Success Story of Zerodha: How Its Valuation Went From Zero To $2 Billion

What Is Zerodha?, zerodha success story, zerodha case study

What Is Zerodha?

Zerodha, an Indian start-up that provides a digital platform for stock trading, is one of the most interesting business in the Indian ecosystem. In just 10 years, Zerodha’s valuation went from zero to $2 billion, all while remaining profitable with profits of over 400 crores. 

One of the most remarkable things about Zerodha’s success is that it was achieved with zero funding and zero marketing.

How did Zerodha Achieve Such an Incredible Feat With Zero Funding and Zero Marketing?

The answer to this question can be found in a theory proposed by Kunal Shah, one of the most renowned entrepreneurs in the Indian start-up ecosystem. In 2016, Shah gave an Ink Talk in which he proposed that there are systems in the world with a lot of inefficiencies and barriers that prevent ordinary people from moving to a more efficient system. However, once people find an efficient system, they have an innate ability to go ahead with it and never look back.

Shah suggests that if an entrepreneur can build a start-up that removes these inefficiencies and helps ordinary people overcome barriers, the start-up will spark a revolution and create an irreversible change in consumer behavior. Will bring a paradigm shift. Once that happens, the start-up will have three huge superpowers that will elevate it to another level entirely. These three superpowers are: high consumer tolerance, unique brand proposition and an irreversible change in behaviour.

An example of this principle in action is WhatsApp. Before WhatsApp, sending a local text message cost money and making an international call was considered a big deal. But WhatsApp came along and removed all these barriers by making text messaging and international calling easy and affordable. As a result, people started spamming each other with good morning messages, and making international calls was no longer a big deal. Today, WhatsApp has over 2 billion users. This success is due to the three superpowers that WhatsApp acquired as a start-up: a unique brand proposition that resulted in word-of-mouth marketing, an irreversible change in behavior, and high tolerance. Even after the dreadful WhatsApp privacy policy, people are still using WhatsApp.

The Solution Provided by Zerodha that Made it so Successful

Zerodha as a business, has been able to capitalize on the inefficiencies of the Indian stock trading system by creating a digital and seamless platform to trade with low fees. This has resulted in higher customer retention, word of mouth and an irreversible change in the behavior of merchants in India. By identifying and solving the inefficiencies and bottlenecks in the stock trading system, Zerodha was able to revolutionize the industry and unleash the three superpowers that propelled it to success.

Zerodha came up with three unique solutions. The first solution was to tackle the lack of knowledge and awareness by creating Zerodha Varsity, a comprehensive compendium of stock market and financial lessons for people to gain knowledge and make strategic investments. This helped him gain the loyalty of new investors.

The second solution was to exempt brokerage fees to such an extent that it would result in a revolution. Instead of charging a percentage commission, Zerodha charges a flat fee of ₹20 or 0.03% (whichever is lower) for all intraday trades, and zero fees for all equity and direct mutual fund investments.

The third solution was to solve the tedious and complicated process of investment by creating a user-friendly website and mobile application with 100% transparency, so that anyone can familiarize themselves with the process without any hassle.

By solving these three problems, Zerodha was able to gain the loyalty of newbies and become a billion dollar company with 4 million investors using the platform. The founders of Zerodha have shown that funding is not the only way to accelerate a start-up, and there are many pots of gold in the form of inefficient systems that can be identified and resolved to build a successful business.

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