= The Interview: Zerodha’s Nithin Kamath on the business of money From ‘the lure of making easy money’ as a teenager to building India's largest stockbroking firm with a unique pricing model, Kamath talks candidly about his journey Sumsath 17 052020QTHEKEN &vaon 2aoasntinns x © 5 © tesencomitsyte-ranion 2s anaty m2 oad Teyaald stctrign Zeeh apt rc s fa o- 4 20-Ie Ceyptowtnec company snr nett Roa lt hat tou eet ne Lea ore motte ames showyou ht terete tng. ‘thon na tra ie be orev cheng tm eames aol pe tome uch OFC Sao mesg nd ota scar oto mre sr sty sts O00 75000 | token tong et tea ee iste hcl one On fe evs Teco nah ara tplnet wound e000 coef mailorder fe owe lon Caroston so meted. zame a eye 2 Inari mri itn Sumanh dn amsthpsu atngnie elt Zaodhae (onan suc Money. Can't live without it. Can live with it. Can't have too lite, Can't have too much. ‘The means to all ends. The ends to all means. ‘einen: Zh itn Kanto easiest money hevaon 2aoasntinns x QTHEKEN © ‘Bu if you think your relationship with money is complicated, spare a thought for Nthin Kamath of Zerodha. Kamath, 40, and his brother [Nikhil 34, were both recent entrants in Forbes “India's 100 Richest Pople” list. They also topped Hurun India's “40 and under self-made rich lise 2020", wth an estimated fortune of Rs 24,000 crore ($3.3 billion). To top ital his startup Zerodha is quit literally in the business of money. e's India's largest stockbroking firm in terms ofboth volume and Kamath sat dovn with The Ken to share his startup story, world views, life lessons, and how the business of money is atthe centre of i al Outside the investing community, most people don't know much about Zerodha, How would you characterise what you do? {At its broadest level, Zerodha i a platform that lts you save or invest ‘money in the mos efficient way possible, We provide education, acess to allinsruments, and acess to a bunch of platforms that can help a person decide whats the best place to invest. Specifically, Zerodha is a sockbrokerage frm, but unlike traditional stocKbrokers who provide advisory services, we stay away from investing tips and the lke. Our focus(van: 200 A decide whats the best place to invest. Specifically, Zerodha is a sockbrokerage frm, but unlike traditional stocKbrokers who provide advisory services, we stay away from investing tips and the lke. Our focus asa discount brokerage i to function as a platform that empowers users to take informed financial decisions, rather than provide that advice ourselves. So, apart from advisory, we essentially do everything else that a ‘ypical stockbroker does. @. For people who don't know stock markets, what exactly is a discount brokerage? How is Zerodha different from other stockbroking firms? ‘The brokerage industry is probably one ofthe oldest industries in Inia; and the Bombay Stock Exchange (BSE) isthe oldest and one ofthe largest stock exchanges in Asia, Historically, BSE has been an association formed of stockbrokers. When we started Zerodha 10 years ago there were 400- 500 retail brokers inthe country. Ou of these, the top 20 were lke 80% ofthe market. A lt of the remaining 380 people were these guys siting fon the street or in small offices in Mumbsi, with small clients, ‘The large ones were the likes of ICICI, HDFC, Sharekhan and Reliance. All these firms operated with a pricing model that charged a set percentage fee based on the value ofthe stock transaction. Zeradha was the ist fim oe one(van: 200 A The large ones were the likes of ICICI, HDFC, Sharekhan and Reliance. All these firms operated wit a pricing model that charged a set percentage fee based on the value ofthe stock transaction. Zerodha was the frst frm to introduce a pricing model of ala fee per trade. At that time, this was both unique and innovative, relative tothe rest ofthe marke. ‘The second thing we did very differently was the business model in itself We offer one deal fr all our customers. Otherwise, what happens generally in the industry is that the broking firm gives you differen kinds of deals based on your net worth and the revenue you generate. Which ‘means if youte someone who's ina postion to bargain, youl probably seta better deal. "Nowe, the problem with thi is that, because brokers don't want to let go of| ‘he customer, they will kind of agree to whatever i the dea. But cis, in tum, forces brokers to be opaque inthe way they operate, We said we are soing to offer the same terms and rules for everyone. So, today, all ur 3.5 milion customers have essentially the same deal ‘These two aspects were our primary diffeentiators and I suppose a big, part of our success. ally Q. I's interesting that neither ofthese two aspects were ra oe onevaon 2aoasntinns x QTHEKEN © Q. It's interesting that neither ofthese two aspects were radically innovative, but given how closed and tight the stockbroking industry was at that time, it required an outsider like you to come in and {introduce these fundamental changes. Yes, when we started in 2010, brokerage charges were priced onthe value ofthe trade. So, for people who traded actively or had heavy daily volumes, the transaction costs were high, IFyou look ai from the broker’ perspective, the work needed to execute a trade was more or less the same irrespective ofthe sizeof the trade, since all these transactions were electronic. The cost incurred by the broker to add new clients was also marginal. But brokers had no ral incentive to change the status qu. In fact, fr most brokers, the high profit margins from brokerage services were use to subsidise other offerings like research services Brokers also had favoured clients, typically those with high volumes, with whom they would negotiate rates and offer deals that were cheaper than, those advertised or availabe to everyone else. While this might have helped brokers loek in customers and optimise profit margins, it made them dependent on these clients. t made for an opaque business line Fidaled with perverse incentives(van: 200 A riddled with perverse incentives [single rate for everyone enabled us to offer a much simpler and cleaner deal to customers. Alb, fom a practical perspective, it made it easier for 1s to run operations, as we did't require to put in place separate teams for different sets of customers or have different rsk management engines for each group—things that would have led to lot of complications . Shaking up the status quo is never easy. Insiders don't have any incentive to do so and outsiders typically struggle to enter into these closed markets. How did you think through this challenge? [Nikhil and I used to trade inthe makes for a very longtime before we started the business. So, we hada good idea about the problems that traders faced, Specifically the challenges of active day trading on Fucures and options “These things might seem alien to most people, because the number of people in India who actively trade futures is quite smallS00,000 or so. Bur this small group contributes over 989 of exchange volumes. Mast people that you see around you who invest in stocks ae folks who buy stocks, hold i for a while waiting frit to appreciate, and then sel, right? ‘That’ what most people assume the stock market is oe one(van: 200 A Bur these investors contribute only 1.5% ofthe trading volume on the exchange. The rest actually comes from people who are doing active day trading, essentially buying and selling during the day. And because you're buying and selling during a single day, you get whats called leverage Now, normally, if you want to buy stocks worth, say, Rs 100 ($1.36), you Ihave to pay Rs 100, But for someone who is day trading, you just have to puta margin to buy that number of shares because you are not taking the produet home. So, assuming you're a day trader, you go toa broker and say that you will sve him, say, Rs 10, Dut to buy RS 100 worth stock because you want to sell these shares in the next 20 minutes: Now if the share price goes up in the next 30 minutes, you can pocket the profit; but if goes down, you an at most lose only Rs 10 that you invested. This is leverage. The enticing thing about day trading is that leverage gives you the ability to make larger trades and, chs, more money. Secondly, you ean make ‘money in both directions because, when you invest in a stock, the only real way to make money isi the market goes up. But when you are doing day trading or futures and options trading, you can make money both on ‘he way up and on the way down. This is important fr a trader because they can't just be trading in one direction. oe one(van: 200 A When we started the business, the brokerage rates in India were quite high and based on transaction value; this hure day traders more than anyone else. The real question we asked back then was that ithe effort involved from a broker to execute a trade i the same irrespective ofthe sine of the rade, why should the brokerage go up? In markets lke the US, new-age brokers like Charles Schwab had all moved toa flat fee per trade back in the 90s, They were charging anywhere between $7-10 a trade, and had built massive businesses So in 2010, we saw a similar opportunity that Inia is finally going online; people were trading on the desktop siting at home or at cafes. We thought its a good time to build an online-only broker to eater primarily to active traders, Q. Let's segue to the time before you actually stated Zerodha. How did you and your brother get into active trading? It seems a bit ‘unusual, espectaly since you come from a middleclass family and sew up in Basavanagual, a sleepy neighbourhood in Bengaluru. Yes, we come from a middle-las family. My father was a manager in CCanara Bank and my mother a Veena teacher. But Nikhil and Ihave been trading sine our teens, Even though it was a sleepy neighbourhood, oe one(van: 200 A ‘Yes, we come from a middle-class family. My father was a manager in Canara Bank and my mother a Veena teacher. But Nikhil and {have beer trading since our tens. Eventhough it was a sleepy neighbourhood, Basavanagudi had alo of ative traders, so we were exposed tit very cary in fe. OF course, initially, twas the lure of making “easy” money that attracted 1s to trading. Istarted when I was 17 and had just joined an engineering college. You can call it the volatility f youth or an adrenaline rush, but like how people get attracted to certain video games or sports, for me trading was lke love a first sight. ‘The other thing is that trading in the market i really brutal. If people think entrepreneurship is tough, trading is even tougher and lonelier, Because you can continuously keep losing money and it can become quite frustrating. So, I've gone through all these troughs as a trader. I blew up ‘vee, ve had go workin a call centre for three-four year. Bur the important thing was that we persisted, and realised that this was something we were good at and passionate about. Luckily, we succeeded and, thus, ave the luxury to characterise this Tove for trading as @ passion Ifwe had failed, it would have been perceived as foolishness, oe one(van: 200 A Something we were good at and passionate about. Luckily, we suecceded and, thus, have the luxury Co characterise this love for trading as @ passion. IFwe had failed, it would have been perceived as foolishness 1 became a sub-broker for Reliance Money and Nikhil for Way2Weath, Seeing our sueces, other people asked us to manage their money for them, and we set up a partnership firm called Kamath Associates. (. What was the final trigger to set up a discount brokerage? How did you think about framing your business ambitions? [At one point wanted to take a break from trading for a year. And Nikhil was a much better trader than Iwas, soit was quit straightforward [Nikhil would continue trading and the business was such that he just had to increase the size of his own bets to compensate for whatever trades 1 would have otherwise done, And I would give this a shot for one year and sce what happens One ofthe biggest enablers was the National Stock Exchange (NSE) Jaunching a trading platform, NSE Now, in 2008. I was given fee of cost, to stockbrokers, if you become a member ofthe NSE, you would’t ed to invest in technology. Ie was very disruptive in terms of an exchange doing it. oe one(van: 200 A ‘That was really the opportunity we spotted because we had no understanding of technology and we just knew business a that time. We saw this alos lke an arbitrage of sorts where technology that would have otherwise cost crores of rupees was suddenly available for free. Now, 1 as generally a very curious guy when ic came to stock markets, and had ‘ied diferent platforms and different brokers, When NSE Now was released, I tried it and it was very rude. But by 2009, the platform had become beter. [Aso the servers for this platform were hosted within he exchange premises back then. NSE Now was like tick faster than other platforms because all ther brokers were situated outside the exchange premises ‘And for ative day traders, every second counts. So we felt thatthe time ‘was right, and bit the bullet to launch Zeroda with the simple vale proposition of fla fees, charging only Rs 20 per trade. In sharp contrast to other heavily funded fintech startups, Zerodha was famously bootstrapped. What was the thinking behind this decision? Well to start with, we didn't really require much extemal capital to launch the company. We needed to pay a deposit to NSE to become a broker and get acess tothe platform; and we had run our partnership oe one(van: 200 A Well, to start with, we did't really require much extemal capital to Jnunch the company. We needed to pay a deposit ro NSE to become a broker and get acess tothe platform; and we had run our partnership firm for nine years upto that point and had enough reserves to pay for this. Also, we were doing okay in life and didn't have any great ambitions to make this a large company. We saw it asa comfortable lifestyle business even if itsueceeded. Also, 1 be very honest, iL was. a VC or an fnvestor back then, I wouldn't have invested in myself because there was no pedigree, no vision or ambitions But in September 2011 or thereabouts, The Economic Times wrote a litle aticle on discount broking and they mentioned our company. That was ‘one year and one month from the time we started forthe first time, i gave alte bit of credibility tothe busines. More importantly, it also ‘made us realise that this was a bigger opportunity than we had initially envisaged and that we could build areal business here @ Right, s0 les talk about building the business. How did you get Your first 1,000 customers? What was the scale of your ambition? The ist challenge was distribution: to get the word out to active day traders about our offering. Now, given that we had been in the ‘community for many years upto that point, we had a head-stae of sors. 1 oe one(van: 200 A Your first 1,000 customers? What was the scale of your ambition? “The first challenge was distribution: to get the word out to active day traders about our offering. Now, given that we had been in the community for many years upto that point, we had a head/-stat of sors. 1 sed tobe fairly popular on lt of online forums: online day traders ‘communities, Yahoo! messenger groups, Orkut communities. In fact, I sed to myself run a couple ofthe largest communities back then. So, the fist set of customers essentially came through that network. I guess the initial set of customers were easy enough to attract bbased on your personal network. But given that you were in the business of money, I suppose it was a challenge to build credibility beyond ths inital set. Also, how did you avoid getting branded as “cheap but unsure” given that you were charging such a small fee compared with other brokers? Yes, the big challenge in our business is establishing credibility, IF you ere offered an opportunity to go put your money into a no-name co operative bank because they give you a 139% fixed-deposit rate, you probably wouldnt. You would ask yourself, “what's the catch," and you would mos likely go with someone you can trust even ifyou got a lower oe onevaon 2aoasntinns x QTHEKEN © For the fist two-three years, people would never keep more than Rs 50,000 ($680) or o with us. We had around 10,000 customers within the fist year, but overall volumes were low because we were an unknown, brand witha low-cost product. After Thad exhausted my earlier networks, 1 atively started outbound selling, cold-alling people and convincing them to ty us out. With time, people started seeing how much they were saving. They ‘developed greater trust in the company and the people behind it. They also saw how transparent our sytem was and how accessible the team. was. Slowly, brick by brick, we developed and deepened our customer base and, at some point, postive word-of mouth started kicking in. So, it was much easier fr us to get from $,000 to 10,000 customers than it was for us to get tothe frst 5,000. In parallel, the amounts that customers Invested through us also increased lock in step. . While your business grew, suppose it attracted competitors as well. Discount brokerages like RKSV and Upstox that followed your playbook to aT. Given that your business model was no longer a differentiator and a platform like NSE Now was equally accessible 0 all brokers, how did you deal with competition?(van: 200 A Jn 2013, ou fis direct competitor emerged. Tey had the exact same story s sft fees per wade, ansparent business, same community presence, and same content suatgy to sed the market Ofcourse, we had a couple of years ofa head-star, a other competitors would have to 0 though the same leaning/rowing pase that we had. And ontop of that, we ran avery efcent bsinee model with very ite fat cut Our charges were just Rs 20 per trade, leaving litle space fora competitor to wundereut; and we spent almost nothing on sales and marketing, relying instead on orgie word-of-mouth that gave us avery low [CAC ‘But we didnt want to rest on these temporary competitive advantages, and realised that we needed to bull a different and more enduring moat. That is what prompted us to thnk about establishing our produet asa ‘moat. While we didn't have a large tech team at that point, as we were piggy-banking on NSE Now that we had white-labelled, I was lucky that I had stated investing small amounts of eapital as angel investments in Some tech startups. This had helped me build a network of tech entrepreneurs, and one of them was Kailash Nadh, Kailash was working on another startup idea that didn’ quite fy, but he hhad managed to build bunch of tings that I thought were spectacular. 1 ‘eventually convinced him to come on board as our fulltime CTO, and replicate his playbook ofa small but committed engineering force Even oe one(van: 200 A Kailash was working on another startup idea that didn’ quite fy, but he hhad managed to build bunch of tings that I thought were spectacular. 1 ‘eventually convinced him to come on board as our fulltime CTO, and replicate his playbook ofa small but committed engineering fore. Even today, we only have a 30-member tech tear, while some of our competitors have teams that are 10 times as big. The second part was 3 startup called TradeLab, founded by a bunch of kids from ITT Kharagpur that we had bankrolled and engaged to build our ist platform, 12014, we had a desktop trading platform called Pi, which was better than the competition. So, forthe frst time, we had a product that was superior to what everyone else was using, The product had unique features such as advanced charting and algorithms, inbult strategies for backtesting, trading signals, and alers. This platform was offered for free to ll clients and generated alot of postive word-of-mouth publicity. But we knew thatthe desktop was going to die and started developing a ‘web-based platform called Kite @. Compared to competitors, what was better about your product? Was it a marginal difference or something far deeper? oe one{d ranien amananione » [oF C& metancomistenenie- roan sanaty oe one @. Compared to competitors, what was better about your product? Was it a marginal difference or something far deeper? While Pi was a full-featured desktop offering for heavy users, Kite was a browser-based application that people could use anywhere, even on their ‘mobile devices. I was light-weight and much easier to use. So, ina sense, we covered the entire spectrum of usage scenario. ‘Aso, at that point in time, beyond the startup competitors who were stil barely launching, our main competitors were big companies like HDFC, Reliance and Sharekhan, Their trading platforms were cluttered and really difficult couse, primarily because they were developed catering to the demands ofthe buyer persona rather than the requirements of the end-user persona, Our approach was to declutter this completly IFT were to draw a comparison, if our competitor products were like ‘Yahoo! Search, ours was like Google search. This sa tougher challenge than what itis apparently. For instance, rake a look at Robinhood inthe US—they havea really beautiful and minimalist platform primarily because they have almost nothing on the sereen. Just a buy/sell button and thats it. Now, ths interface might work well for frst-xime newbie investors that the likes of Robinhood targets, but it will nt work for experienced day trader ike what we target. Such a person needs ‘Tent Zahs th Rah on ess ney ho <(van: 200 A experienced day traders ike what we target Such a person needs strategies, analytics, charts—all the bells and whites So, our challenge was to deeluterthe interface without eliminating the rich features that our users require. It was a tough challenge but we enjoyed the process of building it We believe that we have achieved the right balance between functionality and usability. . Considering your statement that your product is your moat, how do you reconcile that to criticism on social media that comes up often about outages on your platform? ‘While we believe that our product is superior to competitors, we don't for ‘moment believe thatthe battle is won and that we don't need to Improve. We re constantly working on making our product beter in all respects, While we have had some outages over the lst year or 5, these incidents are actually far fewer than what other brokers have faced. guess it isa testament to our product quality that customer expectations are so high that even rare outages get amplified and highlighted Q. Is product your only moat? How else has Zerodha evolved over the past decade? oe one(van: 200 A Q. Is product your only moat? How else has Zerodha evolved over the past decade? (Given that we are inthe business of money, the brokering world is highly regulated and controlled. Business continuity i of paramount importance, and you need to strictly adhere o a number of laws and regulations. So, generally speaking, inthis industry, and more broadly in banking globally, change happens very slowly. There ate so many rsks that no one wants to luy to change anything fast. We changed very ite in the firs five years of ‘our business. Only in 2015 did we add equity investing to ou platform. @. Please explain what that means. So, inthe frst fve years, our brand came to represent discount brokerage. People labelled us a a platform for speculating and used us as such, and ‘would go to platforms like HDFC or Sharekhan for investing and holding stocks forthe long-term. Within the day trader community, we had managed to get meaning traction with over 75,000 customers, ut it was an overall market of les than 500,000 people. While they made up fora much smaller part of market volumes, customers who bought shares for the long-term formed a much bigger market of nine milion ors oe one(van: 200 A for the long-term formed a much bigger market of nine milion or so. While this segment was probably not likely to be as profitable as our core customer segment, by then our ambitions had changed from simply «reatng a profitable company to becoming one with a much larger impact. So, we asked ourselves if there was something we could attempt to cater to in this market. I must admit that, like many other business choices, even this was more an instinctive decision triggered by a stray thought, rather than some long-planned strategy. In December 2015, our PR person and I were stuck inthe coach when our flight got delayed, and I just threw up a random idea. At that point, our revenue from long-term equity investors was 2.3% of our total Lvoiced lout whether we can let go ofthis revenue and charge zero brokerage fees for delivery trades. Within the next two hours, we announced it with @ blog post That was the fis ime that vitality kicked in for our business Q. How so? Until then, getting new customers was a slog in many respects, We used to get leads organically, but we still had to work hard to convince the customer to come on board and open an account. But the moment we went from Rs 20 per transaction to zero, the game changed completely oe one(van: 200 A ‘Until then, getting new customers was a slog in many respects, We used to get leads organically, but we stil had to work hard to convince the customer to come on board and open an account. Bu the moment we went from Rs 20 per transaction to zero, the game changed completely "New customers came in and signed up on their own, They started inviting {heir fiends and families to join. In 2015, we were at 70,000-75,000, users after five years. Inthe next five years, we went up SOX to 3.8 milion you think about it, the difference between Rs 20 and Rs 0 is so small, bout itmade such a big difference, Also i is at times like cis that feel fortunate that I don't have external investors to answer to. Thad VCs on the board, I would have struggled to justify why we are ling go of That was a big ipping point for our business, Soon after, we also benefited from the changes brought about by demonetsation, as we were able to use Aadhaar-based authentication ro complete Know Your Customer (KYC) requirements. This allowed us to onboard new customers ina matter of hours, compared to 2 week or so that it used to take earlier. ‘This helped us grow much faster and with fewer overheads. The lst few years have witnessed boom for equity investments, with low interest ates pushing more people to explore equities for instance. All these oe one(van: 200 A years have witnessed a boom for equity investments, with low interest rates pushing more people to explore equities, for instance, All these secular tends have helped us increase the business mulifold @. While your customer numbers might have increased, the fact that you charge nothing for delivery trades means that you don’t make any money from these transactions. So, how does your business model work? ‘We make a small amount of revenue as annual maintenance fes from Jnvestors who hold a stock worth more than Rs $0,000 ($680). We have a couple of million investors who come under this category and pay us Re '300 ($4) per year, but obviously it’s nota big amount overall. Also, we are seeing equity investor try their hand at speculative transactions, as it {sll available on the same platform. But even with allthis as things stand, tes primarily the day traders, who continue to pay Rs 20 per trade, who subsidise buy-and-hold transactions that ae fee While we don't make money directly from these equity investors, we benef rom their presence in other ways. We have a much wider and deeper trove of data, fr instance. We have also launched new products such as Coin, our mutual fund platform, and True Beacon, our asset management offering, that we can cross-sell and up-sell o our customer oe one(van: 200 A While we don't make money directly from these equity investors, we benef rom thir presence in other ways. We have a much wider and deeper trove of data, fr instance. We have also launched new products such as Coin, our mutual fund platform, and True Beacon, our asset management offering, that we can cros-ell and up-sell to our customer base. We are planning additonal offerings around loans against securities, for instance, that can help make these users profitable as a segment by themselves In any ease, even with ll these low no-income users, on an ‘overall basis, we are quite profitable and haven't sacrificed bottomine health for topline growth. ‘Aso, rom a philosophical perspective think we have realised that there are diferent ways to grow. Originally had thought that for every 100,000 customers, we would need to hire 200-300 addtional employees But by vinue of being tehled business, we are seeing economies of scale that have enabled us to add and service a lot of new customers without having to increase our team size linearly. Even today, we only have 1,100 members in ou team, and I don't think we will need to grow this by too much in the future. Today, Zerodha has a topline of around Rs 1,000 crore ($135.8 milion) and profit of over Rs 350 crore ($47.6 million). While this oe one(van: 200 A Today, Zerodha has a topline of around Rs 1,000 crore ($135.8 million) and profit of over Rs 350 crore ($47.6 million). While this, profits a great thing on one hand, in a sense, others might see it as an opportunity for arbitrage. If your margins are 30-35%, does that ‘open you up to the possibility of getting disrupted in some way? Especially so when fintech is one ofthe hottest VC categories inthe country today? Is there a rsk ofa glut of VC money coming into the system and poisoning the well, as every funded startup attempts to get market share? No doubs, there are a numberof eompanies that are coming after us, Dut I think ther priorities and ambitions are diferent, Everyone is going after the mass market and tying to expand the market to bring in more first time investors, like how Robinhood has done in the US. But, lke I ‘mentioned before, today, there is no revenue from the masses, “The entice revenue pools from active day traders and futures and options traders. Ifyou compare itt shooting, these people are the ones who care deeply about their guns and ther bate is about centimetres and milimetres This is a segment thatthe big guys are no likly to be interested in as ‘hey are a small set and have very demanding requirements. o, in that oe one(van: 200 A This isa segment that the big guys are not likely tobe interested in as they are a small set and have very demanding requirements. So, in that sense, we are at least three years ahead of the competition and probably siming ata different target. Im sure thers will spend time and eventually try to catch up with us and battle with ws directly. But that is why we are spending most of our time continuously improving our product and entancing our value proposition. When we stated the business, our original value proposition was low, ‘at-fee pricing; then, it became about education; then, it became a faster trading platform. Today, we see our offering as not just a platform but as an ecosystem, with a numberof other startups plugging in to our Kite platform and offering addtional products and services. The Rainmatter Initiative that we launched in 2016 supports and promotes startups that siton top of ws; together, we can build much faster and better than any single fintech firm, however much money they have to throw at the problem. If we continue to focus on being customer-first, as we have been ‘hus fa, I tink we wil continue to win, Q. Ifyou believe that you are in a strong postion in terms of competition, what keeps you up at night? oe one(van: 200 A Q. Ifyou believe that you are in strong position in terms of competition, what keeps you up at night? ‘Two things. Firstly the flipside of having active traders as your core customer segment is that they bring risk on the table, because they are carrying leveraged postions overnight. And this isa concentrated risk. To give you an example, you might have heard about crude oil options going to negative levels recently. That day, we lost almost Rs 12 crore ($1.6 nillion) overnight, Our customers had bought crude oil when the market fell and ie went negative Indian markets don't have a concept of setting in negative and trading in negative. So, people who had given Re 1 lakh (81,360) to take a crude oil contract lost Rs 3 lakh ($4,070). We were essentially down Rs 2 lakh for every customer who had one ot of crude oil ‘There could be other unforeseen events that could hurt us similarly if, say, North Korea decides co press the nuclear button and the market collapses; four customers who have deeply leveraged positions wil eke a big hit. 1F the market falls, our customers can lose more money than what they have pledged in [eserow kept with us. Which means that, potentially, we have to make good these losses from our own pockets. I's almost like an Insurance business of sorts and we are really one big black swan moment away from it oe one(van: 200 A (. What about Covid-19? How has it affected your business and your outlook? |e might sound contrary to loge, but Covid has actualy benefited our business immensely, We were at two million customers in January and we are at 3.5 milion today. So, we've actualy grown S0% in terms of new customers this year itself and all our other key business metres— revenues, profits, et—have all gone up by 50-60% over this year. (Quit frankly, 1 don’ even know why people ate buying stocks and why ur stock markets are going up. Iam sure many armchair experts can ‘come up with convenient post hoe justification as to why this makes, complete sense, but out there inthe battlefield ie all seems quite arbitary and whimsical. So, while we are happy withthe grow, we ae not counting on such numbers forthe longterm future, and taking a conservative view overall. I remember reading a newspaper article about you a long time ago Which quoted you saying that you found it dificult to drive your Porsche on Bengaluru's roads. Listening to many of your answers today leads me to believe that you have personally changed a lot over this 10-year jouney. How do you think you have grown and evolved as a person over this time, even as you took Zerodha to great and, oe one(van: 200 A I remember reading a newspaper article about you a long time ago Which quoted you saying that you found it dificult to drive your Porsche on Bengaluru's roads. Listening to many of your answers today leads me to believe that you have personally changed a lot over this 10-year jouney. How do you think you have grown and evolved as a person over this time, even as you took Zerodha to great and greater heights? Ten years ago, 1 was only focused on materialist things. think if people get attracted to trading inthe first place i's because they see it as a way to make quick money. I got attracted to trading when I was sill teenager and I think it was a lite bit ofthat as wel, But as much as a stock market seems like an easy place to make money, itis actually very Alferen. in Fact, think it’ the roughest place in the world to make ‘moneys is easier to make money trying to win a lottery versus trading in the markets, Money was like a central part of this whole trading motivation as well, the fact chat you canbe financially independent without having to go answer someone. And all ofthat was happening even before Zerodha. So, when when I started seeing succes, did get into all the stupid things ‘that people who suddenly se some money do. Buy eas, watches and then, in between, also get quoted stupidly in some press articles. esretted the aticle so much oe one(van: 200 A But around two-three yeas ago, my worldview started changing, Fistly, 1 realised there is no end to that stuf. I mean, ifyou buy a Rolex, you start dreaming ofan Audemars Piguet. f you get an automatic Patek Philippe, you think about a Richard Mille. I think Kailash has been a major {influence in my life, He's like one of those proper monk types who doesn't tse a car because he thinks itll add to the carbon footprint ofthe planet. He doesn’ order fod from Swiggy because i comes in plastic. hope I can be one-tenth of what he Is, Just being around him has made ‘me alot more conscious about money and consumerism. I stopped being selcontred when it comes to money and I think I started enjoying giving back as well. enjoy our Rainmatter funding initiative, for instance, as get to see how we can help create new startups, new employment, new revenues [think that is what our country requres—to create employment, solve bigger problems, and ukimately make a lasting impact {have always loved trees and nature, and I think Hengalur is the best place inthe world when it comes to greenery. I consciously remained in this place because I think Tm a South Bengaluru boy; now, I want to spend a large part of my future to ensure that this beautiful city doesn't deteriorate and our children can enjoy it as much as we did, Now that I have money, I constantly think i can use it this way. oe one(van: 200 A deteriorate and our children ean enjoy it as much as we did. Now that | hhave money, I constantly think if can use it this way. So, I think, now, money has become about the freedom that it has given sme to attempt inikatives like the 500-acre piece of forestland that Lam supporting to conserve. Today, I think I get a bigger kick out ofthat than by adding more zeros to my bank account. Ofcourse, this isnot to say that Ihave let goof all materialistic aspirations bu it matters a Tot less to re than before and life seems much more balanced overall Even things like being on these Forbes or Hurun lists snot something 1 dream about or aspire for. If anything, i just ereates unnecessary tention as we have no intention to sell the business or ge a secondary ext of any sort. And if you don't intend to soll all this valuation and net worth busines is completely notior 1 and even meaningless. Q. Its been a great 10-year journey for you with Zerodha. What are your ambitions for the next 10? Both for the company and personally? From a company perspective, lam still very excited to get up every day and do something new. Even today, | think that we are building a product for someone like me. So, its almost ike every momning getup, Lam oe one(van: 200 A From a company perspective, lam tll very excited to get up every day and do something new. Even today, 1 think that we are building a product for someone like me. So, is almost ike every morning I get wp, Lam thinking about what I ean do for traders, for investors. That's constantly running in my head, That excites me more than thinking about milestones in terms of revenue and net worth. also count myself very lucky that I have @ team around me that has stuck with me for years, and everyone looks at each other as family On the personal side, think Ihave been very lucky to find something that "oved at such a young. age; and it rurned out to be something that has given me so much succes. Iam grateful for that. used to have tonnes of hobbies and I enjoyed playing sport, but think over the last ive-ten years, just havent given that enough time. 's very easy to get consumed by your startup and, beyond like Rainmatter and nature conservation that excite me. Taking time out isa big challenge for me. So, I think, personally, I would like to figure out ‘ way to swith off litle more from work and spend more time with my family. Lead image ereit:Sharath Ravishankar/The Ken oe one