The stock markets, while a risky form of investment, yield one of the highest returns. And the US is home to some of the fastest-growing companies in the world and has a lucrative stock market. However, making money on stocks isn’t.
Currently, wealth management firms that offer global investing opportunities come with large minimum account requirements, rigid investing plans, extra costs for research, high commissions, and entry/exit loads. Additionally, diversifying wealth outside of local markets and across asset classes can also be cumbersome and expensive.
These factors led Sitashwa Srivastava, 38, and Vinay Bharathwaj, 37, to found Stockal in 2015, which started operations in the US in 2016, and entered India in August 2019.
The startup is a global investment platform that helps you invest in a diverse set of global assets from a single account, from anywhere in the world. Through Stockal, individual investors can invest in multiple global stock markets – affordably and with flexibility.
“We have started with the India-US corridor and are launching in the Middle East this month. We will soon be available in Europe-AsiaPAC corridor as well,” says Sitashwa.
How does the platform work
Stockal’s AI-enabled platform curates personalised investing ideas and insights, automates portfolio monitoring, and executes the trade. A user can open a brokerage account online in five to seven minutes. In India, the KYC is done using PAN card and a recent proof of address.
Once the account is approved by the backend team in the US, the user has to fund the account by sending money from their Indian bank account to the brokerage account. This is done via Liberalised Remittance Scheme (LRS) remittances.
The startup manages the entire procedure and works with most Indian banks to help with these remittances while keeping forex costs in check.
Once the funds are received in the brokerage account, user can make investments – buy and sell, etc. Whenever the user needs their money back, they can place a withdrawal request on the platform and the funds are remitted back to their bank account.
Portfolio maintenance, reporting, statements, etc., are all available within the Stockal account.
The startup works on a subscription and commission model. Investors can subscribe to plans ranging from zero to over Rs 1,000 for a monthly subscription. As subscription price increases, brokerage commission comes down, and more helpful features get added to aid the investor in investing smartly.
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The team and setting up the business
Before Stockal, Sitashwa co-founded Jade Magnet, Asia's first B2B crowdsourcing platform, focussed on marketing and technology-oriented services. More than 3,500 companies used Jade Magnet, including several global consumer brands, technology companies, and thousands of SMEs and startups.
Vinay, on the other hand, started his career with Citibank N.A. Then, he started his first venture in the financial compliance space, serving the North American financial services companies. He was also a part of the founding team of an energy and commodities focussed hedge fund of $300 million, based out of New York City and Mumbai.
Prior to founding Stockal, he was also the founder and CEO of Carbon Navigator, an end to end analytics and trading platform for managing energy and carbon footprint.
Challenges of starting Stockal
However, building a platform like Stockal has its own unique challenges. One is solving for both Indian and US regulations, especially as the brokerage industry has its own regulatory complexities as well.
“We took a regulation-light, platform-oriented approach so that we could get multiple regulated entities (banks, brokers, traders, wealth managers, investment advisors, asset manufacturers, etc.) on the Stockal platform. So, Stockal is a plug-and-play ecosystem for almost any kind of player in the financial services space,” explains Sitashwa.
At present, buying international stocks is not seamless with individual investors having to work under RBI’s LRS, which most laymen don’t know about. Additionally, most banks still operate offline when it comes to LRS remittances.
“We partly digitised the LRS process, working with six banks in India, and are making it completely online, working along with a couple of our very large banking partners,” adds Sitashwa.
He adds that beyond the basic needs, most investors need easy to use financial products for investing. The team is working with multiple wealth managers, hedge funds, and asset management companies to bring interesting products and asset classes on the platform.
Revenue and funding
In India, Stockal claims that it is already opening hundreds of accounts every day and making $500,0000 in Annual Run Rate (ARR). Sitashwa says the startup will do close to $1 million in revenue over the next 12 months in India.
“In the last seven to eight weeks, we had about 10,000 registered clients and signing up about a thousand every week now. We have a pipeline of about 30,000 clients to onboard over the next 12 months. We are seeing almost a couple of crores of account funding being initiated every week on the Stockal platform. We have an active pipeline of about $75 million in investments on the platform for the next eight to 12 months,” says Sitashwa.
So far, the startup has raised funding from angel investors and family offices, including Mohan Alexander (Founder of Amba Research), R Natarajan (CFO & COO of Ratan Tata’s Funds - RNT Associates), Dhruv Prakash (Board member of SBI Mutual, IndiaMART), and Nagesh Rao (Founder of Pipa Capital and founding member of Reliance Capital).
Market and future
According to media reports and National Stock Exchange, 97.5 percent of its total 2.78 crore participants are individual investors.
Closer home, players like Zerodha are working to bring in more awareness in the investment space. And the market also has traditional security companies. Speaking of its USP, Sitashwa highlights Stockal’s ability to operate in a B2B2C model.
“We have a well-oiled machinery for enabling local brokers, investment advisors, wealth managers, and fintech companies to onboard and manage clients on the Stockal platform. HDFC Securities is a large partner and we are very excited about the relationship. Cube Wealth is a great wealth management app and a Stockal partner as well. There are a few more partners, where users can discover Stockal,” says Sitashwa.
He adds that the startup also gives automated research on different stocks and prices curated by its AI-based platform.
Stockal’s platform also helps wealth managers, investment advisors, analysts, and hedge funds to publish model portfolios that investors can invest directly into.
Speaking of their future plans, Sitashwa tells us, “We will launch in a few other Southeast Asian countries by the end of 2020. Currently, investors on Stockal invest in the US and we will be adding a few other markets like the UK, Germany, Singapore, and Japan over the next year.”
He adds that by 2021, the startup will also have investors in the US and Europe investing in Asian markets. In the next six to nine months, it aims to have more asset classes available on Stockal.
(Edited by Saheli Sen Gupta)