💸How Zerodha transformed a 145-year-old broking industry?
World's largest stock broking firm, Zerodha, saw a profit of $208M+ last year. But, how did a bootstrapped startup achieve this feat in just 12 years?
VC-funded startups are media DARLINGS!
If your startup gets funded, you're considered successful. Doesn't matter if you've a viable business or not.
In this funding-obsessed environment, Zerodha's founders, the Kamath brothers, have managed to buildd a truly successful business. Not just that, in a very real sense, they have "disrupted" the traditional broking industry in India.
Consider these numbers, for instance. In FY22, Zerodha's profits jumped by 50% from INR 1122 Cr profits in FY21. And, its revenue is estimated to reach INR 4300 Cr.
All this with:
ZERO spend on advertising
No direct marketing
No VC funding
And, INCREDIBLE growth during the pandemic!
So, how did Zerodha do this?
Well, here's the story of a 30-year-old trader who had the courage to spend all his savings on building a brokerage firm during the cusp of the 2008 financial crisis!
The story of the Kamath brothers!
Nithin Kamath's journey is quite unique. For most of his life, Nithin has worked as a trader.
He started trading when he was 17, mostly influenced by his Marwari friends. Later, in the early 2000s, derivatives trading was first introduced in India. So, Nithin started trading online and in the first of many instances, he went bust in 2002!
Just to support himself, Nithin was working at a call center at night, so he could trade during the day.
This went on for several years until 2005 when Nithin met an acquaintance at the gym who was super impressed by Nithin's trading portfolio. He handed Nithin an INR 25 lakh cheque to handle his trading account.
With this opportunity, Nithin could quit his call center job and trade full-time!
He received several more accounts to handle. But, there was no single online terminal that allowed him to switch between these accounts with ease.
So, in 2006, Nithin joined Reliance Money as a sub-broker which gave him access to a single platform to buy and sell from all his accounts. He continued working as a sub-broker till 2008-09.
While Nithin was building his career as a trader, his younger brother Nikhil, a chess wiz, dropped out of school to play Chess full time! Nikhil also started trading as a teen following in his brother's footsteps. He later became a sub-broker with Way2Health.
The age-old Indian brokerage industry needed a change!
The brokerage industry is a 145-year-old fossil. Typically, old-school trading communities are tight-knit groups that mostly operate in their own circles.
This includes all the traditional broker firms that are used to operating in their age old, rigid ways.
In 2009, by the time the idea of Zerodha started brewing, Nithin had already worked with several different brokerage firms. So, he knew the industry in and out.
With Zerodha, he simply wanted to become a broker he never had.
He decided that the industry needed a makeover on several different fronts:
The lack of transparency: The brokerage system was built to be complex and opaque. This allowed middlemen to take advantage of the lack of transparency to make extra money.
Offline operation: Sub-brokers had access to an online terminal, but all other operations or interactions took place offline.
Percentage brokerage fee model: For every trade made, a percentage of that trade would be charged as a fee to the broker (x% of INR 1000).
Limited reach: During that time, only 20-30 lakh people were trading actively on the stock exchange.
Nithin's focus was to solve problems on these 4 fronts, which would make Zerodha a game-changer in the coming years!
So, how exactly did Zerodha solve these problems & more importantly how did Zerodha grow to 6.5M users in a mere 12 years?
Well, we cover this in a 2 part series:
Part 1: How Zerodha transformed a 145-year-old broking industry?
Part 2: How Zerodha grew to 6.5M daily active users, with ZERO VC money?
I'd love to hear your thoughts on our 2-part series on Zerodha! What do you think about the bootstrap vs funding debate? Are you team bootstrap or funding! Share your thoughts by simply hitting Reply!
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That's it for today! We will be back with more interesting articles!
Stay tuned and keep buildd-ing 🚀
Cheers!
Hrishikesh
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