Why KV Kamath thinks ‘disruptor’ Zerodha is a good business model
Chairman of the National Bank for Infrastructure Development and veteran banker KV Kamath on Saturday praised online equity trading platform Zerodha, founded by Nithin Kamath and Nikhil Kamath, for being a seeded and cash-flowing business. positive, calling it a good model for a business.
Giving his advice to startups looking at the financial sector, Kamath suggested looking at the pain points and getting through them. “For example, online brokerage was probably the easiest way to enter where the barriers to entry were very low. You brought in someone like Zerodha and in the first year of lockdown he became the market leader,’ he said at an event hosted by venture capital firm IvyCap Ventures’ IvyCap Day 2022 in Mumbai.
“It’s a low-cost platform, it bootstrapped itself and runs the business. Good for him. (They) run a cash flow positive business. It is a good model to understand how the business is run. He is a disrupter because Zerodha disrupted all the incumbents who had been there for 20-25 years.
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On the value and valuation dichotomy, Kamath said, “Startups should focus on either becoming cash flow positive or having it in their sights, and then you move on to the public market.” Otherwise, it’s a risk not only for the startup, but it could also create an environment of mistrust, he added.
Saying that the fintech space will see the most disruption, the veteran banker advised founders to be patient in chasing valuations. “The creation of value in your platform, you have done it. If you are eager to create value, you will hurt yourself.
There are many opportunities for fintech players as incumbent banks still lack modern technology, he said. “But if a startup tries to jump into the valuation game, they’ll be crushed because the market will see that you’re still not in a positive state. Now you need the money, but you won’t get it. not that money, whatever opportunities you have to grow will be crushed. The idea that you have and that you are a disruptor is a given. Have a little patience.
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The former BRICS Bank chief also suggested proactively seeking partnerships with incumbents, instead of waiting for them to approach first. “Both sides need each other. Incumbents, especially in financial services, have huge regulatory shelters. If you say I’m going to steamroll the big banks in place, that may or may not happen. The regulator will say that you follow the discipline of the banking or insurance sector which can be tough for a startup because you are used to doing things in an agile and nimble way.
“The value, you certainly created it, you have to monetize that value in the valuation and get a positive cash flow first,” he said. The other party must also seek partnerships. There is no other choice, he added.