Indian Growth Story: A Conversation with Viraj Joshi

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May 25, 2022

Viraj Joshi, who is part of the CEO’s staff at Zerodha, an online trading platform based in India, joins the podcast to discuss his company’s growth, his career journey, and India’s startup scene.

Bonnie Kavoussi: I’m glad to have Viraj Joshi on the podcast. Viraj is part of the CEO’s staff at Zerodha, an online trading platform based in India, managing strategic initiatives across all aspects of Zerodha’s business. He also helps with legal and compliance for Zerodha and works as a venture capitalist at the Rainmatter Fund. Zerodha is a rare tech company in India that was bootstrapped and is now a unicorn. Tell me about how the fact that Zerodha is bootstrapped is reflected in how it’s run day to day.

Viraj Joshi: Yeah, Bonnie. Before we start, thanks for having me on your podcast. I’m really happy to be here. So I’ll just set some context for your listeners before we dive deeper into this. So Zerodha as a company started in 2010. Over the last 11 or 12 years, it’s grown to be one of the leading players in the Indian capital market space. So just some numbers we have at present, we have about 10 million clients, process about 8-10 million client orders on a daily basis, and have about 20-25% market share in the Indian capital markets. Now as you said, I personally don’t really have a job title here. I’m part of a small team that works closely with Nithin, who’s our founder and CEO, helping out on various strategic initiatives across the business. Now there was a time earlier in my career when I used to pretend to be a practicing lawyer, so anything on the regulatory front at Zerodha usually ends up at my desk even today. But I’m also doing a bunch of other things on the side as well. You’ve mentioned some of them, but I’m a bit of a jack of several trades at this point and a master of none.

So Bonnie, now coming to your question about how Zerodha as a bootstrapped entity, how that reflects on our day-to-day things. Again, historically, the fact that Zerodha is bootstrapped is something that happened purely by circumstance. The company started in 2010 in the backdrop of the great financial crisis. The market conditions at that time just weren’t there to raise external funding, no investors would have entertained an investment in a broker firm back then. So it was a bit of a compulsion as to being bootstrapped, now that has worked out really well in the long run. The firm was profitable nearly from the beginning when it started, and there was no real need to raise funding after that. So in that sense, being bootstrapped, even though a bit of a forced decision, has been a huge blessing in disguise that shaped the company philosophy even today and that helps maintain, that’s the edge really that the company has over the competition.

Another reason for that I think is because Zerodha has no external investors to answer to, whether it’s in the public markets as a publicly listed company or private investors. Because we don’t have anyone external to answer to, what happens is there’s no short-term revenue pressure, there are no sales targets, there are no revenue targets, there are no short-term metrics that we track, and so on. Nobody in the company, for instance, has any sales or revenue targets. We’re not incentivized to chase growth metrics as such. The focus right from the top down, right from the CEO, is largely providing a better experience to the customer. The bet here, if I may, is do right for the customers in the long run, and in the long run those customers will reward the business. That’s the philosophy that we operate on on a day-to-day basis. I think it was Naval Ravikant who said it, that we like to play long-term games with long-term people. We try to live by the same philosophy, really. That’s really the edge for us in this sense. Being bootstrapped allows us to play these long-term games where we’re not chasing short-term growth metrics but are trying to do right by the customer, help customers do better with their money, and obviously that sort of flows back to us in the long run through clients being committed to us and so on.

Zerodha has more than 9 million clients, tell me about how Zerodha’s been able to grow so much so fast.

So Bonnie, I’d say the largest factor just like everywhere else has been the liquidity sloshing around globally. Markets have been in a bull run since the great financial crisis of 2008, 2009. The central banks around the world stepped in and took this accommodative stance, pumped in a lot of money in the ecosystem, and Zerodha’s been a huge beneficiary of that. This is true for a lot of other players across the world. That fact I would say is a big reason. This only got heightened post-COVID in 2020. People were stuck at home, they had time on their hands, they were bored looking for entertainment. As you know, this sort of translated into greater interest into stock markets, where it became entertainment for a lot of people. Like Robinhood in the US and so on, who sort of benefited for the same reasons. Zerodha was a direct beneficiary of that as well. Just as an example, around 2020, our user base was around 3-3 ½ million. That tripled over the last couple of years, it’s just short of about 10 million today. We’ve been big beneficiaries of that COVID trend as well. Again, these are basic factors that affected everybody, right?

But I’ll also try to point out a couple of other India-specific regulatory factors if I may. Just for context, again, over the last 6-7 years in India, the government regulators have laid a lot of emphasis toward digitization of the Indian economy. This has been something that’s talked about a lot, they try to do a lot towards digitization in the hope that that creates that next spurt of development. So given that, I’ll point out two specific regulatory initiatives that really helped us, Bonnie. I mean the first one I’d like to talk about is Aadhaar. Now think of this like India’s version of the Social Security number, just a tech-first version of it because it started in the early 2000s. So what Aadhaar essentially allowed is for an individual’s identity to be proved, KYC to be done instantly via an OTP from the Aadhaar database. What that did for us is that made customer onboarding completely seamless. You know a customer account can be opened in less than 10 minutes. We didn’t need any physical documentation, no physical signatures, no back-and-forth with the clients, and so on. All the friction from the process got removed post-2017 or so when this entire KYC identity verification piece went online. That was entirely because of Aadhaar. That was a big regulatory change that sort of removed all the friction from the account opening process, an account could be opened in less than 10 minutes, and that really helped us with our sign-ups.

The second regulatory tailwind that I’d like to talk about is something called a unified payments interface, what we in India call a UPI network. Now what UPI was is essentially, think of it like this, new payment rails for all payments, this went live around 2016 or so, and all Indian banks were all mandatorily required to be on these new payment rails. So what UPI did was essentially allow payments to be made across all Indian banks on an instant basis, no cost to the consumer, and no minimum sort of limit. So you could transfer as little as one dollar to, say, your friend. This transfer would happen instantly, it wouldn’t cost you anything, and there were no limits as such. This was a change that was pushed by the government and the regulator, so that really helped us because it became really easy for funds to go in and out of a trading account at low cost, it became very easy for the customer. So that really helped as well. Again, just for context, perhaps arguably UPI is probably the most efficient payment system globally. Brazil has a system called the Pix network which is quite similar, but as far as I know, there aren’t any other payment rails, other payment methods, which are doing what UPI or Pix in Brazil is doing. So again, to sort of sum up and answer your question, Bonnie. I’d say the growth that Zerodha experienced was probably a nice mix of luck, being in the right place at the right time, the philosophy of doing right for the customer, and these favorable regulatory changes that sort of added tailwinds to the growth journey.

That’s great. What kind of marketing has Zerodha done to grow?

Bonnie, that’s an interesting question. So our philosophy generally is that savings and investment really are not a push product. You can’t market to someone who doesn’t have the intent to save or invest. This space is not like e-commerce where you sell something and you’re done, you make the sale. Here, you want the customer to be interested because otherwise, they’re going to drop off. If you try to market to someone or adopt, say, a conventional marketing approach in this space, the customers you will particularly acquire are going to be low-intent customers who will drop off soon after their initial excitement wears off. So based on this insight, we have not spent a single dollar on ads or conventional marketing in that sense. Whether that’s digital, whether that’s TV advertising, any other media, we haven’t spent money on acquiring customers. The philosophy entirely is based on building a better product for the consumer and letting word of mouth do the rest. So within this referral program, the existing customers get nice rewards for referring others and so on, but that’s about the extent of marketing. It’s mostly word of mouth through existing customers and focus on the product single-mindedly, ensure that the product is better than the competition so that anyone who’s serious about trading or investing wants to come to Zerodha.

Now apart from that, we also run a bunch of educational initiatives. We have this platform called Zerodha Varsity, which is an educational initiative about the markets that we offer for free to anyone on the internet. This is not behind– You don’t have to have a Zerodha account to access Varsity and so on, this is free for anyone who wants to learn about the markets. Think of Varsity maybe like a Khan Academy for capital markets, plus we have a bunch of these podcasts, YouTube events, etc. The hope is that we sort of provide free education to the customer, that creates goodwill for us, and that sort of adds to the growth story really. To sum up, no conventional marketing, but do right for the customer, and word of mouth helps. Think of someone who has absolutely no idea about the capital markets who goes to Varsity, reads about A, B, C things there. Now assuming that this person gets interest, it’s pretty natural that this person is probably going to go open a Zerodha account. Now, again, we don’t push them to do it. There’s no mention of “Open an account” on Varsity itself, but I mean it creates goodwill for us which sort of leads to virtuous movement in a sense. So that’s really how we think about marketing, Bonnie.

That’s great. What have been some of Zerodha’s biggest challenges as it has grown, and how has Zerodha addressed them?

The biggest challenge for a tech company is always scale, Bonnie. Building technology in a heavily regulated environment to cater to a scale that you’re able to handle eight to ten million daily orders requires you to be on the cutting edge of technology, adopt new technologies as and when they come up. So the challenge is always adopting this new technology and implementing it in a manner that is regulatory for sure. Now again, India’s probably a much more heavily regulated market than the US. A lot of the things that, say, fly in the US, don’t work here. From that sense, that is really the biggest challenge, this is not something that can be overcome. This is going to be a daily fight really as we scale, but thankfully we have a brilliant tech team who’s always up to that challenge. So that works for us.

Why do you think it’s important for people in India to be able to invest in the stock market?

So Bonnie, the straight answer to that would be beating inflation, right? Equities are probably the only way asset class that beat inflation over the long run. That’s probably the only way that normal regular people can build sufficient retirement corpuses to sustain themselves. Now, again, when I’m saying equities, I don’t really mean individual stocks. I don’t think stocks are for everybody. Most people are probably better off with investing in index funds or ETFs or whatever, safer products. But it’s really important for people to have equity allocation in their lives so that they can beat inflation in the longer run so that their money can work for them. That’s what we try to help people with at Zerodha.

Is Zerodha considering expanding beyond India? Why or why not?

So this is interesting. We spent quite a bit of time around 2020 trying to integrate a bunch of US locals and offer US investing to our customers on the same platform. Now we have dropped that plan, now we are going to focus solely on the Indian market for the foreseeable future. Now the reason for that really is the remittance cost. Now for a small-ticket customer, remitting money from India to the US, the cost can be anything from 2-5% of the capital. As you know, there is no free UPI payments for remittances that you make abroad. Given this 2-5%, we just didn’t think it made sense for our customers to be paying that much, especially in a situation where the returns might not even be that much. People will be paying money for the privilege of remitting money abroad and taking a big hit as a result. So that entire foreign idea, foreign now is on hold, until someone manages to reduce international remittance costs. So we are always looking for opportunities where someone’s come up with a solution to reduce international remittance costs, but for now, we haven’t come across a workable solution yet. Until that point, this will probably be on hold.

Okay. You also work as a venture capitalist at the Rainmatter Fund, which is a VC firm owned by Zerodha that focuses on fintech. Tell me about some of the startups that you’re most excited about that have been funded by Rainmatter.

So yes, I do moonlight as an early-stage investor at Rainmatter. Rainmatter is Zerodha’s seed fund. We use Rainmatter to back early-stage startups. Bonnie, again, Rainmatter isn’t really a conventional VC firm in that sense. Like Zerodha, Rainmatter doesn’t have any external LPs or external investors to answer to on a regular basis. What that allows us to do is, again, be a lot more long-term in our thinking. So what we typically like to do is invest in companies really early, usually in the first or second rounds of funding, and we see ourselves as a long-term source of patient capital. What I mean by that is we are not– Unlike some of the other VCs in the market, we’re not looking for quick ROI, quick returns on investment. We’re not looking for a quick follow-on funding rounds, mark-to-market profits, or any of those traditional metrics that some of the other VC firms look for. We see ourselves as a source of non-interfering long-term patient capital, really. So what we are looking to back is impact. What we’re not looking– Basically what we’re trying to do is back a startup whose idea we really like and we feel can create a large impact in the longer run. Now again, I think we can probably distill the investment thesis for Rainmatter down to three questions. How can we help people do better with their money? Which is sort of what informs our investments in fintech and also ties into the larger strategic business at Zerodha. The second question would be how can we help people lead healthier lives with more nutritious food? And generally, be healthier than usual. So we have this arm of Rainmatter which does these nutrition and health investments. And the third prong really is how can we fight climate change and make earth a more sustainable place to live?

So these are the three prongs, three investment theses that we’re looking to invest in. As you can imagine, all three of these questions, there are no real easy answers. These are very long-term problems which may not give any results for 5, 10, 15, 20 years, difficult to say. Climate change or health or retirement generally are long-term problems to solve. Which is our long-term outlook and the fact that we don’t have external investors gives us an edge in these spaces where we’re able to adopt that really long-term outlook and hope that one of the investments that we back is able to change the world in that sense. Now personally, even before I started doing this, I was very passionate about all three of these things. So knowing this is very personal for me, that all three of these areas are things that I was passionate about even before I started doing it. So that’s really how I see it, this is what I’m sort of meant to do in a sense. Again Bonnie, after my long-winded answer, to answer your original question about some of the startups that I’m very excited by. Say in the climate space, we’ve invested in this company called Zerocircle. What Zerocircle is trying to do is they make plastic out of seaweed. What that does is the idea in the long term is to replace all your conventional existing plastic with seaweed-based plastic which is biodegradable, doesn’t leave microplastics around that, and because seaweed is naturally found in the seas, even if this plastic goes into the seas, it’s a natural byproduct of where it should be. So that is an idea that we found was very interesting. Again, very early-stage. Not sure if this is an idea that could change the world, but I mean it definitely has potential.

In terms of our health, nutrition thesis, we recently invested in this company called TruNativ. What TruNativ is trying to do is think of a protein that is soluble in any sort of regular food that you eat. If you are looking for a source of protein, you don’t have to go have a protein shake. You can just mix TruNativ protein into whatever regular food you are eating. This protein is heat-resistant, so you can cook it, it has no taste so you’re not going to realize in the course of your regular diet that you’re having this additional protein, and everybody needs protein, so it’s a healthier alternative. This is one idea that we thought was very interesting, we did a small investment in TruNativ very recently.

On the third front of fintech, I mean it’s hard to pick one, Bonnie. There’s a country which has 5% of people investing in the markets and a lot of brilliant ideas to come across. Just to take some names, we’ve invested in this company called Smallcase, which creates these baskets of stocks, think of it like a pseudo-ETF for a new Indian investor. There’s ZuPay, which is looking to educate teenagers in a safe environment about the markets so that once they’re into the market, they’re not blind in the headlights. These are the two I can name off the top of my head, but I mean to be honest, there are quite a few. There’s a lot of potential in India when it comes to wealth and capital markets, really.

Great. What excites you about India’s startup scene?

Well Bonnie, on some level it’s just demographics. The world is aging rapidly. India is still a pretty young country. Our average age is about 27, 28, thereabouts. We have a billion plus people. All of those people will want to do better with their lives. They want to earn more; they want to achieve a better standard of living. Now given that, there’s a sizable market opportunity here. And I think globally, people are recognizing the size of the opportunity here, which sort of explains the huge investments that have happened in India over the last four or five years. Second thing that I can think of is this focus on digitization that I talked about earlier. I already told you about Aadhaar and UPI and those regulatory measures. Now in addition to that, India also has some of the cheapest mobile data rates in the country. Although we are a poor country, almost everybody has mobile phones, everybody has a data connection, and it’s really cheap. Even the worst-off person can get a phone and get a mobile data connection. The focus has been on internet connectivity, and that sort of ties in directly with the startup ecosystem, we’re trying to be a tech-first platform. So those are two I can think of, Bonnie. Demographics and this focus on digitization that’s come about in the last four or five years.

What do you think needs to happen in India for its startup scene to grow more?

The most obvious one that comes to mind is a lack of diversity in the startup ecosystem. Indian startups are still full of men, typically from privileged backgrounds, from richer communities, and so on. Most Indians, I mean it’s a bit of a bubble. Most Indians aren’t really able to access the benefits of this thriving startup ecosystem that we speak of. Now my personal opinion, Bonnie, is that this creates another set of haves and have nots. So for instance, in Bangalore, where I live, there’s a large number of people with high incomes in these startups that end up pushing up the prices for everything. This ends up pricing out the lesser privileged people who traditionally used to live in these areas. Now the same thing happened in Silicon Valley, I keep reading about homeless people in the Bay Area and so on, but it’s also happening here. These are tough problems to solve; there are no easy answers for problems like this. But the way I see it, until the startup ecosystem generally becomes more inclusive, there’s always going to be a ceiling on growth.

The second thing I can think about is regulations. Traditionally, India’s been a tough place to do business. That comes from our socialist history until the 1990s. We were a closed economy until the early 1990s, and there were a bunch of regulations that made it a tough place to do business. That’s changed over the last decade or so. Of late, the government has come to recognize startups, they talk about it pretty regularly. Each annual budget exercise will have some allocation to helping startups and so on. But of course, a lot more needs to be done on that front is what I feel. There are quite a lot of regulatory challenges that can be solved that will really help in the growth of the startup ecosystem.

Tell me about your journey to working for Zerodha. You got a law degree from the National Law School of India University and then you worked at a couple of law firms, and then you worked at the National Institute of Public Finance and Policy before working for Zerodha and Rainmatter. What interested you about tech to want to make the transition from law into the tech industry?

So Bonnie, I like to think of my own earlier career journey as a period of self-discovery and exploration. But to be honest, I’ve taken quite a roundabout path to what I’m doing today, and honestly, I wouldn’t recommend that path to anyone. I mean, that’s just how life played out for me. I went to the National Law School here in Bangalore, which is one of the better law schools in India. Just like my peers, I took up a big law firm job with a fat paycheck after I graduated. Now of course like a lot of people, I realized pretty soon that that wasn’t for me. Even though the money was great, the hours weren’t for me, the pressure wasn’t for me, the high-stress environment wasn’t for me. I was sort of looking for an out pretty soon. Now this is around the same time that I got interested in micro-, macroeconomics, in the finance world, in the public and private markets. These were all things that interested me at that time, so I wanted to explore more. So after my big law firm job, I worked with this small boutique firm who was working with startups. This was, in retrospect, pretty special honestly. Simply because I got to work with startups or unicorns today at this stage, and they were really tiny companies. So there are large unicorns today who I worked with when they were a five, six, seven member company. Again, this was not planned, it just happened that way. But it was a great learning experience for me, really. So after that stint, I went and worked with the National Institute of Public Finance and Policy, which is a research institute funded by the Indian Ministry of Finance. I was a research fellow there, and that’s really where I picked up the basics of finance, that’s where I picked up finance theory, that’s where I picked up how government funding works, what macroeconomic tech means. A lot of the building blocks of finance, I sort of picked up there. Now I also did a few independent consulting gigs on the side. I helped a startup raise funds, I helped a couple of Indian states with their tax policies, and so on. Basically whatever came my way in these areas of interest that I had, I took up. I mean I was in my early twenties, I saw this was the time to explore as many opportunities as I could. All of that sort of culminated with where I am today. All those varied skill-sets that I picked up over the years help me on a daily basis today. But that’s just the way it played out for me, Bonnie. I have no regrets, I’ve had a lot of fun along the way, picked up a bunch of different life skills, but I wouldn’t recommend this to anyone.

Okay. You worked in Mumbai and New Delhi before moving to Bangalore to work for Zerodha. How do you compare Bangalore to Mumbai and New Delhi?

So Bonnie, I come from a defense background. My dad was, actually he still is serving in the Indian Air Force, so throughout my childhood I was pretty used to moving around every few years as my dad went up the ranks. I went to six or seven different schools over the years. I’ve lived in all three of these cities, New Delhi, Mumbai, and Bangalore as a child. And I was pretty comfortable with all three. I mean, these were all childhood experiences, I knew my way around all three cities. Each city has its own charms, Bonnie. New Delhi has this historical charm. It’s a city that has been around for maybe 2,000 years, if not more. For most of that time period, it’s been a center of power for whichever civilization, whichever power was in power, then it’s always been a capital city really. I mean it has this historical charm across the years. Mumbai is incidentally where my family historically hails from as well. They don’t live there now, but I mean that’s where my grandparents used to live and so on. Mumbai is the traditional financial capital of India, think of it like an Indian version of New York. That’s where the big firms are based, that’s where traditional high finance is based, and so on. Bangalore is a bit of a more laid-back, informal vibe. I have childhood memories where the city was full of lakes, full of gardens, very laid-back retirement home sort of place back then. Now that’s changed a lot with the influx of the tech industry. Of course, haphazard development has also spoiled some of that old charm, but I mean to be honest, the weather more than makes up for it. Bangalore is one of those few places in India that isn’t insanely hot. Now you, being in Texas, can probably relate. So Bangalore, I’d say, in Fahrenheit is maybe a pleasant 60 to 70 degrees throughout the year, which is unlike most other Indian cities, which tend to be very hot. So I mean your daily life isn’t really a struggle when you’re living in Bangalore, the weather is nice here, that works. But each of these cities have their own charm, Bonnie. I am comfortable in all three. I think because of the weather, that’s the trump card really for Bangalore, but I mean to each their own, Bonnie.

Bangalore has a thriving startup scene. Do you think Mumbai and New Delhi can have significant startup scenes too? Or do you think Bangalore is going to stay the center of gravity for Indian tech?

So as we say in the markets, Bonnie, liquidity begets liquidity. What I mean by that is most smart people today who want to start up on their own want to move to Bangalore. This is where most of the startups are, this is where the widest talent pool is. Anyone who is a talented person looking to break into this space wants to move to Bangalore. In fact, when I moved into the industry, I also did the same thing. Moving back from New Delhi after my stint in the Ministry of Finance at the National Institute. That’s just how it works. My own cousin, he runs his startup in Mumbai. He reached out to me the other day, and he wanted to discuss relocating to Bangalore simply because he felt that that’s where most of the market is, that’s where most of the opportunities lie. Now again, when I say this, Bonnie, I’m not saying that the other cities don’t have their own startup ecosystems. Delhi has these satellite towns called Gurgaon and Noida, which probably after Bangalore, are home to the largest number of startups in India, they have their own thriving ecosystems. I have quite a few of my own friends who are running their startups out of Gurgaon. That is its own ecosystem, but it’s smaller than Bangalore, and if you ask me honestly, my bet would be on Bangalore staying the center of gravity for Indian tech really. Maybe that could change, I could be wrong. I’m not sticking my neck out for that, but if you ask me my personal opinion, I’d probably stick with that.

Great. Tell me about how you use your law training in your work for Zerodha.

So, I mean, Bonnie, finance is generally a heavily regulated industry. Being comfortable with regulations is something that comes naturally to a lawyer. So at Zerodha, I’ve been working on a lot of the regulatory stuff that keeps happening. That comes from my law training. Similarly, a lot of the commercial contracting or the arrangements we have with other people, or even at Rainmatter, it could be investment agreements with the terms of those agreements and so on. The law training honestly is pretty fundamental to each of those things. Now I’m not saying that I couldn’t have done each of those things without a law degree as well, but it definitely helps.

That’s great. Is there anything you want to add?

No. I mean, nothing I can think of, Bonnie. But I’m really glad that I could come on your podcast and thanks for having me, Bonnie.

Of course. It was great to have you on the podcast.

Likewise. Let’s maybe do this again sometime.


Thanks for your time.

Thank you.


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