When SmartCrowd was founded in the UAE in 2018, the concept of crowdfunding was still mostly a foreign concept to people within the MENA region.
Crowdfunding within the real estate sector? Almost unheard of.
Company founder Siddiq Farid realised that individuals in the region had limited options to invest their money. Investing in a single piece of real estate, for example, was well and good, but it meant that an investor would have a lot of money parked in one asset or would have to borrow money, increasing the risk of the investment. Realising this himself as a professionally trained chartered accountant and CFA charter holder with an interest in investing, he sought to create a solution.
Siddiq realised that many struggle to access real estate as it requires a lot of capital, and potential investors might not have the ability to source deals or have the competency and experience needed to evaluate opportunities.
The result: SmartCrowd, a digital real estate crowdfunding platform that allows individuals to get started for as little as AED 500, gaining access to pre-vetted investment opportunities all supported by third-party market players and third-party market data and investment analysis, allowing investors to educate themselves and make investment decisions.
With SmartCrowd, several investors can put forward a sum of money towards a property, sourced primarily from individuals and brokers, giving them a fractional share of its ownership and earnings. The properties that make it to the SmartCrowd platform are handpicked and qualified by Farid and his team–two to five assets a month–to ensure quality assets that can generate positive returns for investors, which would in turn build trust, and create returning customers that value the service
With SmartCrowd, investors are exposed to less risk while being able to diversify their portfolios with lesser amounts of capital across various real estate assets. The SmartCrowd platform also simplifies the process of sourcing deals for potential investors, and educates its users on evaluating an opportunity, building an investment portfolio, and more–hence its brand name: building a smart crowd of real estate investors.
Siddiq Farid, Founder and CEO of SmartCrowd
Sure, the adage goes ‘if you build it, they will come,’ but when what you’re building is mostly a novel concept, it takes a lot to attract early adopters.
To kick start their operations and validate their concept, Farid first had to secure a licence from regulators, which is no easy feat when you are pitching an entirely new business model in the country. It took SmartCrowd nearly two years to obtain a licence and become operational and open to the public.
Onboarding regulators was a massive obstacle, to say the least. The UAE has seen a boom of innovation in the past few years, especially within the fintech space, and so bringing all stakeholders across the private and public spheres up to speed remains a challenge, even to this day.
“It's still a learning process, I think both for the businesses [doing new things] and for the regulators,” Farid said in a conversation with the Abu Dhabi SME Hub.
Building a consumer base
Once regulated, SmartCrowd became a source of media buzz, which intrigued experienced investors interested in this new investing model. SmartCrowd hosted many panels and discussions to help educate the market, and Farid communicated personally with each of their early adopters to inform them about what he notes is a “solution” first, and a platform for buying real estate second.
“[Selling] real estate, that’s not what we [try] to do here,” Farid said. “We offer real estate as a solution.
“What we try to teach people is financial discipline, the importance of investing your capital, the importance of understanding risk versus reward, where you're putting your capital, how you're allocating your capital—because once people understand that, the product sells itself.”
And this is indeed what happened. The multi-year nature of investing meant that users would inherently be long-term customers, and the returns they made convinced many to invest further. Word of mouth also played a big role in catapulting the size of the startup’s user base, and today the company is reaping the results.
In July of last year, SmartCrowd delivered its investors a 39.25% total net return (rental income + capital gains) over a 17-month period, and a 27.92% return on an annualised basis, after exiting a studio apartment in Marina Bay Central, Dubai Marina. The property was purchased by 53 investors for AED 530,000 in February 2021, and sold for AED 780,000 in July 2022, resulting in a 47% gross capital appreciation. The property had generated a net income for its investors of AED 74,330, representing a net annualised yield of 10.04%, compared to Dubai Marina’s market average of 6.20%
“This exit is one of many that SmartCrowd has done since, and each investment will vary in results,” Farid explained. “But the key message is that diversifying in other asset classes ensures your investment portfolio is built to withstand any market volatility.”
Farid highlighted that compared to investment avenues like the stock market and cryptocurrencies, which are historically very volatile, real estate is often the safer bet, which balances the risk in an investor's portfolio, allowing them to generate better overall returns.
Achieving profitability and sustainable growth
As we find ourselves firmly in 2023, Farid shared with us that Smart Crowd has some objectives to achieve.
While the company has raised over $4 million so far, it is still aiming to achieve profitability over the next 1-1.5 years, followed by a big fundraise to push the company further.
“[We want to become] a cash flow-positive business, because then you can control your destiny,” Farid said. “You don't have to rely necessarily on external money for survivability and so forth. So our focus is purely on continuing to grow the business.”
He explained that SmartCrowd is seeking sustainable growth “in the sense that I'd rather give up 10x growth… I'll be happy with 5x growth that comes with profitability. Because if you are able to generate cash flow positivity, and be profitable, you have a better chance of survivability… you'll be able to grow in perpetuity. And then you also give yourself lots of options as a business. Whether it's future funding… [a] merger, or a strategic acquisition.”