Nithin Kamath, Founder & CEO Zerodha chats with Sanjay Swamy, Managing Partner Prime Venture Partners.

Listen to the podcast to learn about

01:00 - Zerodha’s Founding Story

06:30 - From 2Million to 10Million Customers

15:00 - User Behaviour, IPO Markets & Young Money

26:00 - “You can’t just spend money to gain credibility”

37:00 - Doing What’s Right For The Customer

Read the complete transcript below

Sanjay Swamy

Hi, everybody. Sanjay Swamy here with Prime Venture Partners, and welcome to the100th episode of our podcast, really grateful to all the guests as well as all of you listeners to have made this such a big success for everyone. And in keeping with the special episode number, we have a really amazing and special guest. Someone we’ve known and admired and become good friends with, the one and only Nithin Kamath, the founder of Zerodha. So Nithin, welcome to our special podcast show.

Nithin Kamath

Thanks, Sanjay. Thanks for having me on your 100th episode.

Sanjay Swamy 0:47

Hey, so Nithin, you’ve had an amazing journey over the past several years, and much of which was probably spent under the radar, but over the last few years, suddenly, in the limelight. Many people say, these are all overnight sensations that take 15 years. Can you share a little bit about your early days, the making of Zerodha and some of the anecdotes that most people are not aware of.

Nithin Kamath

So we started Zerodha in 2010. So that’s, technically it’s 12 years old, but in my head, really Zerodha started the day I started trading the markets. And that was 1997-98. So I was in my 12th standard and I got introduced to the stock markets, and I started trading actively. So that was another 12 years behind that. So in my head, I think it’s a 20,23,24 year old journey right now. So yeah, so I started trading,

Sanjay Swamy

If I may interrupt you Nithin, so at that time, it was relatively new. How big was the, I would say, universe of people that were trading the scripts that were there? What was the process of account opening? And how did that evolve along the way?

Nithin Kamath

I was trading with my parent’s, my mom’s account, actually, and it was an offline account. So online trading really started in 2001, when ICICI started off. So I was trading… I used to stay in a Marwadi neighborhood, so it was like a bunch of people, who were dabbling in stocks. And that’s how I got introduced. My dad used to invest. I mean he had invested in the Reliance IPO and all of that. So every morning he would get up and look at economic times for the latest stock price. I mean, he would stop looking at it, as soon as it’s a bear market, but in a bull market, he would look at it everyday. And so I started markets early, I blew up as soon as I thought around 2001. I joined a call center for three, four years, mainly because I could kind of trade during the daytime as well. So trading was always by the side, and I also was very active, as soon as the world went online. And I mean, I’ve always had this urge of trying to share market knowledge of sorts.

And so I used to run some really large Yahoo Messenger groups and Orkut groups. And in a way, there was some background of interacting with customers. In 2005, I met this gentleman who said, can you manage my money? I quit my job, and I started an advisory business like a Portfolio Advisory business. And around 2005-6 was also when Nikhil, my younger brother joined. And he also started trading quite early, because I had already started trading, and I’d set a very low benchmark in terms of education expectations in my house, and I disappointed my parents a lot more than him to say so. But yeah, he was a much better trader than I was, I mean, I think he still is. And also in 2008-9 we kind of asked a question saying, if he’s a better trader, why should two people sit and trade? And I thought it was about time someone solved for the problems that very active day traders faced in India.

So when we started Zerodha, it was only meant for really, very, very active traders, people who buy and sell daily. I mean, that was a niche audience for whom we were trying to build this. And the enabler for this also was the National Stock Exchange in 2007 launched a free trading platform, because we didn’t have a tech background. So they gave tech for free almost, it’s a very commoditized vendor product and on that, you could kind of innovate in terms of pricing etc. So I think we were almost the first guys to spot an arbitrage opportunity of sorts, where if tech is coming for free, is there a way to disrupt pricing?

So that’s really what started Zerodha in 2010, there were two problems we’re trying to go after. One was, of course, reducing the trading costs for very active traders, and two was also to bring in transparency to the business. Because in the business of money, businesses are generally very opaque in the way they work. And as an active trader, you want everything to be clear and transparent. So we started in 2010 with these ideas, Nikhil continued trading, and we had a team of four people from the days before, and I was doing sales, Venu was doing compliance and ops, and Anan was doing support and that’s how we ended up starting the business.

Sanjay Swamy

Amazing. 2010 was also a significant year, that was sort of the start of Adhaar. And which later led to a lot of the onboarding processes getting streamline and digitized. So how were things in 2010, when you got started, and if you try to trace your journey from 2010, say to today, in what would you say, the two, three distinct phases of evolution of the business and the trigger points?

Nithin Kamath

Yeah, so when we started, really, the USP was this: low cost, transparency, young bunch of guys, who are social media savvy, etc. And around 2012-13, the first competitor came around the scene. And he was essentially saying exactly the same thing that we were saying. And that’s when it kind of hit on us that we need to kind of innovate in terms of product. And I got… I think, one of the biggest tipping points in my life has been finding Kailash, who’s our CTO, he’s as co-founder as me in this business. He doesn’t like to be called because he joined us in 2013. And so around him the whole product journey started. 2015 is when we put out our in house products. Actually in 2014, Karthik, is an old friend of mine, he kind of joined, very passionate about market education. So we started building our Varsity. He single handedly built the whole initiative.

So yeah, Varsity started in 2014, we launched the in house mobile and web app called Kite in 2015. I mean, I think with Kite, what we were trying to do is, while, our core audience was very active traders who need all the bells and whistles that very active traders need. But we also by then we’re kind of outgrown this saying I want to build it only for traders. And now, we are more ambitious. And we said you know what, we need to go after a wider audience. Because the very active trading community in India is a very small community, even today, it’s maybe less than a million. So we said we need to kind of go build the product for everyone. And that’s how Kite was built, it was very minimal, so it can kind of attract first timers. And it also had all the bells and whistles, which the active day traders required.

So yeah, in 2015, we launched this. I think the second big tipping point in our journey was, in December 2015, we went zero brokerage for equity investing, until then, we were charging 20 rupees per trade, now be it active trading or investing. But the problem was, we were getting labeled as a broker to be used only if you’re speculating in the markets, I mean, if you want to invest, use a bank, if you want to speculate use Zerodha. And we wanted to kind of break the image. So we said, why don’t we go zero for equity investing, because anyways, we are not making any money from equity investors. And that kind of played out really well, because we got a lot of press because of this. And in 2016 Aadhar happened, and in that sense, you could now use Aadhar for onboarding customers. You could use it for KYC and esign. So I think the biggest challenge in the first five, six years was really onboarding a customer. And when there’s intent conversion, because account opening used to be like a 35 page document with 40 signatures. And people had to fill, sign, and courier to us.

Sanjay Swamy

I remember opening a payment gateway account for one of our early companies and you’re just saying I counted like 176 signatures, sideways and upside down and what have you. So it really was one of those, and the amount of paper wastage that happened along the way.

Nithin Kamath

Paper wastage is okay, I mean, we wouldn’t mind any paper but you couldn’t onboard customers. But yeah in 2016 this happened, and I think we were at 70,000 customers in 2016. And we are at like, 10 million customers today. So in a sense, it took us like six years to get to the first 70,000. And the journey from the time Aadhar onboarding happened, I think there were a bunch of things that went on, I mean, we’ve been at the right place, right time, multiple points in this journey. So I think some of the things that we did in this part that worked very well was first, when we launched Kite, I think Kay and the tech team did this whole super thing of first launching the Kite connect API. So it’s like a suite of API’s that allows for any product to be built on top of us.

So Kite web and mobile app were two platform but it allowed for startups can build on top of us now, today, what banks call as banking as a service that allows neo banks, I mean, we started broking as a service in 2016, and so we started inviting startups to come build on top of us, because by then, we had realized that the real problem in the country to solve is to grow the capital markets, and not really, to become a big fish in a small pond and we knew that to grow the capital markets, you have to collaborate, there’s not something that you can own everything. And that’s how, the reason for these API’s and when these startups came to us, this was when FinTech wasn’t hot. I mean, broking has been hot for the last 2,3,4 years now, but it was not hot back then. And so these startups also needed funding. So we set up this initiative called Rainmatter, and we were profitable by the end. So we took out some of our profits and started investing in the startups.

And most importantly, for the startups, we also get them customers, because the business of money, I think, it takes a long time to build trust it took us like two years to get to our first 10,000 customers, a lot of our startups get their 10,000 customers in like, first 10 days in the sense, because we are kind of showcasing them to our customers. And this is not only a neo bank, where your bank has to go find customers. Imagine you’re a neo bank, and the main bank somehow gives you customers, exposes you to the customers. So it was an initiative like that. And so that worked very well.

We launched Coin, which is a direct mutual fund platform in 2017. We were one of the first direct mutual fund platforms in the country, today is probably the largest in terms of AUM. And then the product kept getting better, and it kept evolving. And then 2020 happened, and suddenly COVID and work from home. I mean, we were 2 million customers just before COVID. And I remember sending out an email to our team in March of 2020, saying you know what, this time to get into a monk mode. And, and I haven’t been more wrong about anything in life than that.

Sanjay Swamy

In fact several of us were surprised I mean the level of acceptance of digitization across the board, whether it was UPI payments, whether it was e-commerce, whether it was ordering, I remember talking to some of the founders of the food delivery businesses, and they all said it’s gonna take a year to get back to our February volumes, and instead, they got to probably five times their volumes.

Nithin Kamath

I mean, the same thing happened to us. I mean, we are at 2 million customers just before COVID. Like I said, we’ve grown 5x In the last two and a half years. So I think the thing about the last few years is, I think, March-May of 2020, was probably the most volatile Indian stock markets have been for, I don’t know how long, not just most volatile, but most activity as well. And I think one of the best things in the journey was the fact that we were able to survive those two, three months. Because we had tech team at work, quite a bit on just being ready for the scale, when we never thought the scale will be like this because we went like 4x in terms of our trading volumes in like, no time, like some of the large brokers in the US, they were down for like hours together for multiple days in these two, three months, because they were not able to handle volumes.

Even in India we had some large brokers being down but we hardly had like, I think 30 minutes outage in the whole of that year. So it was one of those, like we were supremely confident after that volatile period that we have built a business that can scale well as well, in terms of tech. So that’s been the journey, I mean, right now, I think the last three, four months finally there is some cooling off of sorts. I’ve generally been quite pessimistic about the world in the last two, three years or so. But the business is just the opposite of my pessimism. But I think the last three or four months is kind of like we’re seeing some kind of a correction in terms of activity, trading volumes and everything else.

Sanjay Swamy 15:05

Right. And that leads me to a question about the user behavior, because a lot of the users you got over the last two years, were not just new to Zerodha, they were new to stock market investing, and perhaps in mutual funds. So what have you seen as the sentiment amongst those users, because they hadn’t seen any sort of ups and downs, they’ve only seen up and up and up. And now all of a sudden, these massive corrections, what are some of your insights from the data you’re seeing?

Nithin Kamath

See, the thing is not just the last one, two years, from when we started the business, our business is a very high EBITDA business. So it’s I mean, so we are so correlated to the underlying market and the indices. So if we were to map new account openings, and compare it to the nifty mid cap index, for example, we would be almost like a mirror image. And so except for that, COVID, two months, where it went down, because, except for that, otherwise, it’s just been a one on one kind of, like a mirror image of sorts. So and the behavior remains the same, even with the new folks and I’m in as soon as there are drawdowns, people don’t want to log in and check their portfolios, like, my dad would stop looking at his economic times as soon as stocks went below a certain, notional price of sorts, and so the behavior is the same, or even other apps, etc.

And even the new account opening, I think, over the last one, two years, also, what helped grow the market was the IPO markets. I don’t know why. I mean, yesterday, I was having this conversation with someone. IPOs are probably like, in India, there’s this whole misconception that IPO is safe for first timers. IPO really is not safe for the first timers. I mean, because you’re investing in a company, which has no track record. But somehow, every IPO tends to get a lot of first time investors. If you want to be investing in a safe stock, I mean, I think you need to go and look at something which has got a track record, and then invest into it versus an IPO where insiders are selling and you know all of that, dice is kind of loaded against the investor of sorts.

But IPOs did help, get in a lot of first time investors, a lot of these IPO investors, because allotments were not happening, they ended up investing into other stocks as well, because in some of the popular IPOs, which got a lot of applications, that allotment was hardly anything at all. Now, the problem, I think in the last two years, all the customers who come in, they come in with a lot of wrong expectations, they’ve all come in thinking stock market is easy money, and then they’re probably are soon going to realize that, it’s probably the toughest place in the world to make easy money. So as a business we’ve been constantly trying to temper down expectations, in every single communication that we’ve had, as a business with a customer, we always try to talk to them about the risks of investing and trading in the markets.

The positive about the customers who come in and over the last two years is most of them are less than 35 years of age. So which means they are really trading and investing in smaller amounts of money. This isn’t like the bull markets of the late 2000s, the bull market of the late 90s, because in a lot of these bull markets, because the 90s, late 90s. And the financial crisis when I was actively part of it. And I could see at that time, the money that was coming in was much older money, this was like, people putting their hard earned savings of many years at stake. But what has happened in the last two years is these are young guys who are just putting between two to five months of their salaries of sorts, and the best way to learn in life is to make mistakes, so if you can somehow get away making small mistakes, that’s really the best way to learn.

So I think the optimistic side of what’s happened in the last two years is the fact that all these people, most people who come in are actually trading and investing with small amounts of money. So while some of them might get disappointed, many of them might end up learning some of these very important money lessons of sorts in life but there is there’s a lot of people who come in for wrong expectations, and a lot of people have been driven to the marketplace because of social media. And social media has just been like just all over the place in terms of setting expectations.

Sanjay Swamy

So a lot of questions actually kept coming up as you were talking about the journey and the recent months but I will probably go a little chronologically back from where we are. One of the big recent phenomenons, or at least the last 18 months has been, Crypto, and certainly at least before March 31 was a very different world. Did you see a lot of money being diverted away from stock market investing and stuff to crypto in your audience? And generally, maybe we just back up with your views on crypto itself, and how they’re being handled here in India?

Nithin Kamath

I personally don’t understand crypto. And I’ve stayed away from crypto because as a regulated entity, now, being the largest broker in this country, I didn’t want to have anything to do with an asset class that is non regulated. So I’ve let go of opportunities to invest in a lot of these crypto exchanges, and etc. And because I didn’t want to have any conflict of interest of sorts, so has money moved away in the last two, three years in crypto? Not much, I think, I mean, even if you look at estimates of what some of these crypto exchanges say, they’re just, like $3-4 billion in the grand scheme of things of the equity markets, that’s nothing. And in terms of users, I think crypto markets has, captured a lot more audience, a lot more of the 20 to 30 year olds have exposure to crypto versus equity, I’m guessing. So the younger they are, I think the higher the percentage, the exposure to crypto.

So, when there was a point in all of this, a lot of times, I kept talking about this to our team saying, like there is no status quo, everyone’s gonna get disrupted. And we have to just look out for who is the one who can potentially disrupt us. And, and usually, this disruption happens from places that are not so obvious. It’s not just your direct competition. And for me, there’s always been in the back of my mind that if there is another asset class that is in a bull market, and which kind of gets to work in unregulated territory, so essentially, they can say anything they want, they can sell anything they want, do whatever they want, and also, it’s almost like a regulatory arbitrage that could potentially have turn this asset class or all these crypto platforms into potential competition, and maybe even disrupt the regulated equity market crowd. I mean, yeah, that risk was always there. But I think some of these actions that the government is taking around, taxation, etc, I think it’s even now that regulatory arbitrage of sorts.

So while they still don’t have their own regulator, I think the kind of restrictions that are put in place right now kind of puts it on an even keel. So, unless crypto really, really out performs equity, I don’t really see how people will get into crypto, especially after the kind of almost, some of these altcoins have gotten massacred of sorts. And also, I don’t really see how that can really take off of sorts. I mean, it can do well, but I don’t think it can really disrupt equity investing.

Sanjay Swamy

Cool. So let’s come back to the journey of the entrepreneur at Zerodha. And now, obviously, you’ve sort of multiple phases along the way and obviously, I run a venture capital fund here. And just curious whether you seriously considered venture capital or you just didn’t need to, or you just felt it was not aligned with the principles with how you were looking to build the company. And we would love to hear your take on your journey and thoughts as well. And also, there’s a second part, which is now you are with your own VC Fund, which is Rainmatter.

Nithin Kamath

So back in 2010, if it was, it was really… You know I was very raw as a person and I had no pedigree background. If we had got proper professional Venture capitalists, who would have said Nithin I’ll give you money, I probably would have taken it. And once you’ve started the journey, Zerodha would probably be very different to what it is today. I mean, you would have probably taken a different kind of route.

Sanjay Swamy

Can you elaborate on that. What do you think might have been different?

Nithin Kamath

So my understanding of this business even before Zerodha, was that people don’t look at advertisements and decide to invest more. It’s not that Shahrukh Khan dancing around the tree will get you to buy a mobile phone, maybe. But it won’t get someone to, someone might even open an account, but it won’t get someone to invest in the markets because of that, unless of course, the advertisement was selling greed in some form. If you could say, like, how some of these crypto exchanges were saying, you can make guaranteed money, then, of course, their ads will get a lot of interest, but you knew that is not working in a regulated space, you can’t really run ads that can push greed of sorts. So that was, in my head even before Zerodha saying that, the way to grow this business is really organic and word of mouth. And we need to put as many enablers in place as possible to get our customers to be talking about us. And where we are not forced to go and advertise.

Philosophically, I think especially after K joining, I think we’ve been one of those, let’s do whatever best we can, and whatever growth has to happen will happen. So philosophically, also, I was not very in sync with how VCs think about it, which is to put targets and chase it down. And I mean, it works for some people, but personally, for me, I don’t think it would have worked. And because I like the freedom, I appreciate this whole freedom more than any amount of money. So the first year before I knew all of this, I would have probably taken money. But between 2010 I mean I was not really connected to the startup ecosystem. I think 2012 and 13 is when I started interacting, I went to a bunch of events and then I heard all of these CAC and PMF, and stuff like that. I mean, I never knew these words. It was really the first time I was even listening to all of these words of sorts, I mean, all of this lingo of sorts but in 2012-13, we were already profitable.

Sanjay Swamy

I still don’t know the difference between SAM and SOM right now.

Nithin Kamath

So in 2012-23, we were profitable. And then we started this whole tech journey. And that’s when a lot of interest also inbound started coming in around 2013-14 is when,

Sanjay Swamy

People will give you money when you don’t want it or you don’t need it.

Nithin Kamath

I also kind of realized that in this business, you are like this girl in college, who doesn’t date anyone, and everyone wants to date her. So the more you say, No, the more interest you create. But in 2014, this is the conversation we’re having internally back then, as well saying that you need to take this route of raising capital. See, the thing is to build a business, you need to have some kind of a moat or an edge. And I mean, of course, you can get into the fight of deepest pockets. It’s a fight that many people have won and built great businesses around the world. But there is also a fight, a way to fight this, which is to say that, can you do stuff that is tough for the one with deep pockets to do?

And I don’t think you can really do it in every industry, but certain types of industries where the product is very complex, where you can put some, because in our business, you can spend as much money gaining credibility takes time, You can’t just spend money to gain credibility, right? Or you can’t just spend money to build, I think building a trading platform is more complex than building… It’s a really complex product. And also, because you’re talking to multiple exchanges, every order has to be executed in microseconds, you cannot be down for like even a minute. I mean, you’re dependent on exchanges, depositories, clearing corporations, while the customer is just looking at our app which looks very simple. But at the backend, there is so much happening, and all the regulations in the world that you need to be compliant with. So we knew that, no one can just raise a lot of money and just catch up with us in terms of distance. And we also knew that as a business, we can do things, which will be very hard for a funded business to do.

Sanjay Swamy

Like the material moats in just all aspects of the business that you didn’t feel capital would necessarily be a weapon somebody could use against you.

Nithin Kamath

Absolutely. And I thought capital also brings disadvantages to a competition like for example, we haven’t done a single push notification till date asking a customer to buy or sell a stock. Not everyone appreciates it. But there is this large community within the audience which appreciates it. Varsity, which is our largest education initiative and is maybe the third or fourth largest in the world. We have millions of people who have registered with Varsity to read the content and get some emails etc. Or post comments etc. We haven’t till date sent one email to all of these guys saying why don’t you open a Zerodha account, or giving away stupid deals to induce customer to open account, we’ve always said that trading in the market is a serious business, it’s not like getting on an app and ordering Samosas, and you need to build the seriousness right from when the account is started. I mean, you don’t want to give away all these goodies and people come in thinking this is some casual stuff happening, this isn’t. People can lose their shirts and pants in the market.

Some of these things I think would have been very tough to follow through, if we were kind of funded. As of today, one of the biggest things is that we are working on this platform called nudge, which is really like a layer of user experience on top of our trading App. So what we realized is to do well in the markets, to do well with money, you need to avoid a few mistakes. If you avoid a few mistakes, your chances of doing well improves significantly, like, don’t concentrate on one or two stocks or a sector, don’t go against the trend. Don’t buy penny stocks, don’t over leverage, stuff like that. So what we’re doing right now is essentially, introducing all of these mistakes, I mean, these things as mistakes on a Trading App. So if a customer is making a mistake, we proactively nudge the customer to say, you know what, you’re making a mistake, don’t do it. So essentially, each nudge really reduces the business for us. And it would have been very tough to justify something like this, if there were investors.

Sanjay Swamy

Right thing to do for the customer.

Nithin Kamath

Yeah. I mean the thing is, usually the problem, I think, with investors also is that if you’re chasing shorter term targets and goals, all of these things seem okay to do but it’s just your horizons, I mean, if you say no, like I keep talking about in the business, saying that I’d rather make 100 rupees for customer from next 10 years, versus making that 1000 rupees in the next one month and losing the customer. I mean, it’s just a choice that you’re making, so while nudging the customer not to trade might seem like it’s not a good thing for the business. Yes it’s not probably in the next one month, if you look at it for the next 10 years, I think it’s a smart thing to do, which is doing what is right for the customer.

Sanjay Swamy

You’re absolutely right, it’s all about the time horizon, also, and how you align the incentives. I mean, having said that and certainly we love founders to think really long term and think about just building big companies, I mean people ask me, what do you think about this or that in terms of, IRR and stuff, I actually don’t. I hope my LPs are not listening. But generally, all we say is, we just want to build great companies. And these have to be great lasting companies, if we can and good things will happen. And the return will be perhaps not optimized for the second decimal place, but it’ll be above a certain threshold that if you do good things, good things will happen. I always even tell founders, Financial success is an outcome. It’s never a goal, And invariably in life, whenever I think all of us, from time to time, have chased financial success as a goal, it’s never happened.

Nithin Kamath

I mean as a trader when you’re trading the markets, I think the worst thing you can do as a trader is to set a money goal. As an active trader, because then you end up taking too many risks, and you’re just optimizing for that money goal.

Sanjay Swamy

And on the flip side, perhaps getting out too early as well.

Nithin Kamath

Absolutely, I sometimes think about it like, if we were a funded business and say, We were listed on exchange, maybe I would have sold my own stock in April 2020. This is probably, like a peak and stuff, like I’m saying, when you think too short term, and I think you end up, I have a feeling you end up making a lot more mistakes of sorts.

Sanjay Swamy

So let’s talk a little bit about Rainmatter, the other side of the coin, where y’all have funds and even if when you come in you can sort of drive the thought process and mindset with the founders you choose to partner with. Over a period of time those companies will raise from other investors and we’ve done stuff together as well. So how are you able to sort of influence and balance and choose these companies so that they have the longer term mindset, and is it just the nature of the business you’re in and the founders you cherry pick?

Nithin Kamath

No, I mean, the thing is, firstly every founder that we’ve interacted with Rainmatter probably vouch for this that we have never, ever done an investment with an ROI in mind, in terms of in our return on investment for me in my head, it’s almost like a CSR thing. So now you know the investment is done right. See, all these investments were done with the objective of expanding the capital market ecosystem, it’s more like an Impact Fund, versus where we’re trying to chase returns on this. And also, we think these ideas should exist. And when you find a startup, kind of executing on those ideas, and we think it should exist and need some support, and help is when we get in. I mean, it doesn’t mean that we don’t have a for money chasing kind of a fund, and Nikhil, my younger brother manages our portfolio.

So we have large investments in public market stocks, and so which is where we chase returns, so where we are actively, buying, selling, and there is no emotional connection. I mean we’re just acting like traders and all that. But what we’re doing with Rainmatter is just for impact, and it’s a very small percentage. Yeah, I mean, it’s just,if we feel like the idea and we think it is something that will help the capital markets in the country we do. I think in due course, it all started as capital markets, but it then got extended to one of those personal things that I’ve been very passionate about is health and fitness, etc. And I believe that Indians need access to healthier food. And at least an option to make a healthier choice. And because, a lot of times today, we don’t even have that option. And I have a sweet tooth, but I don’t want to have 20 grams of sugar in a single piece of chocolate, I want a chocolate, which is more chocolate and maybe very little sugar. So you need those options to be available, as in if I want to work out at home, I should have an hour to work out at home, and not have to go to the gym etc.

So I mean we started supporting some of these kinds of causes that I was passionate about. And then this whole 2018-19 is when financially started doing really well. And we realized that there is no use of money for the business. I mean, we’re not spending on anything, I mean, our team, we are 1000 people in 2020, we are 1000 people today, but our business has grown 5x. And so the margins were going up, and all of that, and we said, money shouldn’t be lying idle doing nothing. And that’s when we said, we need to put this at good use. And me and Kailash, we’ve been, I mean Kailash more than me, are big proponents of climate change issues, etc. One of the things that has bugged me, right from the time Aadhar started was that the kind of efficiency that Aadhar brought into the system, it helped businesses, but it also created a lot of job losses. Today, for example, to open 100 accounts, if we needed 30 People in 2015. Today, we need one person.

Sanjay Swamy

You’re the second person. The other one is also on this podcast right now, who is actually, I’ve actually written an interesting blog published about the job loss, but it’s the right thing to do. I’m not saying it’s not the right thing, but it has had a short term effect.

Nithin Kamath

Yeah. I mean the thing is, eventually you don’t need inefficient jobs. I mean you need to create more efficient jobs out there.

Sanjay Swamy

Yeah, correct. Availability of the right services, but the middlemen that were sort of, I would say, arguably thriving, because of the inefficiencies are going to have to do new things.

Nithin Kamath

Yeah. So these two causes, me and Kailash and our team, Nikhil, all of us were very passionate about climate change, and around livelihood creation. So that’s where we ended up, and Sameer heads this initiative with a Rainmatter climate. So it’s a foundation through which we are investing in for profit, and for non for profits. We’re kind of working on all of these causes. And the way we structured it is that any profits from the for profit investment goes back to the foundation, and we’ve said that we will give back most of our… actual investment in the future. I mean, every time I say give back the team says, I shouldn’t be saying give back, but say investment in the future.

And also, we have allocated most of the wealth generated from the business to the foundation. So we haven’t yet found large enough causes to deploy large amounts of money. And I think we’ve done 100 crores I mean, we’re just leaving a large round into Akshay kalpa right now. And so we will probably, we’re in that whole experimenting phase, interacting with startups and foundations and NGOs and etc. And we’ll probably start cutting larger checks as we go by with the Rainmatter climate.

Sanjay Swamy

Awesome. Great. Two last questions. One is, Nithin of today, if you had met the Nithin of 2006, 2010, what would your top three pieces of advice be for that person?

Nithin Kamath

I usually think about this quite a bit and it’s just I’ve been in the right place, right time so many times. And I don’t know what if I changed my life would have made me not be at the right place, right time. So if I go back in time, I almost feel like I’ll not say anything, and I just leave my life the way it was, I mean, 2006-7 was a very tough time for me. But if I had done things to optimize for that I would probably not be where I am today. So it kind of must be a cliche, kind of an answer. But it is actually true.

Sanjay Swamy

A cliched question. But yeah, I think the answer is very interesting, which is I think you’re extremely humble, to say that a lot of this didn’t happen by plan. And I couldn’t have done this consciously. And one thing led to the next and suddenly, it got into this virtuous cycle. And very, very well set. Having said that, now that we have, and especially with the current climate, and we’re seeing a lot of strange developments, especially for anyone who graduated after 2016, this is probably the first time they’re seeing things. Your council to entrepreneurs, especially those who are either midway through their journeys, and suddenly seeing headwinds and new people who are starting out now.

Nithin Kamath

The thing is, if I look back at Zerodha and kind of attribute some reasons for the success, I think like they say, you need to sharpen the axe before you go chopping wood. So, I think those 12 years that were spent in the industry before starting Zerodha is really, I think, what has helped, even today because this is not something that you decided in a coffee shop and started in a month. I mean this was something that I lived with for 10-12 years. So I personally think that because of that the odds of succeeding, increased quite a bit, I mean I like my poker, I like trading, etc. So I’m always looking at risk rewards on almost everything. And, I think the way to increase the odds for almost anyone who’s starting up, or even starting a career is to pick 1,2,3 things to attempt, find something that you really like to do and then spend some time around it before you think about building a business.

In today’s world everyone’s in a hurry to get there fast. But I don’t think I have this… so I keep asking this question. Every time we meet the Rainmatter climate team, is there a way to grow the tree fast? Is there a way to grow a forest fast? Is there a way to growth hack into this and how to do it faster? There isn’t, I mean you can of course, right away you can put steroids into people you can put some fertilisers and get a tree grow fast but it’s not going to be a forest. People can have a single tree standing which is grown forests and a forest. So I think building a business is quite complex and there is no easy or fast way. Of course, some people have gotten there much faster than others but I don’t think you can really start off thinking that you will get there fast. So I think you need to sharpen the axe do whatever it is before you start the journey and once that and second, I think the learning in my life has been that the odds of succeeding is higher when more people want, as many people want good things to happen, in a way it’s actually again a very cliche thing to say, do good and good will happen to you, but in a world where we live in where customers are connected to each other, if your customer wants you to do well chances of you doing well actually increases.

So what is the relationship you have with your customers and I think in Zerodha for example, we have 10 million customers not a single advertisement till date and everyone coming from word of mouth and that’s happened because your customer has wanted you to do well. I mean he is speaking about you to his friends, family whatever and that is really I mean, you can build a large business I mean we are living proof that it can be built. You can actually build a large business without having to actually go, kind of do all the marketing and advertising and that you’re supposed to do as if you can do good to your customer I think and given Right Place, Right Time I think. So keeping customers in the center all the time and never doing anything that’s against the customers. I think it’s a good idea. I mean, these two things probably are what has helped me and Zerodha as a business.

Sanjay Swamy

Awesome. Nithin I really appreciate these pearls of wisdom. I think it’s really, really commendable. I think I’ve had the pleasure of knowing you since probably 8-10 years. I think we met at one of those NASSCOM events long ago and it was awesome to see how the company has evolved and scaled up and really you’ve been a role model to all of us in the ecosystem, the FinTech community, the entrepreneur community, as well as the ecosystem at large. Thank you so much for being on the show. And I look forward to the next 10 years of Zerodha where it should hopefully be one of the larger 100 billion dollar companies or a trillion dollar company.

Nithin Kamath

Yeah, thanks Sanjay. And hopefully you have your 900 more podcasts.

Sanjay Swamy

Podcasts are means to the end, but yes, absolutely.

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