Nithin Kamath of Zerodha on bootstrapping his way to build the largest online brokerage in India

Karthik: My guest today needs no introduction. Nithin Kamath has been recognized as one of the most influential entrepreneurs of the last decade. He's been associated with startups, but he's an established business today. Winner of numerous business awards, primarily because he's built a robust, profitable business without any external capital.

And his journey, along with his brother, has been a great journey of entrepreneurship. A product which came and disrupted the industry that he was working in. And on this episode of the Blume Podcast, we would love to hear more about Nithin's story, his motivations, his ability to sort of persevere through this decade plus journey, and how he built this massive business without outside capital.

And most importantly, for all the young listeners out there and entrepreneurs who are aspiring to be someone like Nithin Kamath - What lessons can he impart? And, of course, he is a great example of the theme of this year's podcast, which is the power of compounding, and you've seen that impact as he rose up the ranks and became the leading brokerage in the country.

Karthik: So welcome again, Nithin, lovely to have you on the podcast and thanks for taking the time. 

Nithin: My pleasure. Thanks for having me. 

Karthik: Yeah, so let's get going. I think the first segment I want to cover a little bit of the backstory. I know it's well documented. There are many versions of it that are already there in the public domain.

But while the story is documented and you’ve bootstrapped this into a… anybody's guess on how valuable it is on any given day… it's clearly a multibillion dollar company. It's taken over a decade. But what would be most interesting is, I think, when you look at the venture lens today, we keep questioning these young founders, how do you build…how does this become a billion dollar business?

How does this become a unicorn or all of these fancy terms that the venture industry uses, but what was the trigger for you to a start the business? And what is the second trigger when you know, “Oh my God, this is going to become big and I want to pursue this”. Were you content with whatever the size of the business? I will be happy doing this. I'm just curious to know. 

Nithin: So the thing is, I started trading the market in the late nineties. You know, a lot of people think of Zerodha as something that started in 2010, which is 13 years ago. But in my head, it's actually 23, 24 years old because, the day I started trading the markets is really when the business began, in the sense it was not called Zerodha. Zerodha is just another of what I was doing from then. So what happened was around, 2007-8, I was very active in the online world by then, and I used to run really large Yahoo Messenger groups, Orkut groups on trading and markets and etc. So, Nikhil had joined me by around 2006 - 2007, and he is a better trader than I am.

And until then, we were sitting and trading the markets and the bet was really why two people should sit and trade. If Nikhil is doing a good job at it, maybe he should just increase the quantity. I mean, it's as simple as that. 

Karthik: Interesting. Yeah. It's the right perspective. 

Nithin: Yeah. And, I anyways always had this whole, like keeda off sorts to go and talk about markets online. So, the bet was that why not try to attempt to be a broker for very active traders like us who are paying a lot of fees. And we're getting services which weren't very transparent of sorts.

It was nothing like what Zerodha is today. I mean, it was never meant to be this. It was really meant to be like a small boutique kind of firm. And the plan was just to attract that small niche bunch of traders who are very active on online trading communities. So that's how Zerodha started.

I don't think I thought of it as a real business until maybe around 2015. 

Karthik: Oh, wow. That late! 2014-15. I had met you by then, I think. Around that time is when we first met. 

Nithin: Yeah. Yeah. The thing is, you know, Kailash, who heads our tech, I mean, he's a co-founder in the business.

He doesn't like to be called a co-founder because... he joined us in 2013! But he's as much a co-founder as I am in the business. So he joined us in 2013 and the journey from vendor led products to like a fintech firm started after he joined us. 2015 is when we put out our in-house products since I was already questioning on -  like your pricing and your transparency can't really be a moat of sort, then someone will easily catch up on that. And in 2015, when we launched our in house products was when the realization kind of hit that. You know what, now you also have a better product with everything else, which means now we can really build on this. And coincidentally, we are at that right place, right time, because this is also when we could now start using Aadhaar for online onboarding.

Karthik: Correct. Changed everything. The speed of onboarding. 

Nithin: Yeah, because until then for a financial services firm, the only way to grow was to put more branches, right? And by then I decided that I'm not going to go raise VC money. So I knew that, without doing that, you can't really go set up thousands of branches.

So, with Aadhaar, I think our ambitions grew quite a bit, in 2015. Until then, we were not really sure if it's a real business or not. 

Karthik: And, and since we're on that point, of two branch questions, the one I was going to ask you anyway, but curious to know, was it the combination of what Kailash was doing, your sort of ambition to make this accessible to others via your products? And Aadhaar which created the massive spike in 16-17 and then made this like a really imaginably large business. When did you think this could become a very, very large business? 

Nithin: The thing is, we get a lot of credit for expanding the markets. And I usually say that I'm not that deluded to believe that, so in a sense, we were just there, in the greatest bull market of India, right?

And with the right products, right initiatives, right team, et cetera. So all these three together and an underlying bull market, which is attracting people to the markets, right? I mean, a good product by itself won't, you need people to be making money to do it, so all of this together. But, the real scale started coming in as and when the bull market picked up, so by 2020, we were at a million customers.

And then from there we've grown 10x from there in two years. So it's that, that last bit of rally was like really powerful. 

Karthik: I think there's, there's two lessons in … I know we're coming to the power of compounding in the third segment, but, there's two interesting sort of tidbits we shouldn't forget. One is people talk about, you know, a lot of entrepreneurs will say there is an element of luck that plays in. And a lot of entrepreneurs fail because of timing or the lack of it right? And the ones who succeed, you get timing, right? They say, “Oh, you got the timing right” But what I think they're ignoring is that journey all the way to 2015.

So if you're persistently chasing that singular problem, and you've surrounded yourself with the right people to build, as you said, the right products. The timing will present itself eventually, and which is essentially, it seems like, the story here that I'm hearing from you around Zerodha right?

Nithin: I mean, just to add one more point, I think you need to, if you want to get lucky, you need to just... Survive long enough to get lucky as well, right? 

Karthik: Yeah. That's a common one as well that the best, the grittiest entrepreneurs say, but I know you're not taking as much credit, but, this is what exactly what entrepreneurs seem to forget, that they want a certain urgency.

I know you tweeted about it recently and there are multiple misaligned incentives. VCs want urgency. Entrepreneurs get caught up in that urgency. You're trying to drive value artificially much ahead of its time, whether that's market sizing, whether it's running through money, whether it's hiring without any purpose, and you're a great example of building within your means for a very long time.

And then when the market actually takes off, you've already become self-sustainable. So you're able to take advantage of that. You said it, and therefore I have to branch into that question. You said you had decided that you won't take VC money. To my credit as a VC, I think an early stage startup generally benefits from the network effects of what it means to be a VC funded company, right?

Insights from all investors might not be great, but you have a sounding board, you have an advisory board, you have some access to advisors, you have more capital when you need it. Potentially, all of these are ranges of probability,  I get that. But why did you and Nikhil say … one is, of course, we are self sustainable - I get that. But I know for a fact, and I've heard it in the market, that many people wanted to come and offer you growth capital, right? And say, we want a piece of this great business, and you can do secondaries, you can take money and grow faster. And you yourself said, you went from where you were in 2015-16, to what scale you've hit in 2022.

Theoretically... You could have grown faster to that mark by having that capital. You might say that's not true. It would have only happened at the same pace. And maybe that is the right answer. But prior to that, why did you switch off from VCs and win every sort of bootstrap plus every entrepreneurship award without the VCs?

Nithin: So the thing is, 2013 is when I got to interact with VCs for the first time and the startup community. I don't think this whole conversation around CAG, MAU, DAU, etc…  I couldn't get that you should get a customer who will not pay to use your services, in the sense it didn't sit well with me as an entrepreneur and I think there's also a realization then that if you get into this game, you cannot stop at one round, in the sense it then becomes the deepest pocket wins kind of a race. That realization was probably there, right at the start. The other thing was in our business, because I'd done this for so long, I'd also realized that you didn't need, I mean… People don't look at say Shahrukh Khan dancing and decide to open a trading account. It doesn't work like that.

I mean, I kind of knew that our business has to be through word of mouth because usually how people decide to trade and invest in the market is, you know, there's a friend and you're having a coffee and then you say, “I invested, I made some money” And then he says “where are you trading? You need that…

Karthik: Trust…It's layers of trust that we built before you actually buy a financial product of any kind. 

Nithin: We've worked on that significantly, right? As in, I've been maybe answering customer queries on our multitude of forums, just to build trust. Even today, I spend at least an hour answering our customers, as myself, because that builds a lot of trust. I get market intelligence and all of that. So yeah, so 2013-14 is when thankfully we were profitable in the sense we were making enough. I don't know the other thing, I think culturally, I think me and Kailash are more like this than Nikhil, but I think we're not very ambitious, there was never this whole idea. There's no chase of saying I want to be a unicorn or I want to be number one. I was supremely passionate about what we are doing. And the idea was that you get up every day and do get better at something and you'll get to wherever you have to get to in life. I love my music. I love my sports. I mean, I have a life outside business and I don't want to be chasing something which I can never reach in life because then, you're always constantly getting up and chasing something.

Karthik: Very high point in Maslow's hierarchy reached very early in life. It's fantastic to hear.

It matters also as you said, surrounding yourself, having a Kailash and having these co-pilots, it's very measured and tempered then. I actually had a couple of questions around what he's brought to the firm, more from what the firm stands for. And I'm curious on how… was that your core DNA at Nithin's level is what I was keen on. So you're lauded for product innovation and UI, UX- and yes, the bar was low, one can argue, right? The Indian brokerage industry had not evolved dramatically on tech, but it looks like a world class product that you can compete with anyone. I know you haven't gone overseas. What guides you on that front? Are there any tips, any philosophy that you followed, any books or people that inspired you to do it? And it must have been there even before Kailash came. And how has he taken it? How have both of you taken this to the next level? Because I think that's what Zerodha has known.

Nithin: Even today when someone comes - even within the team - and someone comes and asks, what is our moat as a business? I say, it is just our philosophy.  The way we think of customers is very hard for a competition to think of like that. Because I was a trader for 10, 12 years before Zerodha started.

And  I think every single thing that we're doing as a business today is by considering me as that person. For example, just to have a no spam policy, right? As in, we haven't once sent an email or a push notification asking someone to buy yourself. Knowing very well that, you know, this can give you revenue or whatever.

Karthik: You wouldn't have liked it if you were on the other side and you're saying that. 

Nithin: Absolutely. And also I think the problem that I see and I think where we've done okay, as compared to the rest of my peers I see, is they are always optimizing for the short term.

I know everyone's thinking six months, one year, like what is the right thing to do? And I think as culturally, we are thinking long term, right? Like, if a customer comes to us, do I make 3000 rupees in one month or I'm okay to make 300 rupees a year over 10 years? And if the customer is going to survive 10 years, I'd rather make 300 rupees a month over 10 years because this customer can potentially bring in a lot of business to us in the future, versus that 3000 rupee customer will come and go and, you know, not really incrementally add any value to the business.

So some of these kinds of philosophies is what has kept the business together in the sense a lot of us on the core team. I think we think of it like that and it's also very… because the team is compounding, I think something that doesn't get spoken about much is that the people's skills also compound over time, right? Your team skill sets as well. What I've seen is, at least whatever little I've seen, I realized that usually when someone joins you, the sweet spot when they actually start contributing to the business is one and a half to two years that is when they get the overall context of the business and typically that's the time when people are quitting companies, right? 

Karthik: Yeah.

Nithin: At Zerodha, I think the core team, everyone has been together for at least five or six years, at least. Which means their understanding of the business, their skill sets, everything is compounded quite a bit over time.

And the reason they're staying together is not for the money. A lot of people think you can keep money. A lot of guys who come for money, go for money, right? There will always be someplace that you will give them more.  

Karthik: You'll always miss a few. You can't catch all of them in the filters. Yeah.

Nithin: I think in the whole team, I mean the top hundred in the team, they're here for the philosophies - the way we treat our customer, the way we are using our success to give forward, the way we represent for the broking ecosystem or even the way I speak, when I speak on social media, right?

I mean, this is not me saying it, it's really the top team saying it. A lot of these things are something that we've discussed internally and I'm usually the guy who gets to be the face of that. 

Karthik: By the way, this - what you just said, Nithin. I was listening patiently because at some point, when we make this public, I would want my team to listen to this.

We debate this a lot. And as a venture firm, we ironically have no choice but to be built in this fashion, because with due respect to everybody who builds for 20-30 years, a venture firm doesn't have a starting point unless you can plan for 20-30 years. So it's a core of the business model and we struggle with this.

We know we get young, aspiring kids, who have a wrong sense of like that gratification coming much earlier. And we try to tell them that it's going to take you two-three years to figure out whether you can compound, forget about the fact that you can or you will compound, right? Because it's a learned skill set.

It's an apprenticeship. At least in a lot of companies, 7 out of 10 roles are functional in that sense. They know what they have to come and do. In venture you have to learn the trade on the fly. And I know we've done very different businesses, but fantastic learning. So thanks for sharing.

Now, this point is irrelevant because you've already covered it. However, my team's research shows that out of Kailash's team of 33 people, only two have left in the last decade he's been here. How often do you think this philosophy and culture thing needs to be rearticulate to remind people why they're here?

Nithin: No, I believe it's like this, right? When you're in a hurry to grow fast, focusing on culture and philosophy and building a cohesive team is crucial. The ideal time for this is during the hiring process. People's core values tend not to change.

When you're hiring and someone doesn't align with your organization's culture, no matter how much time you invest later, it won't work out. So, what we've done, especially on the business side, is to address this soon after Kailash joined us. I used to think that more people could solve more problems, but I eventually realized it's not the case.

So if I have to think about Kailash’s way of hiring. It happens right from the start. His first question to potential hires is usually, "Show me your hobby project." You can't be a serious programmer without a hobby project, right? This alone filters out a lot of candidates, and the quality of their hobby projects matters a lot.

Karthik: Correct. Sounds like a lovely question. 

Nithin: I think the tech team actually are a bunch of hackers. Like, almost everything is open source. I mean, everything that we build for ourselves is also open source, like a list mark. We built this utility to send out emails. We send, I don't know, like a hundred million emails a month. We spent, I think, 200-300 USD on it. So we built this ourselves, and now we are open source, you know what I mean? And the team loves the fact that we open source. 

Karthik: Yeah. I think to see a product out in so many millions of like hands is a delight in itself. And I think, incredible product and tech culture. 

Nithin: There's one other thing in terms of.. I think it's just about hiring right. Also the second thing I think we've done is….When I've seen this happen, when founders find someone exciting, they tend to oversell to get him on board.

I actually undersell. Like last year, someone came for a job, and I said, "You're at the market top, and are you sure you want to join a broker?" I showed him, like 2008, and I said, "You know what, this was a market top, and this is what happened to the brokering industry."

Karthik: Small history lesson, you have to scare them off. 

Nithin: In a sense, you don't want them to come with the wrong expectations. For the wrong reasons. You know, and it's almost like VCs you're getting a VC on board. I tell the founders,  you don't want to be overselling because then you're setting the wrong expectations, right?

So I think we are constantly internally being quite transparent about every single thing, every single risk out there for the business. And I think all of these things together has probably helped us in some way to keep going.

Karthik: It's an absolutely amazing culture, and it shows. It's very difficult to look under the hood, behind the scenes, and see what the magic is. I know you're giving us glimpses of it. It's not easy to recreate many of the tips you give, but thanks for sharing so transparently.

I think these are great lessons. The last segment on your company-building in the storyline, to put it bluntly from the outside, it looks like you've almost built the perfect picture-book Cinderella story, right? Maybe for the audience, you'd like to highlight one or two instances where you made short-term to long-term compromises or compromises with people. Do you have any examples of that? And then, how did you course-correct, and how did that further amplify the learning that you should never make short-term compromises versus long-term?

Nithin: When we started the business in 2010, there were around INR25 lakh left on the table. We had about one INR1.5-1.4 crores to begin with. One crore was a deposit to get a membership on the exchange, leaving us with around INR30-40 lakhs. Nikhil was trading with it, and Nikhil's trading profit acted like a sort of VC capital. So, there was very little money left. 

In a broking business, you need two things, right? First, you need a trading platform where you can place your orders, and secondly, you need a back-office platform for processing trades at the end of the day, managing ledgers, and sending out contract notes, among other things.

The first vendor we approached for a back office was the one who offered it for free because we didn't have much money. The idea was that if we grew, we could quickly shift.

Karthik: Understood. Classic startup problem

Nithin: It took us 10 years to make the shift because, as we grew larger, the problem just kept growing as well. We kept postponing that move because the back office isn't customer-facing. So, as a startup, I think you're always prioritizing whatever is customer-facing. We started working on our own back office in 2017-18. It took us like two to three years to overcome it. It significantly slowed us down, and we couldn't implement many good things for our customers. This was due to a technical debt that accumulated very early in our journey.

Karthik: A great example. In fact, it reminds me that there's going to be one more guest on the show, Manish Sabharwal of TeamLease. I remember first meeting them in 2007 or 2008, about 7 or 8 years before their IPO. They had crazy numbers, and they actually went flat for two years. They were doing exactly what you said, accumulating so much tech debt.

They realized that their business, much like yours trading stocks, was trading people, right? They operated on very thin margins, so they had to optimize that margin to the fullest. Ironically, they dealt with human assets, while you dealt with stocks. But essentially, they went through the same thing. I'll probably try to draw that parallel in his life as well.

Because you're unafraid to express your views, India gets to hear a lot about your views relative to most other public market proponents, other than the ones on TV channels, via Twitter, etc. I just wanted to touch a little bit on your understanding of the Indian consumer, right? You mentioned growing 10x in the last 2-3 years. India exploded. What has changed?

What did you think when you started servicing the customer? What were the insights that informed you on what you were building, and how has that changed in 10 years? Or is this fundamentally still the same, with more people wanting to do this? It'll be interesting for audiences to hear how that has evolved.

Nithin: No, I've been in the stock markets for the last 25 years, and to be very honest, not much has changed. Of course, the platforms have changed, but people's behavior and the way they deal with money remain exactly the same. Greed is really the enabler, right? Whatever asset class offers the maximum return is where people want to be. Everyone wants to make money quickly.

Karthik:  Yeah, the market offers all of that, yes. 

Nithin: The biggest change, I think, from before Zerodha to now is mobile, right? I don't understand our customer very well at times. The other day, I was trying to figure out how people are day trading on a mobile app. I couldn't figure it out because when I used to trade, or even Nikhil, he has four computers and four monitors. I thought, how do people day trade on a mobile app? But 60% of our day traders actually use a mobile app for day trading.

I don't get that consumer, I don't get the consumer who can actively use mobile for all of this. I don't use my mobile outside of Spotify or Audible or something like that. Maybe I've grown too old for that. The other change is a power of social media.

It's just incredible in all good and bad ways. But it's incredible because Zerodha itself started because of me having this Yahoo Messenger group or Orkut communities. There was this forum called TraderJi in India, which was very active. 

Karthik: Yeah, I remember

Nithin: I used to be very active on this forum. But today it's just, like so many micro-influencers and, like all of these people enabling in some good ways and a lot of bad ways, to get people to the market. So I think that these are really the two things that have changed drastically over the last 10, 20 years, in terms of - What or how do people decide to trade, buy, and sell, which is through these influences and how we're using a mobile app, which is, I don't think…

Karthik: No, summarized. I think you're basically saying access and this media explosion as I love for a lot more participation than sitting behind a computer desk and not knowing where to get information or access, right?

Seems to explain everything, but what I like about it is that fundamentally, human behavior on that front hasn't necessarily changed. You've just tapped into a much larger market, which brings me to, I know you also dialogue much like we do in the industry, trying to keep the industry self-regulated and informed, but also grow the pie of Indian money that actually comes into these kinds of markets, stock or public markets.

That percentage has, of course, crept up, but we are way, way lower than what you would have in, let's say, Western markets. If you had to switch that entire question, not looking at the past, but looking to the future, and say, if Zerodha is still around, 10, 15, 20 years building away for these customers, would it be more of the same or do you anticipate more demographic shifts? Or the tailwinds that are in your favor, what do you think Zerodha has to adapt to be able to capture that market share and that, that customer?

Nithin: The thing is, the business kind of has evolved over the last 30 years. It started off saying, 'I want to reduce costs and be transparent.' Then it became about platforms; then it became, we started this RainMatter. I started saying we can't do everything ourselves. We need to collaborate. We also have varsity and education, and now, the question we've been asking over the last one to two years is, 'What's the point of existing if our customers don't do better with their money because they use us?' Being just a niche platforms isn't enough. You give a guy a Ferrari who doesn't know how to drive. We're trying now to find ways to help customers do better. In terms of, if you were to ask me “Nithin, why do I get up every day to do what I'm doing?” I think the way we think about it is that, as Zerodha, we today are in a position to be able to change people's behavior, outlook towards money, I think India needs to take a lot more risk. So there's so much money lying in fixed deposit, gold, real estate, which isn't really adding to the economy, right? Doesn't need some, at least a small portion of it, at least from the top 1, 2, 3% of this country to be backing entrepreneurs. And we think with our success, we can make some of that happen. And maybe one of the things I've been hoping for is that there is some regulation that allows Indians to more actively participate in, like at least the accredited investors, etc., to participate actively, and in the private markets as well. Because today, the problem with the last five to 10 years has been that most of the wealth creation is really happening in the private space. The ones who are IPO’ed haven't really created a lot of wealth for the Indian retail because the only way to get a retail investor interested and then the participation to grow over the long term is to create wealth for people, right? And that has to happen.

Karthik: Absolutely, absolutely. I know we've discussed this briefly as fellow investors, not just on cap tables, but in our efforts to advance the industry. So, thanks for sharing your perspectives. As I have a role within IVCA, which is the industry body, I strive to encourage regulators to think in these terms and allocate risk accordingly, right? You can't treat an HNI as you mentioned, using the Ferrari example, like we're not attempting to sell a Ferrari to a two-wheeler rider. Therefore, once they are as capable as driving a Ferrari, let that industry flourish.

Let that drive private investment into Indian entrepreneurship, which is, by the way, dramatically better. The good news is that it has grown nearly tenfold in the last five years, according to  AIF data. But you're absolutely correct; we should advocate for further growth, aiming for another tenfold or twentyfold increase from here.

So, that's the good news. Now, similarly, on the same note, it's commendable that you're working to educate more investors about the risks they're undertaking. I believe I've identified two aspects, and please correct me if I'm mistaken. I'd love to hear your views regarding these two facets of what you're attempting to accomplish, which Zerodha alone can't fully achieve for every individual's savings.

You're striving to help people amass wealth, but you can't address all of their problems. I understand that Nikhil is working on the wealth side, but there are still niche segments. As co-investors in companies like Smallcase and Wint Wealth, do you perceive two components in your investment strategy?

One of them involves investing through a family office, which I'm aware of. Do you view this as a strategy to mitigate the risk that Zerodha can't resolve every investment issue for a customer? Anything that simplifies this and assists customers in making better investment decisions, thereby creating wealth. I would like to support such an entrepreneur - Is that the motivation behind it, or is there another driving motivation?

Nithin: It's because everyone in the business has a stake in Zerodha, and then we invest through a vehicle, which is so that everyone in it, the way we have looked at private investments till now with the impact of fintech has been we need to help Indians do better with money, and we can't solve all the problems, so we need to partner with folks to do it and collaborate. So we haven't really gone into anything expecting any monetary returns. And I think, thankfully, the financial success we have had has given us the liberty to have this outlook towards our investments. But going forward, I think, given how much cash the business is generating, and how we don't really require that cash for our own business, right?

It's not that we're going to get up and want to do random things as a business, yeah. So I think going forward, we are planning to have more skin in the game of sorts. I think if I were to give a right analogy, I think, turn this into a Berkshire Hathaway kind of thing, where if your core business is generating cash and you go use that cash and kind of start partnering businesses and take a very similar kind of model of sorts. 

Karthik: Lovely, lovely to hear that vision. And now, since you brought that up, I have to ask the question, if you're going to build a Berkshire, then you have to give us the chance to own a share. So is that built into the ambition that someday you think you'll have a team and an ambition ready to build this into maybe India's first perpetual sort of investment vehicle? 

Nithin: Yeah, so the thing is, one of the reasons we have not thought of an IPO at Zerodha is because the business is not very predictable. The revenues are in sync with what happens to the Nifty. And I think at least when you're IPOing, there has to be some predictability. If you were to ask me then how much we need to do next year, I'd have no answer, right? Because my immediate response will be, can you tell me what Nifty will do next year? Then I'll tell you what my revenue can be. There's no predictability today, but say if you were to start investing in these companies and there's some predictability built, and all our fortunes are not really linked to the Nifty or Sensex. Maybe then is when we would actually think of saying, maybe we should…  because that's the right vehicle, it has to be a listed entity, for this to really be a Berkshire. It can't be private. Hopefully, if there is some success through some of these investments, eventually we'll probably list this because also I think it's almost borderline hypocritical to be the largest broker in the country and not say that I won’t.

Karthik: It's great to hear. No, I think a lot of people have always wondered whether they can be a small shareholder and aspiration wise you've given them hope to look forward to that in a few years from now. So that's great. So I think we already, in the last two questions, quietly segued into what you've achieved in terms of the power of compounding, which is the theme for the podcast series this year. And what it may look like when you start compounding Zerodha for the next few decades at least, right? That's already a great segue, and I have a bunch of questions before we wrap this up. The first of those is, as much as you are a trader and as much as you've built the firm on that strong product linkage with your love for trading, do you also invest in public stocks? And if there are, out of curiosity, given that your wealth compounds in your own organization, are there examples of public stocks that you can share where wealth is compounded faster than your own efforts or where there have been great examples of this? And how have you judged that from the outside?

Nithin: No, all the public market investment, actually, Nikhil handles, and he's been quite special in terms of his performance over the last 13 years and…

Karthik: I've heard, yes, I've heard good, great things about it. 

Nithin: Like I said, one of the reasons we didn't have to go out and raise venture capital right at the start was because he was sitting and trading the markets and generating returns for us to be able to take the stance because I think the business on its own started generating cash only in 2013. So the first two, three years really, we survived out of these trading profits. So in a way, if you were to think of it, that capital that he brought in because of trading, it is almost invaluable for us, and that has probably outperformed everything else. But yeah, but during the last few years, we've been holding a bunch of stocks. We have a lot of exposure to banks over the last two, three years. We also sit on a lot of gold because we are already overexposed to the equity markets. So we have quite a bit of sovereign gold bonds in our portfolio. 

Karthik: Understood. That's your investment mix. But if I bring it back to how you've compounded value for your current set of shareholders, which is also your team, etc., any one example where you've...You've judged and seen that be successful in the public markets. You're saying, let's leave that answer to Nikhil, but let me then switch gears and come to the startups that you back. And I know you do a lot of that, right? And what indicators are you looking for from these founders? I know it's very similar to how we are judging, but how do you know these people are likely to be winners in that power of compounding game?

Of course, we're going to get some wrong for various reasons, right? But how do you differentiate compounding and non-compounding if there is a startup founder who pitches to you? If you don't have a view on the public one necessarily.

Nithin: So we've stuck around our core competency. It's around finance, investing, trading, and the stock market. All the private investments in this space mostly, I think we have invested, I think 400-500 crores till now. And it's across 80-90 startups.

Karthik: Oh, wow. I didn't realize that it becomes that big.

It's more than our portfolio now. It's great that you're doing this. This is what we love to see, right? More people enabling more startups. But yeah…

Nithin: For example, Smallcase really, was our first investment, right? And so when the founders came, they understood the market. They had a product that was solving a real market problem. They seemed like decent guys, and we knew that we could bring some strategic value to them. So in finance, it's actually been quite easy because we know that almost every investment we make, more than the value we bring in terms of monetary capital, we bring a lot more value in terms of having the experience of having done this. Navigating regulations, providing quick opportunities for someone building a consumer-facing app, because the way we have done this for a lot of... Like even for Smallcase, for example, when they first conceptualized the product, we showcased it to our customers as if it's our own product.

So in a way, we helped them achieve what would otherwise have taken maybe two, three years to get to, probably accelerating it for them. So we bring a lot of value. So what happens in FinTech, especially around saving and trading, is that anytime someone out there is starting something, we automatically get the deal flow.

Karthik: Correct. You've done this before, and you've established a track record of actually enabling this for many startups... and they are all accessible. You've backed some great founders who, in some sense .. I know you're not saying it overtly.. You’ve backed founders who also think open source. They're giving back, they're helping other founders, and that's how I've seen it flow from the Smallcase founders, etc. If it's happening for me, I'm sure it's happening tenfold for you, given how focused you are on what you chase.

Nithin: And then it extended into health. I'm passionate about health, fitness, nutrition. I think Indians should play more sports. So the instincts don't play as well here as in finance. Yeah. But that's why I think we're still writing smaller cheques, etc. We're trying to figure it out before we start committing larger capital. The final theme is really around climate change and the creation of livelihood. So we set up a foundation…

Karthik: I'd love to hear what motivated that, and I know it's a personal passion, and all of them seem to be driven by personal passion, but please maybe spend a few minutes on what you're trying to actually impact on climate change with this huge corpus that you've set aside.

Nithin:  Well, it all started with Kailash questioning internally, saying that success, the financial success, also brings some kind of an obligation to help society in some way, right? These kinds of questions started, and then we realized that in a world as unequal as it is today, people who have become wealthy should do more to give back. Otherwise, wealth will just keep concentrating, right? So we started with that idea. Through Rainmatter, we were already giving back by supporting entrepreneurs. We were closely associated with two problem statements: one around climate change and two around creating livelihoods. Even within our business, we realized that as we become more efficient, we indirectly cause job losses in the industry. Today, we have 1,100 people, but if Zerodha was not as efficient as it is, we might have needed 11,000 people. So we decided to pick up these two themes and support anyone working to solve these problems, whether for profit or nonprofit. We set up the foundation and allocated a thousand crores to start. We're helping nonprofits and for-profits in this space. Any upside from the for-profits goes back to the foundation. This approach also helps keep the team together, knowing that the business is using its success to give back.

Karthik: I think there was an important lesson there. Many founders and wealth creators talk about wanting to give back, and I heard that in the first part of your answer. But reading between the lines, my takeaway is that you want even that giving to compound in some sense. Chasing things that truly align with what you want to see in the world. All the things you mentioned about your team falling in love with it, having a passion to solve these problems, will allow that giving-back to compound. So we keep going back to the principles of change agents and what impact we can create, whether it's as a VC, as Nithin and Zerodha, or through the foundation. The motivation to compound is fantastic, and you're doing it across the core business, investing side - we’ve seen in 7 years you have gone from 0 to 80 odd investments, and the foundation with a focus on environmental impact.

You've effectively used media for personal branding and, more importantly, for the right kind of messaging… What message do you want to send out into the world.. How important do you think this is for startup founders in general? I understand that not everyone can do it, but people can learn, as we all aren't founders or CEOs by definition. We train ourselves for these roles because they come with responsibilities. So, do you have any tips on how to get started or how to compound your media presence? It's evident that you've done it very well when we look at your team, product, customers, revenues, profits, and your initiatives outside of the core business. It seems to be central to your DNA, Nithin. That's my read. So, I'm summarizing this for the audience and then moving on to some lighter questions about how founders should think about compounding their media presence.

Nithin: I think so. I blew up my trading account in 2001, and I joined a call-center, where I worked for three to four years between 2001 and 2004-2005. Even before the call center job and during my time there, I was also involved in multi-level marketing, trying to essentially sell.

Reflecting on my journey, I believe I learned most of my life skills during that time. As a founder and CEO, storytelling is crucial, especially for consumer startups. Building a brand for a business is challenging without the founder's involvement in storytelling. As we spoke about earlier, back in 2013-2014, I realized that if we were to raise venture capital, it might limit the kinds of stories I could tell.

In my view, as a business, you should be able to say and do things that are difficult for your competition to say-and-do. Social media is incredibly powerful today. I was actually late to the game, only joining Twitter and LinkedIn in 2019. Until then, I managed everything through Zerodha itself, operating under the company's handles and engaging with forums.

I used to spend a lot of time meeting with journalists. I don’t know how many India-darshans I’ve done. Just meeting journalists across the country to build Zerodha's story in the press. However, I realized that the power of traditional press was waning around 2017-2018, and the reach of business handles on social media was decreasing as well, requiring advertising for visibility. So in 2019, I started using Twitter more actively. One challenge with social media is that it can give you dopamine hits, so it's important to be conscious of that. In our office, there are three people who have the authority to approve or disapprove anything I want to say. I send my thoughts to them before posting, and unless they approve, it doesn't go through. It's a great system because it prevents me from impulsively saying things I shouldn't.

I usually write down my thoughts, think about them, and sleep on them. If I still feel it's worth saying the next day, then I go ahead. It's not about firing off random tweets or posts; there's a lot of thought and consideration behind what I share. This approach allows me to address topics that others may find challenging to discuss given their positions as entrepreneurs. It also helps me build an audience.

Karthik: That's a tough one, especially for people who've already taken the money! But I think the other tips are very valuable. Interestingly, there's another parallel in our lives. I managed all the way until 2014-2015 for Blume Ventures. I didn't have a personal handle until around 2015. In fact, I didn't even have a handle, let alone tweeting. My account was created much later, well after Blume Ventures. So I believe in everything you've said. Thanks for sharing your insights.

You're building toward that IPO, and you understand what public markets and investors want. As parting advice for founders, I think there's going to be a flood of companies wanting to go public. This idea has gained traction over the last week. There are other success stories in the small-cap and mid-cap space. Personally, I want to harp on these success stories and showcase them as role models.

With all the knowledge you have, if you were an investor in their IPOs, what advice would you give these founders?

Nithin: I think the problem is that many founders are primed to view an IPO as an exit. However, it's actually the beginning of a new journey for the founder. It involves getting retail investors who can't take as much risk. Retail investors are at the bottom of the risk hierarchy when it comes to capital. So your obligation only increases, not decreases. This mental framework needs to change. People should see the money retail investors put into their company as an obligation rather than viewing it as an exit strategy - where you are trying to optimise for the exit

Another thing I've noticed is that, as a private company, there's sometimes an incentive to oversell. But as a public company, it's always better to promise less and overdeliver. Overselling can come back to haunt you, and you need to maintain the right mindset to run a business in the long run. You don't want volatility. To reduce volatility and increase the likelihood of making rational decisions in the future, it's better to constantly underpromise and overdeliver.

I think these two things are crucial.

Karthik: This example that you gave of underselling and outperforming, I've seen it in action the most… I don't follow public markets much, but I've always been intrigued by DMART because we look at a lot of players in that segment. We had invested in Milk Basket & Dunzo. So I got intrigued, and of course, Damani Ji is not very visible, but Neville is at the front, and he does a fantastic job of this. He takes two, three hours every quarter to talk to analysts, walk them through the journey. He keeps it very humble and very real, and then just keeps outperforming, right? It's an amazing story. And I'm sure Zerodha will be a public story of the same nature someday. We know the man behind it thinks this way. So a big thanks for giving us that philosophy that guides you and what to expect the day we can all be public shareholders in Zerodha. Thanks again, Nithin. Thank you for your time today. It was an incredible conversation. I enjoy these because I get to interact with some of the best founders in the country. I love tracking these decade-plus, two-decade-plus journeys. I'm sure you've inspired a lot of our listeners, motivated them to think long-term, build sustainable businesses, and see what compounding can do. And that's the message we want to send out this season. So thank you once again.