Cowrywise, a Nigerian fintech startup offering digital wealth management and financial planning solutions, raised $ 3 million in pre-Series A funding. Quona Capital led the round as Tsadik Foundation, Gumroad CEO Sahil Lavingia, and a syndicate of Nigerian angelic investors participated locally and in the diaspora. The company it previously raised more than $ 500,000 through a combination of equity financing and grants.
Cowrywise’s idea was born when the CEO Razaq Ahmed was an investment analyst at Meristem, covering stocks and providing recommendations to retail and wealth management clients. He noted that existing investment management firms in the country have focused on the top 1%. They could not scale investment products to millions of Nigerians mainly due to their limiting size.
Banks, however, have been able to make progress on this front compared to investment firms. They expanded significantly in the mid and late 2000s to accumulate the branch networks they have today, where there are approximately 45 million unique accounts in Nigeria.
But over the years, the quality of banking services in terms of savings and investment has drastically reduced. With interest rates hovering around 3-5% annually, what Nigerians now know is sending and receiving money through their bank accounts and using debit cards for withdrawals leaving the market still underserved when deals with investment products.
For this Ahmed, alongside Edward Popoola as a CTO, founded Cowrywise in 2017 to solve this problem. With Cowrywise, they hoped to democratize access to savings and investment products to the growing demographics of disadvantaged Nigerian millennials and the middle class.
“Wealth management had been strange to many Nigerians because the existing players weren’t created for the mass market. This has always been an issue that we have found a solution to be needed, ”Ahmed told ProWellTech.
When they launched, the founders wanted to leverage the reach of the telecommunications industry to bring its investment products to millions of subscribers. But it didn’t go as planned, as the project became expensive to undertake and telecom companies demanded ruthless prices and commissions.
The company changed focus, deciding to build on existing payment infrastructure companies like Flutterwave and Paystack. The first aspect of the products launched on the market were savings-related products supported by fixed income instruments such as treasury bills. Ahmed says these products yield better interest rates at 10% -15%, more consistent than those offered by banks.
The introduction of the products of its mutual funds follows. Currently, the company has 19 different mutual funds, and at least 20% of the total mutual funds in the country are listed on its platform. Ahmed says this is the largest mutual fund portfolio a single entity has in the country.
These resources cover five investment partners and allow users to save and invest with as little as ₦ 100 ($ 0.25). Partners include United Capital Asset Management, Meristem Wealth Management, Afrinvest Wealth Management, ARM Investment Managers and Lotus Capital. Cowrywise indirectly charges customers for this service and splits the commission with mutual fund partners, but the CEO does not disclose how much.
Additionally, the four-year-old company takes into account the needs of diverse demographic and religious backgrounds, which Ahmed says is the result of an understanding with mutual fund partners.
“Our mutual fund partners clearly recognize the value of being part of an inclusive digital platform that allows retail investors to invest regardless of faith or financial status,” he said.
YC alum and Catalyst Fund also offers advisory services and recommends various funds to clients based on their risk tolerance and spending power.
But building trust with users hasn’t always been easy for the company. It’s a problem Ahmed explains that Cowrywise had to address through transparency and exceptional service delivery.
For example, one of Cowrywise’s darkest days came last September when a customer took to Twitter to complain about his lack of communication regarding funds stolen from his account. In response, Cowrywise apologized for the lack of communication, he acted on request and promised to do better.
“Service delivery has helped us bridge this trust gap to a large extent and I believe it is reflected in the growth and user adoption we have experienced. Trust was a big deal we had to deal with, but right now we’re crossing that bridge pretty well, “the CEO said.
Speaking of which, Cowrywise has over 220,000 users. In its first year, it only had 2,000 users. Likewise, to highlight the journey ahead for the company, there are only half a million Nigerians actively investing in mutual funds. When compared to the total number of active bank accounts in the country of over 40 million, it goes without saying that Cowrywise still has room to grow in the $ 3 billion market.
Cowrywise’s unique approach to wealth management is one reason Quona Capital led the round according to partner Johan Bosini. Company VC, known for supporting fintech and retail enablers such as Lulalend and Yoco based in SA, and Sokowatch in Kenya, is making its first foray into the Nigerian market with Cowrywise.
“Razaq, Edward and the Cowrywise team are providing everyday Nigerians with easy access to powerful and flexible wealth generation tools that have typically been reserved for people who are already wealthy,” Bosini told ProWellTech. “In a market of 200 million people, we think this will have a big impact for individuals to have more control over their financial future.”
The company hopes to increase its customer base and the new infusion will be key to that. According to the company, the investment will also expand Cowrywise’s product offering, support more fund managers in Nigeria and develop its investment management infrastructure.
Cowrywise is one of the many rich tech startups on the continent. There are startups with comparable business models like Piggyvest in Nigeria and other Robinhood-style platforms like Egyptian Thndr and Nigeria’s Bamboo, Trove, Risevest and Chaka. Cowrywise’s investment, the largest advertised round at this stage, brings the necessary validation for this segment of fintech startups that are starting to take off.
Similarly, despite a year-long slow start that saw Africa’s agritech and cleantech sectors take the lion’s share of investments, we might see fintech startups picking up the kind of pace we used to be that made them dominate VC. financing in the last two years.