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Zerodha’s Nithin Kamath and Zoho’s Sridhar Vembu open up about being bootstrapped, an impending bubble burst and more

Sridhar Vembu, founder of Zoho and Nithin Kamath, founder of Zerodha, opened up in the latest edition of Moneycontrol Masterclass about being bootstrapped, stock market bubbles, the challenges of Twitter and more.

March 10, 2021 / 12:37 PM IST

Zerodha’s Nithin Kamath and Zoho’s Sridhar Vembu have both built huge businesses without raising any external funding. They opened up about this, their life lessons, counterintuitive thinking and more in the second session of Moneycontrol Masterclass- Ideas for a new India.

The session was moderated by Chandra R Srikanth, Editor- Tech, Startups and New Economy.

Vembu, who has been living in Tenkasi, a village in Tamil Nadu, for a while now said, “ I never raised money since I felt that we will not have the freedom. It always comes with strings attached. If I had investors, they would have an issue with me sitting isolated in a village, right?”

Although they are tied by the common thread of being bootstrapped, their businesses are quite different. Nearly 25-year-old Zoho is an enterprise software firm whose major chunk of revenue comes from US-based companies. Vembu and Zoho have lived and built through the dotcom bubble, the 2008 financial crisis and more. Zerodha, on the other hand, is an India-centric stock trading platform which has been running for the past decade, and is currently valued at over a billion dollars.

While venture capital-backed firms have hyper-growth in their DNA, this may not be right for many companies, and may not be sustainable, both founders said.

“At Zerodha, we have never chased revenue or growth. Every day the team wakes up to see how to make the product better. For us that actually means less revenue because you may trade less when the product is good,” Kamath said. 

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“I am doing this for the 25th year. A lot of founders are not doing it anymore. For startups that follow “grow big or go home”, they grow big and then go home. Because they are completely burnt out. If you want to make this your eternal love, you need to take this slow,” Vembu said.

Both founders also warned that India and the world are in the middle of a stock market and investment bubble, and one way or another, it will burst someday. The US has been printing a record amount of money, and investors are chasing opportunities in emerging markets. This is also leading to structures like the new-fangled SPACs (Special Purpose Acquisition Companies)- blank check companies which help do an IPO with far less regulatory needs than a normal listing. 

“There is a massive bubble we are in. A lot of companies are looking to list Indian firms in the US through the SPAC route. So a lot of this bubble money is going to flow into India. We don’t know when this will burst,” Vembu said.

A bubble is particularly concerning for Zerodha, given its business will be hit directly and wealth could disappear overnight. “A lot of the morning we wake up knowing that the money we have made can go away. We know we are in a bubble, the day it bursts we will lose some money,” Kamath said.

Both founders also look beyond business and beyond money to larger goals. Kamath stressed repeatedly that today money was not a focus for him personally, and that beyond a certain limit it doesn't play any role for him.

“I look at myself as a capital builder. Before we create wealth, we have to build capability, the human capital. That is what entrepreneurship should do. The benefit of it is not just monetary, but psychic and spiritual,” Vembu said. 

“I have been influenced by the study of Japan. They just don’t make products. They also make the tools that build a great product. I see long-term strength in this East Asian model,” he added.

Vembu also considers Lee Kuan Yew, the late father of modern Singapore as a mentor because he has been heavily influenced by his books, although he has not met him. He admires Yew for not just bringing the tiny island state from a third world to a first world country, but also for being a global statesman.

Kamath has mandated Zerodha employees to permanently work from home, a decision which stretches beyond the impact of COVID-19 pandemic. “Hopefully it will also help reduce the carbon footprint,” he said. When asked what are some of the thoughts he wakes up with, he said “How can we solve the climate change problem? How can we create green jobs?  (Can you) just create an economy wherever you are?” 

Vembu also said that investing in remote working tools is a priority for Zoho. “We are investing heavily in remote working tools. We have 15 rural centres and there are 10 more coming up soon. You will see major advancements in these tools in the next 1-2 years. In the next 4-5 years we will build a deep vertical technology stack,” he said.

Working remotely and staying away from the noise is also something where Vembu drew a parallel to legendary investor Warren Buffet. Buffet lives in Omaha, Nebraska, away from  New York’s Wall Street- America’s investment hub, and living there helps him invest with control and not give in to emotions while investing 

Both founders are also prominent personalities on Twitter, with over hundred thousand followers each. But both of them said that the platform has its challenges, sucks up time and hence needs to be used carefully.

Kamath’s Twitter is often riddled with irate customer queries and complaints from Zerodha users, especially last week when the National Stock Exchange (NSE) had a glitch, thousands reaching out to him in minutes.

The toughest thing of my life has been surviving Twitter. Building a business is so much easier than Twitter. But if you want your business to be heard you have to be on this platform (Twitter),” he said.

Vembu said rather than spending time on Twitter frequently (like most people do), he prepares his tweets in advance, saves them as drafts, and then tweets it out. Vembu is sporadic but sometimes posts a string of thoughts (or threads) on various subjects.
M. Sriram
first published: Mar 5, 2021 08:55 pm
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