Nitin and Nikhil Kamath launched Zerodha in 2010, and in a decade the company has started clocking revenues of 1000cr INR with a profit of 350cr INR. The personal wealth of Kamath brothers is estimated to be at 24,000crores INR and as if that was not all, the company is famously bootstrapped. So the brothers are still not answerable to investors.
Their story started in a sleepy suburb of Bengaluru called Basavanagudi. And many find it surprising that two boys from this suburb have gone on to conquer the world of stock trading. But a lot of their success can be credited to who they are and where they come from.
Here is what I learnt about Zerodha’s success from Nitin Kamath’s deep and insightful interview in The Ken.
Focus on what you love.
Nitin started trading at the age of 17. Some people are attracted to video games, music and movies, in the same way, trading was Nitin’s love at first sight. Despite many setbacks, they persisted only because they loved trading. Nitin says he blew up twice and had to go work in a call centre for three-four years.
Mark Manson, a famous self-development writer and blogger, mentions that passion is not so much about what you enjoy, but the craft that you will continue to work on despite the problems you will face. In a way, passion is the pain you choose. Probably passion for trading is what kept the Kamath brothers going in an otherwise brutal space.
Being a part of a community and networking.
While Basavanagudi is considered sleepy, Nitin reveals that it has a very active trading community. That is how the siblings learnt new things and kept growing. Nitin was quite active and popular on online trading communities on Orkut, Yahoo and others. This came in handy to bring in the first set of customers for Zerodha later.
Community building and networking have a compounding effect, and in many ways help you validate ideas, gather support and even customers. In a way, this can also be linked to the first point about focusing on a space you are passionate about. At least for me, it is difficult to participate in a community that I am not deeply interested in.
Identify opportunities others don’t:
The launch of NSE Now in 2008 was a game-changer for Kamath brothers and became the single biggest reason for the launch of Zerodha. Kamaths knew the business but had no idea about technology. NSE Now provided them with a platform that would have otherwise taken them a lot of money to build.
They decided to white label the platform and launched Zerodha in 2010. Also, the servers of NSE Now were located in the exchange premises, this made the platform a wee bit faster than other broking platforms. The company was focused on active day traders, and for them, even a fraction of a second mattered. This was another advantage Zerodha had over established broking platforms.
Simplicity makes a lot of business sense:
Zerodha disrupted the market with its pricing model of single fee per trade. Stockbroking industry was riddled with opacity due to different deals for customers trading different volumes. However, volume did not really make a difference when it came to effort at the broker’s end as all trades were implemented electronically.
This allowed Zerodha to break the clutter and focus on the tech to execute trades. And their offer of 20rs per trade was difficult for others brokers to match giving them a first mover’s advantage.
Focus on customers and not valuation.
Why Zerodha did not approach investors is because they did not need to in the initial days. Also with Kamath Associates, their firm, they were doing well. The brothers envisaged Zerodha as a comfortable lifestyle business. But what set them apart is their focus on problems faced by customers. Since they had been active day traders, they understood their problems quite well and continued building a better product.
Grow as you go.
Nitin’s humility and self-awareness in this interview with The Ken are refreshing. He says that it all started with a materialistic purpose and he was also quoted in a newspaper many years ago saying how he found it difficult to drive his Porsche in Bangalore.
He confesses that he did all the stupid things that people do when they get big money, like buying expensive watches or cars, etc. It was only two-three years ago that his world view started changing, he realised the futility of chasing material things and is now trying to give back more. Conserving a 500-acre forest is one of the many initiatives he is supporting. Nitin claims to have grown a lot in the last ten years with the success of Zerodha and for him, it is no longer about adding zeroes to his bank account but living a more balanced and meaningful life.
Founders with such clarity and grounding mean that Zerodha has many more milestones to cross. In all probability, it will continue to grow while making saving and investing much simpler for millions of Indians.
Hope you found these observations useful. All the information in this article comes from Nithin Kamath’s interview in The Ken. I definitely recommend The Ken’s paid subscription to anyone who is looking for deep insights and for a better content diet. Happy reading!
