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New Money Multipliers How Nitin and Nikhil Kamath bootstrapped their way to build Zerodha - the biggest stock brokerage firm in India

By Punita Sabharwal

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Nitin Kamath, founder and CEO, Zerodha (L) and Nikhil Kamath, co-founder and CIO, Zerodha and Truebeacon (R)

The stock market is not just a phenomenon of bull and bear runs in the stocks, it also captures the life story of many traders whose journey gets build-up or lost in these highs and lows. One such phenomenal upstart has been Zerodha and the story of its founders who navigated their way through volatility.

Circa 1990s

Nithin Kamath used to live in a Marwari neighborhood where people get introduced to business quite early. Nithin's banker father was recently transferred to Bangalore. Having a lot of colony friends, Nithin got introduced to trading. When for the first time Nithin made money through stocks, it gave him instant joy as a teenager.
In the year 2000, Nithin got hooked on the markets when derivatives were introduced in India, which also happened to be the last year of his engineering. But soon came the dotcom burst and Nithin lost all his money and ended up finding a job. But the trader in him was still eyeing the market. So he opted for a call center job, which gave him time to do trading during the day. From 2001 to 2005, Nithin tried to put back a trading capital to be able to trade the markets. And by 2005, he had done quite well in terms of returns. Talking about what worked during this period, Nithin Kamath, Founder & CEO, Zerodha, says, "I met this guy who had come back from the US and, he saw my account performance and asked me if I can manage some money for him as well. I started, trading like a portfolio advisory kind of." But there was a problem in terms of being able to manage multiple accounts. And Nithin realized that being a sub-broker is an easy way to do it. "I became a sub-broker for Reliance Securities in 2006," shares Nithin. His brother, Nikhil, who is seven years younger than him, also got attracted and joined him in 2007. Just like his brother, Nikhil also started his journey in the market as a teenager. He joined up portfolio advisory services and in 2008 when the markets fell he ended up making money. That was the time Nithin realized his younger brother Nikhil is better at trading. This was the time Nithin started building a community via conversations while Nikhil focused on trading. A financial services company CEO blogging at that time was quite unheard of.

When a new trading platform National Stock Exchange (NSE) was launched in 2008, Zerodha Securities became a member. In 2010, when Zerodha was officially launched, it introduced the flat-fee business model. Till that time, Indian investors were used to percentage broking, which means the bigger the order size, the more brokerage. "In an online world of technology the cost of the effort involved in executing a trade, doesn't go up with the size of the trade," states Nithin. Going by the logic that if the effort doesn't go up, why should the pricing go up, Zerodha upturned the market with the flat fee model. Soon afterward Zerodha introduced standardized deals for all customers. Till then financial services firms were opaque in their operations. In hindsight, it was the smartest move to start in 2010 because it was great timing but, it wasn't easy as it was the worst year for the markets owing to the global financial crisis. Still, they got a headstart as there was no competition apart from traditional players up till 2015. Being a transparent company, they realized their operations were being copied by others but realized technology can make a difference. In 2013, Dr. Kailash Nadh, who has been a startup founder and who's currently Kamaths' CTO, helped them with all their technological requirements. In 2015, Zerodha launched its first product kite, the web mobile platform. But before this, they launched kite connect APIs, a technological platform. The front end interacts with the backend using a bunch of APIs so they first put out the APIs before actually building the frontend. The APIs were built in such a way that anyone can build a frontend on this. Kite web and mobile were really built for very active traders.

A zero-sum Act

Till December 2015, they were charging a brokerage fee of Rs 20/trade and then they introduced zero brokerage for equity investing. "The idea was to change the perception of the business saying that this is not just for active traders, but also for investors," shares Nithin. It was the biggest tipping point in the journey of Zerodha. Talking about the market reaction, Nithin says, "It took us five years to get to our first 60,000 accounts until we went zero brokerage." With the Kite platform, they had a 15 minutes onboarding process, which was completely online rather than the 40-page document. This acted as the second biggest tipping point in the Zerodha journey. During 2016, they added 90 lakh customers. Zerodha has remained a bootstrapped business in the world of highly-funded tech startups. To this, Nithin mentions, "Today, we get a lot of credit for bootstrapping the business, but I think one of the reasons for bootstrapping, especially in the first three years was because Nikhil was trading in the markets and we didn't lose any money in the first year. For the last 14 years, Nikhil has been trading profits compounding 30-35 percent plus. His trading profits really helped us remain bootstrap for the first one to three years." Zerodha also runs Rainmatter Capital, a fund and innovator for fintech startups launched in 2018. Talking about the first investment, Nithin says, "We met Smallcase as a startup with a bunch of guys who had an idea to build a thematic investing platform. They didn't know how, and we told them, why don't you use our APIs and build on top of it?" Today, Rainmatter has got 20 startups in its portfolio.

The Covid Effect

From standing at 2 million customers, two years later in March 2022, the numbers reached 9 million. Zerodha has never spent any money on marketing and advertising so their customer acquisition cost is zero. Zerodha doesn't offer free account openings. What it means is that every customer has to pay between Rs 200 to 500 to open an account. Answering this, Nithin says, "These are customers with intent, who have paid some money to us to trade with us. If you consider that we charge an account opening fee, that's really being the reason why we are profitable as a business today." During Covid, Zerodha launched Nudge, another platform to help first-time users, not to make basic mistakes. "How do you help people do better with their money defines Nudge," shares Nithin. During the lockdown, the trader in Nikhil, who in Nithin's words is more ambitious out of the two, started another startup True Beacon, an asset management company. Talking about the concept, Nikhil Kamath, Co-founder & CIO, Zerodha & True Beacon shares, "The cost in the asset management ecosystem is really high and, there was room for somebody to come and do it in a much cheaper way. True Beacon is a Category III Alternative Investment Fund, so we invest in public markets only but we removed the fixed management fee, which is associated with asset management. So typically people charge you 2 percent, whether the client makes money or does not make money. True Beacon does not do that. It just charges a flat 10 percent fee."

The Startup Culture

The kind of culture Zerodha has built over the years has been one for people. Owing to this, most of the core team has stayed together. Talking about it, Nithin says, "You need people to come to you because they like the problem that you're solving. When they're passionate it, it's easier to keep them together for the longer term." Commenting on today's startup culture to build fast, Nithin mentions, "Today what's happening in the industry is there's just excess money, the founders are given targets to grow fast and in this rush, people end up compromising on culture. A business can't really be grown fast, it takes a long while to build culture and business."

Talking about making his choices clear as an entrepreneur, Nithin says, "The problem is when there is excess money available and you are pushed to do random things in life. We could have potentially dreamt of becoming an ICICI or HDFC Bank or doing everything under the sun in the financial services space, we have gone easy on it. We have some core competency and we'll try to collaborate wherever possible." A proponent of building a profitable business rather than a high valuation business for investors, Nithin says, "One of the reasons why the startup ecosystem has no profits is because they spend too much money to acquire a customer while the value being created for them is much less." When asked about taking Zerodha public, the self-confessed pessimist Nithin says, "I think businesses should have more predictability before they go raise capital from the public. The big problem with our business is that there's no predictability. And the second risk that we carry as a business is regulatory risk, which is undefined. The issue is that our business is too much dependent on stockbroking. And the brokerage income which is really 80% of our revenues is very volatile. So whenever we kind of realize there is predictability in all of this and more annual type of business. I think we would, want to list at some point."


  • Processing 10-12 Million orders every day (Largest in the world)
  • Maintaining a position as the biggest brokerage firm in terms of active clients as per the NSE data till Feb 28 (2022)- More than 6.1 million
  • Overall around 9 million clients (Added close to 7 million clients since March 2020)
  • On an average opened 3s-4 lakh accounts- in the last year
Punita Sabharwal

Entrepreneur Staff

Managing Editor, Entrepreneur India

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