Zerodha's founder Nithin Kamath said that the biggest risk for startups and founders going public is losing the flexibility to take instinctive decisions.
Cryptocurrencies have seen immense investor interest even in an unregulated environment and that signals a risk to traditional investment avenues like the stock market, according to Nithin Kamath, founder and CEO of online stockbroking platform Zerodha.
“If there is one potential disruptor for regulated businesses around savings, investing and trading, I think it is crypto. Eventually, money chases money. If one asset class is going to give you more returns than other asset classes, money will flow towards that,” Kamath said.
He further added that it can also be a risk to businesses like Zerodha and other companies that offer savings products as people may choose crypto over other investment options.
Kamath, along with PB Fintech founder and CEO Yashish Dahiya, was speaking with Razorpay founder Harshil Mathur at the startup’s annual event Razorpay FTX on the future of fintech companies going public. This comes in light of the slew of fintech and internet company Initial Public Offerings (IPOs) seen in the past few months.
Gaining from the bull run in the stock market over the past year, internet companies such as Zomato and Nykaa saw stellar listings. The 2021 IPO run for internet companies ended with Paytm, shares of which fell by 27 percent on the day of listing. The steep fall in Paytm’s share price stirred debates over loss-making fintechs going public and right valuations that should be ascribed to avoid losses for retail investors.
Dahiya, whose company PB Fintech (which owns Policybazaar and Paisabazaar) went public on November 15, revealed that inflated grey market premiums ahead of the company’s listing made him consider putting out a statement cautioning investors about the right stock price of the company.
“Some people started trading our stock at Rs 2,300/share 15 days before we went public. I felt very bad about it because I knew that we were going to list at Rs 980/share. I actually considered putting out a statement saying this is the wrong price because people could lose money,” Dahiya said.
Along with going public come more responsibilities for founders, Dahiya explained.
“Your accountability will be very spread out (post listing). And the negativity that you get if you botch it up is going to be much higher than the negativity that you would have gotten as a private company,” he added.
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The biggest risk for startups and founders going public is losing the flexibility to take instinctive decisions, added Kamath. Amid the rush of fundraising by startups this year, he said that founders should also be mindful of raising capital.
“You should take it only if you need it. Not just because it is available or just because it is the right time. Capital brings obligations as well.”
Zerodha has not raised fund from external investors so far and is valued at $2 billion. Kamath explained why the startup does not want to raise funds from investors.
“Apart from the fact that we don’t really require money to grow, we don’t raise capital because there is no predictability in the business yet. Because our fortunes are so dependent on exchange trading turnovers. Until there is predictability it does not make sense for us to take the obligation,” he added.
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