Who is N K ikhil amath

As we almost all heard about Zerodha founder. It was founded by Nitin Kamath with his younger
brother Nikhil Kamath. He was born on 5 October 1979 in Shimoga, Karnataka.

At the age of around 31, he launched Zerodha. He was graduated in 2001 and after that, he worked
in Reliance money on the post of money manager.

Nithin was also doing part-time trading at that time. He has been trading since the age of 17. After
that college, he used to spend more time on trading, and after that like all trader’s journey, he even
went bust once, during the 2001 downtrend.

In the crunch of funds, he also worked call center to earn some funds. As he was a good trader he
manages to convince with his returns a person to manage his fund.

After that, he became a sub-broker at Reliance Money. He was much successful trader at Reliance
Money. Sometimes even he was used to generating more turnover than 1000 all odd traders.

All were going good but there was something that Rmoney was missing so which lead him to go
for the Zerodha foundation. In one of his interview, he said

“The biggest challenge for us is credibility because we charge so less, people assume that there is a
catch or the service is bad,” says Nithin.
“We pioneered the discount broking model in India.
Now, we are breaking ground with our technology.”

We kick-started operations on the 15th of August, 2010 with the goal of breaking all barriers that
traders and investors face in India in terms of cost, support, and technology. We named the
company Zerodha, a combination of Zero and "Rodha", the Sanskrit word for barrier.

Today, our disruptive pricing models and in-house technology have made us the biggest stock
broker in India in terms of active retail clients.

Over 9+ million clients place millions of orders every day through our powerful ecosystem of
investment platforms, contributing over 15% of all Indian retail trading volumes.

In addition, we run a number of popular open online educational and community initiatives to
empower retail traders and investors.

Rainmatter, our fintech fund and incubator, has invested in several fintech startups with the goal of
growing the Indian capital markets.

And yet, we are always up to something new every day. Catch up on the latest updates on
our blog or see what the media is saying about us.
 Nithin Kamath`s People

Nithin Kamath

Founder, CEO

Nithin bootstrapped and founded Zerodha in 2010 to overcome the hurdles he faced during his
decade long stint as a trader. Today, Zerodha has changed the landscape of the Indian broking
industry.

He is a member of the SEBI Security Markets Advisory Committee (SMAC) and the Market Data
Advisory Committee (MDAC).

Playing basketball is his zen.

 Nikhil Kamath
Co-founder & CFO

Nikhil is an astute and experienced investor, and he heads financial planning at Zerodha. An avid
reader, he always appreciates a good game of chess.

Dr. Kailash Nadh

CTO

Kailash has a PhD in Artificial Intelligence & Computational Linguistics, and is the brain behind
all our technology and products. He has been a developer from his adolescence and continues to
write code every day.
 Venu Madhav
COO

Venu is the backbone of Zerodha taking care of operations and ensuring that we are compliant to
rules and regulations. He has over a dozen certifications in financial markets and is also proficient
in technical analysis. Workouts, cycling, and adventuring is what he does outside of Zerodha.

Hanan Delvi
CCO

We take pride in the way we support our clients, and Hanan is responsible for this with his never
ending flow of energy. He is the man behind many of our support initiatives that have helped us
stay ahead of the game. A free thinker, Hanan can be seen posing as one in his free time.
 Seema Patil
CQO

Seema worked with an international airline business for over 6 years before joining us. She uses
her experience of leasing with people from various backgrounds to ensure that our ever expanding
support team maintains highest quality. She is an extremely disciplined fitness enthusiast.

Karthik Rangappa
Chief of Education

Karthik "Guru" Rangappa single handledly wrote Varsity, Zerodha's massive educational program.
He heads investor education initiatives at Zerodha and loves stock markets, classic rock, single
malts, and photography.
 Austin Prakesh
Director Strategy
Bio 

Austin is a successful self-made entrepreneur from Singapore. His area of specialty revolves
around helping organisations including grow by optimizing revenue streams and creating growth
strategies. He is a boxing enthusiast and loves collecting exquisite watches.
If you are a little bit familiar with the equity market then I am sure you have listened to the name of
Zerodha. It is India’s largest broking house. An online website that offers brokerage-free equity
investments, retail, institutional broking, and commodities trading.

Zerodha has stock trading information and capabilities. Before we start let me tell you today we
will talk about Zerodha Case Study.

About their business model and founder.

Before 2010 these financial market were not developed and was not having tech up to date. The
main concern of that time was that the people were not literate that much. People were having the
negative reputation of the stock market in their minds.

Nowadays this industry is growing at a very rapid pace but all this revolution was taking place due
to the introduction of discount brokers in the industry.

Founders

As we almost all heard about Zerodha founder. It was founded by Nitin Kamath with his younger
brother Nikhil Kamath. He was born on 5 October 1979 in Shimoga, Karnataka.

At the age of around 31, he launched Zerodha. He was graduated in 2001 and after that, he worked
in Reliance money on the post of money manager.
Nithin was also doing part-time trading at that time. He has been trading since the age of 17. After
that college, he used to spend more time on trading, and after that like all trader’s journey, he even
went bust once, during the 2001 downtrend.

In the crunch of funds, he also worked call center to earn some funds. As he was a good trader he
manages to convince with his returns a person to manage his fund.

After that, he became a sub-broker at Reliance Money. He was much successful trader at Reliance
Money. Sometimes even he was used to generating more turnover than 1000 all odd traders.

All were going good but there was something that Rmoney was missing so which lead him to go
for the Zerodha foundation. In one of his interview, he said

“The biggest challenge for us is credibility because we charge so less, people assume that there is a
catch or the service is bad,” says Nithin.
Zerodha Business Model

Like all other discount brokers, Zerodha also plays on a low brokerage high turnover model. They
charge very nominally as a brokerage for trader’s transactions. It leads to high transaction turnover.

As fee collection of many smaller amounts from a larger number of clients leads to the generation
of good revenue for Zerodha.

One more thing that aiding high-profit margins for the company is their operational costs.  They
operate quite low for Zerodha as compared to some of the top full-service brokers.

Zerodha works on the online structure which allows them to maintain low operational costs.

Zerodha – Revenue and Profit

Zerodha broking business reported revenue of INR 1093 Crore in FY2020. They had a profit of
INR 592 Cr in FY2020, as per the financials for Zerodha Broking Limited.

Zerodha has got a total client base of more than 5 million today as of February 2021. Recently they
also become a unicorn startup. They always bootstrapped their business. Never raised funding bu
equity sale.
Zerodha – Growth

They dethroned the market leader of that time ICICI Securities within some time which was having
nearly 8.47 lakh, active clients.

They generate around 2-3 million trades every day. Zerodha is the largest retail brokerage firm
across the world.

They are adding 50,000 to 75,000 accounts every month and growing very speedily.

For further growth, Zerodha founder himself quoted –

“India is very dependent on foreign capital to drive the country. For any country to do well, you
need residents to put their money in the market. The money shouldn’t just stay in fixed deposits and
real estate. I want to encourage people to educate themselves and put the money in the ecosystem
in some way or the other to drive growth,”

Zerodha Competition

The main competition of Zerodha is with Upstox, IIFL, Finvasia, Angel Broking, SAS Online,
Beeline Broking, Greetika Broking, TradingBells, Sharekhan, Edelweiss, and Karvy Stock
Broking.

Let’s compare it to basic competition. The thing that makes it different from others.

 Upstox- They are with almost the same services and almost the same brokerage
structure.
 5pasia- They are also with the same services but pricing is different as they are offering
zero brokerage trading. 5paisa provide better services and brokerage is also lower (Rs.10
per order flat)
 Flyers- In this case services and pricing structure as the same as Zerodha. But they
provide free API.
 Angel Broking- They also provide the same services but the margin offered is way
higher.
The broking field is very competitive in India. It is not easy to stand out in throat cutting edge
competition.

Zerodha Success Story in Stockbroking Industry in India:

Trading and Investments are the two terms everyone wishes to experiment with but is reluctant to
step in due to many reasons like lack of knowledge, hefty commission and brokerage charges,
uncertainties in the market and so on.

2008-2010 were the years when the biggest global financial crisis happened and the world was
facing a trading hush. In India, the stockbroking companies that existed also experienced a
downfall and were using old technologies to provide stockbroking services. Many young
generation people were not educated enough to even think of trading at a very young age.
While all of these were encountered by almost every broker in India, Bangalore based discount
broking firm, Zerodha was founded in 2010 by Mr. Nithin Kamath that provides trading services at
discounted brokerage fees and a user-friendly interface with reliability. This firm enjoys a massive
client base of over 2.5 million users.

Let us deep dive into the journey of how Zerodha success story and discuss how it became the
biggest discount broker in India in this article.
Quick Note: Nithin Kamath and Nikhil Kamath are the founders of Zerodha, India’s biggest stock
brokerage company in terms of volume of trade. According to the IIFL Wealth Hurun India Rich
List 2021 Kamath and his family are ranked as the 63rd richest Indians. Their net worth is
estimated to be above $3.1 billion.

The Co-founder of Zerodha “Nithin Kamath”, before establishing Zerodha, was working in the call
center at the night and he used to trade during the morning hours. At the age of 17, he got
introduced to the stock markets by his friend and since then he started trading.

Although he made a good chunk of money by trading in stocks, he lost all the money during 2001
and 2002 when the markets crashed. Over a period of time, he was landed a cheque from a foreign
HNI to manage his money. Eventually, he joined Reliance Money as a sub-broker and made a lot
of money by adding big clients to Reliance money.
Nevertheless, again lost a significant amount of money in the second market crash in the middle of
the global financial crisis in 2008-09. After trading full-time for over 10 years, this Maverick
decided to become a broker when he thought that the time has come to provide a different kind of
stockbroking services that he never came across during the 10 years span of his trading.

He felt digitization and online user-friendly platform are the need of an hour when he first thought
of starting Zerodha. Nitin Kamath also observed that the reason why the young generation is not
willing to start trading is that there are high brokerage charges implemented on the transactions.
His aim was to become an online broker using the latest technologies that is more people-first than
profit-first.

Zerodha is derived from the Sanskrit word Rodha which means Obstructions. The name Zerodha
means ‘No Obstructions’. Hence, the founder aimed at providing a hassle-free, low brokerage
trading platform. He targeted clients who are young and more tech-savvy to contribute to the
capital market ecosystem.
According to him, he wanted more of a Google-like platform with simple to use rather than a
Yahoo-like platform. When he felt the need to change the system, he along with his younger
brother, Nikhil, started Zerodha and the rest is the history or rather a case study for everyone.

Zerodha Broking Ltd.: Member of NSE & BSE – SEBI Registration no.: INZ000031633
CDSL: Depository services through Zerodha Broking Ltd. – SEBI Registration no.: IN-DP-
431-2019 Commodity Trading through Zerodha Commodities Pvt. Ltd. MCX: 46025 – SEBI
Registration no.: INZ000038238 Registered Address: Zerodha Broking Ltd., #153/154, 4th
Cross, Dollars Colony, Opp. Clarence Public School, J.P Nagar 4th Phase, Bengaluru -
560078, Karnataka, India. For any complaints pertaining to securities broking please write
to complaints@zerodha.com, for DP related to dp@zerodha.com. Please ensure you carefully
read the Risk Disclosure Document as prescribed by SEBI | ICF
The Secret Formula of Zerodha’s Success

It is indeed a fact that there is no shortcut to success. However, Nithin Kamath, when founded this
discount broking firm, decided to provide technology-efficient and cost-efficient services to its
customers. He observed that there is a huge lag between the commissions charged by the other
brokerage firms and the amount of money actually received by the customers.
In addition to that, the technology that was used was too old and Nithin felt the need to introduce a
smart platform that enables users to trade online comfortably. He thought of providing services at a
low cost where the idea of charging low commission clicked into his mind.

He also wanted to attract more young customers who often do not enter into trading due to high
commission charges. With this aim, he started his firm and today it has become the biggest
discount broking firm. He believes if we do not depend too much on foreign capital and invest in
our own companies, the day is not far when India will become an economically strong country.
Surprisingly, the firm hardly spent any money on advertising or marketing for its own firm. They
do not run any advertisements.

The founder believes in ‘the word of mouth is your true marketing’. Thus, with a very low
operating cost Zerodha was able to capture a large number of customers.
Interestingly, trading is provided free of cost at his stockbroking firm if the period of holding for
shares is longer than a day. They make money by charging a flat fee of Rs. 20 for futures, options,
and intraday trading.

While other competitors charge much more than this which is based on the percentage of a
transaction traded. Its business model on which it works is ‘low margin – high volume’.
Innovation and New Additions

In order to stay competitive, the firm launched many products to expand its reach and to overcome
some challenges they were facing. Below is a brief on what each product provides:
— Console: It is a central dashboard of a customer’s account with Zerodha that will provide in-
depth reports and visualizations to get more insightful ideas.
— Kite: It is a sleek trading and investment platform using the latest technologies. It eases the
customer’s experience to trade and transact in the stock market.
— Kite Connect API: This is mainly focused on independent traders and startups to enable them
to build an innovative trading and investment platform. Using algorithms, retail traders can
automate their trades.
— Sentinel: A platform that enables you to create market alerts. The alerts can be customized
based on price, trade quantity, and open interest. The interesting aspect of this product is that you
do not need to be a Zerodha customer in order to use Sentinel.
— Z Connect: This is a blog facility regarding stocks, trading, and investment with Zerodha. They
publish articles and information on this blog and any user is allowed to ask questions and post
comments.
— Varsity: One of the challenges faced by this firm was that it lacked in providing research
services to its customers who are sometimes clueless about what and when to buy or sell. To
 overcome this, they come up with Varsity that gives a vast collection of stock market lessons on
the go.
— Coin: It provides a commission-free purchase of mutual funds directly delivered into the
customer’s Demat account.
— Rainmatter: It is an incubator that provides funding as well as mentorship to startup companies
in capital markets and gives a minority stake in the exchange.
Source: Product information from Zerodha.com
In addition, Zerodha has also partnered with a lot of leading stock market platforms and portals like
Streak, Sensibull, etc to create more value for their clients.

Let us Talk about Challenges

Despite the tremendous success and huge customer base, Zerodha also had to confront a few
challenges as described below:
1. First of all, Zerodha does not provide stock advisory or any market-related calls that would enable
its customers to decide on what to buy and sell.
2. They also suffered from a lack of delivery of valuable advisory reports and analysis of one’s
investments and trading activities be it either weekly or quarterly. Most of the big full-service
brokers provide research reports.
3. As Zerodha is mostly online and no offline support branches, inefficient customer support, and lack
of quick customer service are the biggest challenges that this firm faces.
4. Technical errors like app down for a few minutes or charting errors were reported previously which
was basically because of the high market traffic situations.
Closing Thoughts
To sum up, competing with big players like HDFC and ICICI is indeed a daunting task that the
genius was able to cope up. However, there are other competitors too such as Upstox, Groww, SAS
Online, Angle Broking, TradingBells, etc. However, the founder wishes to continue with his low-
margin strategy.
This firm also developed a strategy to start selling Treasury bills, Government Securities, and
Sovereign Gold Bonds which is everyone’s preference while the markets are facing a downfall.

Nithin strongly believes in not running after the money but doing the right things for a long period
of time. This is what is the reason his firm has become one of the top-most broking firms in the
country over the eight to nine years of time.

To add to that, after facing so many challenges, the firm has made its way to persistently increase
its customer base year by year.

That’s all for this post. I hope this Zerodha success story is inspiring for all the budding
entrepreneurs and business enthusiasts who are planning to make something big in the stock market
industry. Stay safe and happy investing.

Interview:

Pankaj: Today, I am really thrilled and of course sobered by what is happening around us
to have this conversation with Nithin Kamath who has bootstrapped his start-up, Zerodha
over few years and is looked upon by many as a role model when it comes to building a
business without funding the way we know it in the ecosystem. So, welcome Nithin.

Nithin: Hey, thanks Pankaj for having me on the show.

Pankaj: How are you holding up Nithin with everything happening around?

Nithin: I mean today, you know, coincidentally is the worst day for stock markets in the
last, I don’t know how many decades. So, you know, we had a really bad day today on the
stock exchanges, so, it’s unreal right now. I mean, I still can’t figure is it a dream, I mean
is it nightmare or is it real, because it just feels like you’re in a movie and you know, just
don’t know how it is. It’s really tough, I think.
Pankaj: It’s kind of a dystopian future playing in front of our eyes.

Nithin: It just feels like I am in a Netflix movie right now. It just feels like some movie I
saw some few days back and somehow; I am in the middle of all of this and you know, it’s
happening so fast that it’s still not sunk in, right. I have been working from home for the
last 2.5 weeks now but still not sunk in. It just feels like it was just one day and it’s still
not over, you know, the day I started working from home till now. I just hope, all of this
gets over, I don’t know how, I hope it all gets over fast. I don’t know about the business
side, but at least, this whole social problems all of this will create, the economic problems,
you know, I hope it goes away fast and I mean founders can always fight it through and
cope up with all these challenges but you know, if the entire economy goes for a toss,
fixing it will take a long time, you know. It’s quite unreal.

Pankaj: Absolutely and I am with you completely in hoping that things get better. Let’s
start from the start Nithin since we are having this conversation for the first time in this
podcast. Give me a sense of where you come from Nithin and give me a sense of growing
up and then we can get into the Zerodha journey as well as in that’s the only way you can
stay ahead of your competition. So, I think the first defining moment for us was
actually finding Kailash and getting him on-board. He hates to be called a co-founder
because he joined 3 years later but you know, he is as much as a co-founder for me than
any other co-founder can be. So, 2013, finding him was one. Then, in 2015, because today,
you know, what Zerodha is, we are not a brokerage firm. We are more a technology firm
which is also essentially doing brokerage business. So that transition, he’s been
instrumental for that.

I think 2015 December, we had our first product that we built out by our trading platform.
We launched it in early 2015 and in 2015 December, there was this whole wild idea that
we had one day saying, we used to charge 20 rupees a trade for people who speculate as
well as people who invest. People who invest in smaller trading volume versus people who
speculate. So, we said how about we make these 20 rupees, zero for people who invest
because people who invest don’t really bring too much risk to the business. Like, for
example, if you want to buy a lakh rupees of Reliance Industry stock, you will put your
lakh rupees in your account, and you buy a lakh rupee of stock.

You don’t really bring any kind of risk to the business, so we said why don’t we just
do it for zero and that was again, like a turning point for us in the business, because as
soon as we went zero, this whole virality kicked for the business. We added more
accounts, I think, in one month in 2017 that what we added in the first five and a half
years of our business. So, that was the second.

And the third, big tipping point, it’s probably the biggest, has been the
demonetization, right. Because the biggest challenge for the business was on-boarding a
customer. If you wanted to open a trading and demat account back in the day, you had to
sign a 30-40-page document and attach I don’t know how many proofs. Thanks to
demonetization, people started using Aadhaar, they started using Aadhaar for KYC,
Aadhaar for sign. Now, you could offer a complete online on-boarding. So, most of
business growth has happened after demonetization.

These 3 were, you know, tipping points. These 3 are like those points, you know, which
helped us significantly. Negatively, thankfully, there hasn’t been too many. In this last 9-
10 years of Zerodha, you know, there hasn’t been too many such, actually not really any
big bad moment as such as a business, you know. We have been quite lucky I would say.
Let’s see how this current situation plays out. But until now, with Zerodha at least
there haven’t been too many tough times.

Pankaj: Godspeed with that Nithin. But, one of the key things about your journey and
Zerodha’s journey is the model itself which is bootstrapping that kind of also negates some
of the external factors that play out in a founder’s journey most of the times. So, what has
been your experience, it can even get lonely sometimes, right, bootstrapping?

Nithin: See the thing is, I don’t know if investors are really your co-founders or friends,
you know, investor has a different kind of mandate so I don’t know you know are you
going to be lonely by not having any investor, I am not really sure. Of course, you will
be lonely if you don’t have a team who works closely. I mean, then yeah. I don’t know
if bootstrapping really means that you’re lonely but no, I think looking back when we
started the business, we were very raw. I don’t think, you know, I keep saying this, if I
was a VC, I wouldn’t have invested in a person like me. The reason was one 2010, was
probably the worst time to start broking business. 2008-09 after the market crashed, every
broking firm in the world was trying to diversify and do other things and there was this
company, and you know, we were trying to start brokerage business, so, but then looking
back last 20 years of my life doing business, I think, is right place, right time, is more
important than anything else.
If you were to ask me in 2010, if you were to go ask 10 people, 9 people out of 10
would have said starting a broking business, way back in 2010 is foolish. But then,
it worked out really-really well for us. It was not that we were super smart to think
about it and start in 2010. It’s just right place, right time and you know, I think there
is a very thin line between passion and foolishness. If it works out, you are called
passionate, if it doesn’t you know, or you’re called foolish. So, today it worked out, so
people call me passionate and they look up to me, etc. but it very clearly, easily, could
have not worked out as well. So, this whole bootstrapping again, you know, was not
out of choice. Raising money was tough so that’s how we started.

But then we started the business and we started making some money and I started
interacting with the ecosystem, started meeting with the other people who have raised
money, etc., I never knew what money will bring for the business, so, one thing I was
very sure that I am not going to blow money to acquire a customer. See the thing is
our business is little different, I don’t know if everyone whose listening can really just say
I’ll also do this. See, in the business of money, right, when you save, you invest, you
don’t just trust a brand because of an advertisement. Now, would you put your money
say in Amaanat Co-operative Bank because they give 13% on their fixed deposit, you
don’t. For you, the brand’s credibility is as important as how much return you make as
well.

For us, when we were building the business, we realized that in the business of money,
advertisement in itself doesn’t really bring big edge so we said you know, if you not going
to really spend on marketing and advertising so what really is the cost of building a
business but we took extreme amounts of efforts. So, the education initiatives that we
run, I think, I don’t know, I must’ve answered 20,000 different people just on those
places, so, today if you look at our education initiative I think after Investopedia, it’s
probably the largest in the world. So, it’s extremely engaging, there are tens and
thousands of people who come and participate and it’s completely free. We don’t even
capture the lead. It isn’t done with an intention to generate leads. We are doing it
saying that we want to grow the ecosystem, share the knowledge, etc. If you look, go,
land in Varsity, for example, you wouldn’t probably even find Zerodha logo anywhere.
We’ve taken that kind of a stance, it’s the hard way to grow the business but its more
longer lasting.

So, once you build relationships, when people come, we are taking so much effort to
help them out, it’s a relationship that we are building. What we realized that it took
us 5-6 years of that effort before we actually started seeing the results of it. It’s just
crazy sometimes like, this month, we have opened 150,000 new accounts and I’m
wondering who these people are because we haven’t done any marketing, we
haven’t done any advertisement. We charge an account opening fees for people who
want to open an account with us.

So, I think, it’s those years of effort which cannot be quantified. Now these things that
you’ve done, it would have been extremely tough for us to do if, I think, the way investors
think, etc. How do I go quantify my time and effort saying that the CEO of the people is
spending 3 hours today and answering people on the forum? Now how do I justify to an
investor that this is worthwhile doing it. It’s very tricky, you know.

I think, as we grew the business, we realized that not having an investor is probably
an edge we have over our competition. Just being, you know, nimble and just being
really fast, like how Murdock had said, I think, today is the world of the fast beating the
slow and not really the big beating the small and to be fast, I think, all these enablers, one
of the enablers of being fast, you know, faster decision making is lesser people
involved. So, like for example, one of the big moments we had in our business was
going zero brokerage on equity investing. Now, that decision was taken, in an airport,
over a beer when a flight was delayed. The decision was taken on a Friday evening,
and on Saturday morning, we were zero brokerage and now, if I had to go convince
that decision, the reasoning behind going zero brokerage at that point of time, I
don’t think anyone would have allowed it to happen, so, I think, it’s instincts and all
of these together helped us.

You know, when I say this, should everyone try bootstrapping, I don’t know because the
thing is, I was just telling this the other day to someone that, if you, I think, someone
has really high core competency in a certain domain, I think, the odds of success will
be higher in bootstrapping. You have such high core competence and you also know
that money can’t really help a competition catch up on you really fast. Starting
Zerodha was not an overnight decision. I had traded for 12 years before Zerodha and I
used to run the largest trading communities in the country. I used to run the largest Yahoo
messenger group where people used to come and talk about markets and all of that. So, all
of that work had gone in before. So, Zerodha is not actually, a 10-year-old business. If I
had to look at it, I think it is actually a 20-year-old business and I think, what I have
realized that you keep at it, and eventually, you know, you keep doing the right
things, then at some point life hits and hopefully, good things happen.

Pankaj: You make some very important points here Nithin. I think, the points you are
making are about long-term institution building in many ways and I think, that’s what I
find very fascinating in terms of understanding the core building blocks of Zerodha.

The other aspect, Nithin, is so I understand what happened on the customer or the business
side and the model itself that you have, how is it been, the journey of building the
organization itself? What has is it meant for you as an individual, as a founder? What
about the culture? How are those building blocks for you, which you believe will go, will
kind of perhaps, outlive you?

Nithin: Looking back, one of those things that I get really excited about is, the core
team, out of the first 100 who joined the business, maybe 5 or 6 have left. Our tech
team which has 30 people, you know it’s such a small tech team which is doing such
incredible amounts of work is a 30 member team and we’ve hardly any attrition as such.
I’m super excited knowing that somehow I’m able to keep all these people without, it’s
not like you are doing something special for them, other than of course giving great
environment and all of that.

It’s not that we pay more than the rest of the world and things like that. The fact that
we are still able to keep everyone together is something that I get super excited about.
So, while building the team the way we’ve gone about is, try to find people who are
young, for example, we’ve not hired a single person in any senior management role
from outside the business. Every single person has grown organically from within the
company and I used to think before that throwing people at problems will solve the
problem but, slowly I’ve come to a realisation that smaller the teams the better it is.
One of the reasons for me to change my stance has been Kailash, who heads our tech. Now
you know we work - the core team is small tiny and very closely bounded group, that has
helped quite a bit.
In terms of culture, I think I generally like people who are like me, who believe that
luck is a very important factor in life. You know the right place, right time. Who
don’t overemphasise on their skill set, only people who can stay non-volatile, people
who don’t react. I think in a business like ours where volatility is there every day, it’s
very important that people are not volatile. If you are volatile, markets are volatile then
it’s not a very potent kind of a combination.

So, 2-3 things we’ve done while building the team out is 1) hire young people who come
with no baggage, I don’t really care about education, background etc., I’m okay to
take a chance as long as they show some intent to grow and show some basic skillset
of having common sense, etc. So, we’ve hired young people and we’ve slowly groomed
people to do different things. And also, overall what we’ve also done as a business is kept
the business in itself very simple. Typically, financial services businesses end up
complicating the product, you know HNI products, low net worth product. With Zerodha,
you know, we just have one single product. We have 2 million customers today and
every single person has just the same single deal, it’s almost like you are this company
who sells only ‘idlis’, there is nothing else to sell. Everyone knows how to sell a plate of
‘idli’, so it’s like that, operationally the leverage you get by keeping a product simple
is immense.

I think one of those things we didn’t get carried away in this journey was try to cater to
every single customer. Be it with the trading platform itself or be it with in terms of the
product. We are just saying we are going to build one thing and if customers don’t like it
they’re going to use someone else. We’ll do this one thing well and that’s kind of
worked out okay for us.

Pankaj: You mentioned something very interesting Nithin about the volatility of the
business you are in. So, how do you stay sane? How do you maintain poise? Your
business, like you clearly said is quite volatile.

Nithin: I’ll give you an incidence. Last Monday, crude oil, I don’t know if you track the
markets but, crude oil opened down 30%. People who trade crude oil, trade through this
product called futures and options, where the margin required to trade crude is 15%.
What it means, if you had 1 lakh rupees and say you had somehow bought crude oil and
crude oil went down 30%, you lost 2 lakh rupees, that means you lost 1 lakh more than the
money you had in your account. If, 1 thousand of our customers lost 1 lakh rupees more
than what they had in their account, so we’ve lost 1 crore rupees. Now it almost ends up
like we have to recover that money from our customers, which as you know is extremely
tough in India.
So, things like that happen all the time and also, you know the markets are open in a 6
hour window from 9 AM in the morning to 3:30 PM in the afternoon and we do between
4-6 million trades in that interim. All our trading happens on top of some underlying
infra, the exchanges, the lease lines connecting to the exchanges. Unlike any other
business in this country where you can be down and not have too much problem, in our
case every second we are down it’s a profit and loss for a person, a notional profit and
loss. So we can’t afford to be down at all. One is the market volatility itself and two is
managing all these moving pieces, it’s extremely stressful.

I think what helps me personally in all of this is, 1) since I’ve done this for so long, so
now it’s almost become like second nature, this volatility is almost in me but, even
looking back further behind in the journey I think one of the ways I’ve been able to
remain same is actually back in the day when I used to trade, I blew out and I worked
for 3-4 years. I think that is when I
probably matured a little as a person and I think this whole realisation that if you don’t
make peace with your worst possible outcome, you’ll end up being non-sane and in a
position where you’ll take irrational decisions.

Over the many years, I’ve matured. So, today every single thing I do, before I do it, I know
the worst possible outcome, I try to make peace with it saying, dude if you do this, this
will happen. Are you okay with it? Only if I’m able to make peace with it is when I go
ahead and do it.

So, now what happens is you know once you’ve made peace with this worst possible
outcome anything else that happens, it actually feels like a bonus. That’s the way I’ve
been looking at my life and doing business because otherwise, it’s extremely tough. Every
time if you are expecting and your expectations are too high you keep disappointed, it’s
very tough as a founder to always keep leading a team, if you keep getting disappointed
yourself with these humongous targets, which is very tough to achieve in the first place.
So, I think it’s probably a different way to look at it but, it helps me significantly. People
who know me closely, they’ll vouch that I hardly ever get stressed because whatever
I’m doing, I’m doing only when I’ve made peace with the worst possible outcome.
Which is probably a decent way to lead this life?
Pankaj: That’s very well said, Nithin. Let’s look at the scenario today which is unfolding,
which seems to be getting worse day after day. When you as a founder or as someone who
is building a company, looks at such massive thing unfolding in front of you, what do you
think about it? What are some of the first things? What is your checklist?

Nithin: I mean the thing is what’s happening right now, I’ll be lying if I say that, I mean
this is beyond you know any checklist anyone can make. I don’t even know what
founders can essentially do right know to, of course other than you know just not
panicking etc. So, I think it’s actually really like what is happening right now with this
current scenario, I’m a little caught up as well in the sense, I’m thinking, last few days I’ve
been thinking if this continues for say a month, the damage this can cause to the economy
I think is going to be a lot worse than what the virus cause, in the sense not directly.

Right now I think all of us should just pray and hope that we find a vaccine or we find a
new way of life where we get into this mode where we spot and quarantine people fast and
not really let this affect the economy, just bring the whole country to a standstill like this.
We have to do something in the next few weeks, I hope our government will take some
stance on this. Not just our government, I think governments around the world.

What can founders do in times like these? One thing I give some time for is myself
because for you to be making the right kind of decisions you have to be in the right
physical and mental health. So, I think it starts there. Sitting, last two weeks of
being at home I’ve realised that with all this negative news constantly, you just are
listening to so much negativity from all across. You’re sitting in your house, you’re not
in the same kind of a working environment that you’ve spent and you’ve been comfortable
over many years. You’ve got family around, whom you maybe cannot show emotion to.
When all of this happening it’s even more important that we take care of ourselves. So, I
always given importance to my health, be it physical or mental. So, personally the first
thing anyone should be doing right now is eat well, exercise, try sleeping well. I know
it’s very tough to say sleep well at times like these but, at least try sleeping well, you
need to get the foundations right for you to be in the position to take rational kind of
decisions.

Second thing apart from that, I think it’s important to get, the thing in business I’ve
realised meeting a lot of business people is, people don’t want to be wrong. They get stuck
in this whole ego, saying I don’t want to back this until I’m forced out of it. So, I think,
it’s important to realise that ego is actually detrimental running a business.
Especially in really tough times, like what we have today or what we’ll see in the
future. Because if you look at what stock markets are doing, stock markets by its nature
stock markets try to factor in the future. It’s not really factoring just today it’s actually
factoring the future as well. If you see the way the stock markets, the indices are
melting it’s actually factoring in a recession for some time. It’s probably factoring in
1-2 years proper, serious recession. There is no more hiding away from this. I don’t
think we are in a position where we can say that all of this will go away and will be
hunky-dory in 2-3 months. I doubt if that’s going to happen. Even if there is a vaccine,
by the time the vaccine plays out etc. the economy comes back up, I think it’s a 1-2 year
like a minimum at least.

The first thing the founder has to do now is to sit and say dude do I have a runway
for the next 1-2 year. It’s like I said right, what I’m sitting and doing now is I’m
saying if say our business makes 0 revenue for the next, you know till when am I okay
to run at 0 revenue? And once I know the runway, I’m saying am I okay waiting till the
economy turns around by the time my runway is over. That’s my nature, I don’t know how
it works with everyone. I’m trying to see till what point am I okay, this whole worse
possible outcome. So, I’m saying what could be the worst possible outcome?

I think people, this is the time to go back to leading a monks life. We all have to get
through this problem so, wherever we can cut costs I think we have to cut costs. Wherever
we’ve built these processes and products which don’t really bring any revenue to the
business or we did it just to please say 0.5% of our customers and if it’s adding a big
overhead, I think it’s the time when you just go pull it back and be as lean as possible. The
leaner you are the longer you can last. This is ambition, I don’t know if I really have
enough experience to be able to share saying what exactly can work but, the way I’m
looking at right now is that this is a 2 year kind of a recession so we are most likely going
to degrow for the next 2 years in almost every business. Maybe the online guy, online
education etc. might do well but, I think apart from that everyone else is most likely going
to degrow and I don’t think we should be waiting for that eventuality, I think we
should be saying that this is going to happen there is no 2 ways about it, there is no
point hoping for something else right now. So, what can we do best to make sure we
have a good way to last through that lean period? And if we can’t, I think for some of
the guys who’ve not been able to do well for some time till now, I think it’s a good
time to pull back and just say “maybe this isn’t it”. I think the smart decisions are
also decisions which are knowing when to stop. It isn’t just about, you know chill.

Pankaj: Very well said actually, I know of founders who are actually considering this
event as kind of an opportunity to revisit whether they should pull the plug.

Nithin: The thing the problem is that in India just you know people, it’s a very Indian
thing that this whole ego you know he closed his business, poor guy, stuff like that. The
whole social, friends, family, everyone, people end up waiting for too long to pull the
plug. If something is not working, I think it’s a smart thing to pull the plug. The
faster you pull the better you have the chance of actually pulling the plug. The longer
you spend, the more money you spend, the more time you spend. People just keep
postponing the decision of pulling the plug. But, I think this situation currently is going
to force people to pull the plug, but before it does it maybe makes sense, you know it’s just
starting now we are just two weeks into it, this is going to last a really long time. So, if
people are listening now, this is just the beginning. All of us, people who are building
these businesses, founders etc., we have to be ready for the next 1-2 years of really bad
times, it’s just, I don’t think there is any getting away from this.

Pankaj: So, well said Nithin and very well-articulated actually. The final question for you
Nithin, if I were to look at the next decade of Zerodha, if you look at a 20 year or 30 years
of company life, you know 1-2 years can be a bummer but, you are building something for
longer. So, where do you think this will go for you? Forget this temporary crisis but,
how are you looking at the next decade of Zerodha?

Nithin: Thing is if you would have asked me 10 years back when Zerodha had started it
was a rupee number. What is the objective of starting this business? I would have been like
“dude I want to make this much money” and then, when that much money is made you
started making more than that, I think after certain point money is not really what’s
moving you right. I think for me personally, it’s been, a country like ours we depend
so much on foreign capital to determine where our country goes.
If the stock market, FIIs for a lot of start-ups its VCPs who are bringing in foreign money
and etc. But, India does have its own wealth which is sitting in real-estate, which sitting in
bank deposits and which is sitting in gold etc. I think like if you would have asked me
what the point of building Zerodha here is, I think we want to be that catalyst to move
that money from places which are not making our country grow to actually back
entrepreneurs. Be it through the stock market or you know, today it’s indirectly in stock
markets but, maybe it will be something else tomorrow but, the idea is that you know the
is to be a catalyst to move people’s money from all these assets which are not really
helping the economy to backing entrepreneurs because if you look at any, if you want
to become a super economic power as a country you need local money to be backing
local entrepreneur. We can’t keep relying on this foreign money that decides to stop,
come in or go out any time anywhere. That’s essentially what we are trying to do. We’ve
done broking till now, we’ve applied for an asset management license, we’ll figure all
things but, everything is with that goal of doing that.

Also, until now as a business, we’ve tried to be an execution platform, we’ve tried to be an
education platform in the sense if you have an intent to buy/sell stocks we wanted it to
be the best place in the country. If you have an intent to learn how to buy/sell stock we
wanted to be the best place in the country. But, we’ve realised that being that is not
enough. We need to somehow help people also take these decisions, so we’re building
this product which almost nudges people to do the right kind of things when trading.
So, that’s something that I’m really keen about.

So, yeah we’ll keep building, there is no end goals saying at the end of 10 years I
want to be this. It’s just a journey, so you just keep doing whatever you are doing and
you know what happens at the end of 10 years only time will tell. This whole right
place, right time, luck all has to play out.

Pankaj: So many life lessons Nithin, from your journey, both for business and individual.
Really enjoyed. You know, stay safe, stay the way you are and Godspeed with everything.

Nithin: Cheers. Thanks for having me Pankaj.

Pankaj: Thank you, Nithin.

Conclusion

As we today studied about India’s top stock broker Zerodha Case Study- Business Model,
Founders, Competition the most fascinating thing we learned about the journey of Zerodha
founder Nitin Kamath. How he disrupted and changed the broking community completely.

They are growing very rapidly but the thing with Zerodha founders we can learn is they
bootstrapped them and took it to the unicorn.