to open an account or maintain it.
“Users can see the past portfolio performance and stocks in another investor’s profile,” Mr Mittal said.
“We don’t disclose the amount invested for privacy reasons, but instead share information on the percentage of stocks invested in a portfolio. We also plan to add risk profile to a user’s account, and information on which sectors and themes they tend to invest in.”
However, users are advised to do their own due diligence before investing.
Users can currently transfer funds digitally from their banks to fund their InvestSky accounts but the platform will soon also offer instant funding methods through Apple Pay and cards, said Mr Mittal.
“We don’t charge a fee for wire deposits, but will levy a fee on the amount deposited when you top up with Apple Pay or cards,” he said.
“We currently charge $30 for each withdrawal but are working hard to reduce that fee. Some third-party charges that apply include a regulatory trading fee and trading activity fee.”
InvestSky deals with Securities and Exchange Commission-regulated partner broker Alpaca Securities for executing trades.
The platform offers a free subscription that includes unlimited trades, market orders and basic data, while the premium plan provides enhanced data about stocks, advanced order types, information on special events for stocks and analyst ratings, Mr Mittal said.