How Zerodha grew to 6.5M daily active users, with ZERO VC money?

Let's find out all the strategies Zerodha used to grow to 6.5M users without taking any VC money!

5th May 2022
5 min read

If you sum up the modern startup MANTRA using a single line, it is:

Growth >> Profitability

So, startups will happily light a nice million dollars stash on fire as long as they get an upward curve of users & revenue.

But, what about the rare bootstrapped startups? Someone like Zerodha — who not only manages to grow their user base but also makes a bucket load of profits, INR 1600+ crores! [1]

How exactly did they grow while making so much money?

Well, let's find out how Zerodha grew to a revenue of INR 4300 crores [2] in just 12 years, by taking 0 VC money!

How to hunt those first 1000 customers?

So, before we get into the crux of this, let's first discuss some points we covered in the previous article.

  1. Zerodha's main goal was basically to democratize the broking industry, so
    • The barrier of entry for traders is not HUGE!
    • The system is more transparent and less SHADY (Remember how our parents thought investing in stocks is an elite sport?)
  2. They introduced a flat pricing model that's the same for all customers.
  3. Finally, they were curating financial content to get more people interested.

Now, like any other bootstrapped organization, Zerodha also had several realizations & course corrections during its 12-year run!

Having worked as a trader for 10+ years, Nithin Kamath was very clear on one thing — people don't really get interested in trading or start investing by coming across ads about investing. Most likely, you'll get interested in trading after having a conversation with a friend or a reliable/respected acquaintance or mentor.

So, all marketing would've to be through Word-of-Mouth. That's the first realization.

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Zerodha's early marketing strategy!

Zerodha mainly had 2 ways of marketing their startup

  1. Community outreach
  2. Offline telemarketing

1) Community outreach

During his trading days, Nithin was part of quite a few trading communities. These are your simple groups on platforms like Reddit, Yahoo! Messenger, etc.

In fact, he himself was running a few of the large communities. So, basically, he was quite well-known.

He used this to his advantage by distributing the early version of Zerodha on these communities.

2) Offline telemarketing

Now, as we'd mentioned in the previous article, Nithin Kamath had spent most of his savings on buying the refundable deposits. Naturally, the early team was operating under a tight budget.

So, Nithin Kamath himself was going door to door dressed as "Sachin the salesman guy". He was working on getting prospective users & referrals signed up on the platform.

With community outreach and offline door-to-door marketing, Zerodha gained its first 1000 customers.

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The blessing of VIRALITY!

While there was a steady influx of users on Zerodha, the daily trade amount was still low.

Now, think about this for a second — back in 2010, there is a random trading platform that is offering you a very discounted flat-fee pricing model without any caveats. You can trade from wherever & all you have to do is spend Rs 20/trade.

Sounds too good to be true, right? Although things were going well, users were not ready to trade in lakhs.

Zerodha basically had a CREDIBILITY problem. This was their second realization.

So, what do you do? Well, Zerodha kept on hustling like always. But, things changed when the Economic Times mentioned Zerodha in a small excerpt on digital trading solutions. Although this seemed like a minuscule thing, the dynamic began to shift for them.

They had also realized that most of their revenue was generated from day F&O traders. So, in a very unprecedented decision, they decided to change their fees for equity investment from — Rs 20/trade ➝ ZERO

This coupled with their precious success truly created a VIRAL moment for Zerodha, helping them grow further.

Being customer-obsessed is a good thing!

Zerodha's specialty had shifted by this point. It went from discounted prices to focusing on financial education. I am of course referring to their blogs and educational content. But, now competitors were catching up.

Their third realization was that ultimately to retain customers they had to create a superior trading platform.

Zerodha's main customers were day traders. Day trading is a very intensive vocation. So, they had very specific needs.

Their first product was barebones software based on NSE's NSE NOW. So, they designed a no-clutter, no-noise trading platform that showcased basic analytics, for superior user experience.

This essentially created an awesome feedback loop for them -

  1. Traders would come across Zerodha through communities.
  2. They'd love their platform's simple & intuitive interface
  3. They would tell their friends about the platform
  4. More users would show up!

This ultimately gave Zerodha push and the momentum to reach the 6.5M subs it has today!

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The underrated world of bootstrapping

Zerodha's strength lies in its customer obsession. After trading for years, the Kamaths knew what the traders needed. So they built just that.

In trying to solve a real problem in a niche community they very miraculously created the world's largest stockbroking platform in volume.

Now, with hundreds of transactions made, Zerodha essentially sits on a goldmine of data that it's leveraging to buildd a financial ecosystem. Quite a jump from a simple trading platform, right?

But, this success story is a case for bootstrapping.

Now, there is definitely a case for pursuing VC funding. There is quite a serene, "let's have Shahrukh khan in our ads" view beyond the fundraising route. Things definitely get easier. So now why bootstrap? Well, here's why!

  1. Freedom - When you take the bootstrapping route you are only answerable to yourself and your customers. There is no board with external people questioning your decisions. This increased freedom helped Nithin take some rather unruly decisions that eventually worked out.
  2. Profitable growth - You need cash flow to run a company. Being profitable is not a secondary choice for bootstrapped startups. In the end, this incentivizes you to build a viable business.
  3. Become customer-obsessed - With no third party driving your decisions, you can now become truly customer-obsessed. All of Zerodha's decisions reflect that.
  4. No vanity metrics - Finally, although you might start out with a solution to a real problem, there is a high chance that with external influence your product also gets morphed to chase some vanity metrics. When you're bootstrapping, you're not chasing any vanity metrics.

At the end of it all, bootstrapping keeps you grounded & laser-focused on your business goals!


[1] — Zerodha reports 50% jump in FY22 profit

[2] — Zerodha profit, revenue jumped 60% in FY22, says CEO Nithin Kamath


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How did No-code platform Webflow go from bankruptcy to a $4B valuation on their 4th try?

Webflow is a wildly popular NoCode tool!
But its CEO, Vlad Magdalin:
- failed 3 times
- had $60,000 debt
- no income for 6 months + nearly got bankrupt
On his 4th try, he built his startup into a $4B company!

Bit of Backstory:
Webflow founders Vlad and Sergie Magdalin are both refugees from Russia. They came to the US during the Soviet Union's collapse. They didn't know any English & their parents didn't have any real marketable skills. So, from the beginning, they had to learn to survive and eventually buildd a good life.

The NoCode Vision:
When the brothers were in high school, they started freelancing. Sergie would design websites and Vlad would convert them into executable code. Now, Sergie loved designing but Vlad found coding to be repetitive.
So, he thought to himself how great it would be if Sergie could buildd a website all on his own without needing a developer.

Early days of unrealistic optimism:
Vlad tried and failed to buildd Webflow 3 times in 2005, 2007, and 2008!

He then took up a stable job at Intuit & started working on Webflow as a side project. But, he soon realized that going in full-time was the only way to become successful.

His brother Sergie and colleague Bryant Chou joined him. But, at that time Vlad was sitting on 3 months of income. So they were desperate for funding. And, their only hope was getting into YC!

After failing once, they finally got into YC the second time! Good nice after 8 years of trying!

After raising a small round of funding, they decided to bootstrap the company to profitability and only later take funding to scale further!

In 2019, they raised $72M, followed by another $140M in 2021 and $120M in 2022. Today, Webflow is worth $4B & generates revenue of $100M!

Bootstrapped startup Zerodha beat VC-backed Upstox to become the largest stock broker in India!

Upstox and Zerodha are very similar businesses on the surface:
- Both were started by brothers
- They both were launched after the 2008 crisis
- They also follow the same pricing structure & the ZERO brokerage fee model.

But, although these businesses are so similar, the results they produce are extremely different! Zerodha makes Rs. 1122 Cr profits while Upstox makes INR 72 Cr in losses. This is when their no. of users is very close, 5.5M for Upstox and 6.2M for Zerodha!

This is because of Upstox massive marketing spend. It spent INR ~49Cr on IPL ads this year and they approximately get a return of INR ~9.8 Cr. So they are approximately burning INR 787 to get ONE user!

But, that's not it - 70% of Upstox's users are first time traders who buy stocks and sell them when their price increases. These equity investments only account for 1% of all transactions. So, they are mostly not reliable.

On the other hand, Zerodha has completely focused on getting serious intraday traders who account for the rest 99% of transactions. That's the main reason why Zerodha's revenue is SEVEN times that of Upstox, while their active users are almost the same.