Written by Raunak Agarwal
When thinking of Startups, you think of groundbreaking ideas, or in my case, episodes of Shark Tank with Mr. Wonderful (Kevin O’Leary) offering his usual royalty deals. While most of us perceive startups in this manner, it's a shallow understanding, to say the least. Yes, there is an element of innovation, and in some cases, investors, not necessarily sharks, can help provide the necessary funds for expansion. This is only scratching the surface; numerous other factors contribute to the growth of a startup.
But before we delve into them, let's clearly define and outline what it means for startups to be disruptors. Being a disruptor means fundamentally challenging traditional industry norms by introducing new products and services that redefine the market. In order to do so and do it successfully, startups need to first and foremost do market research. This critical step involves comprehensively analysing the target market, competitors, and industry trends. As a result, a startup can tailor its product to its intended customers’ pain points, providing a competitive advantage over its competitors. Beyond this, a startup's success hinges on good leadership; leaders should create a work atmosphere that allows employees to thrive and deliver on projects. Finally, the development of a scalable business model is key - this is so that companies can grow with economies of scale and not have to compromise on their profits.
All these factors will be discussed in more detail with Zerodha, an Indian financial services company.
Masterclass in Market Research
Zerodha, derived from the fusion of Zero and Rodha (the Sanskrit word for “barrier”), was launched in 2010 by the Kamanth brothers. The brothers acknowledged a clear issue plaguing the stockbroking industry: the high percentage fees for trades and various other hidden costs. Accordingly, many aspiring traders were put off trading, leaving an untapped market for the brothers to appeal to. To address this, Zerodha charged a flat fee of 20 rupees per trade, irrespective of its size, positioning itself as a disruptor in the industry. It was India's first discount brokerage company.
As a result, Zerodha opted to offer users a trading platform without including professional services such as stock recommendations. This deviation from conventional brokerage initially raised scepticism, posing another obstacle for the brothers to overcome. To tackle this, Zerodha launched Varisty - an education platform that informs traders about stock market basics. On top of this, the company also made a conscious effort to leverage the technology available to them to improve on consumer feedback consistently. The culmination of these factors has resulted in a loyal customer base of a whopping 6.48 million users.
Employee Welfare
Employees are the company's backbone and play a pivotal role in its success by contributing their time and effort. Their contributions are expansive, ranging from shaping the culture of a company to working towards achieving organisational goals. Thus, fostering a positive work environment where workers are motivated to produce quality work is important. The Kamath brothers acknowledge this and have ingrained it into Zerodha’s ethos. With 90% of employees working from home and numerous other incentives for staying fit, the company certainly takes good care of its employees.
An inexpensive business model
A non-negotiable when it comes to established companies is a scalable business model. The brothers excelled at this by bootstrapping their company and spending very little money on marketing. Instead, Zerodha relied on customers referring others to their platform and incentivising users to do so by offering 10% off the brokerage fees for each referral. This meant that word about the company quickly spread, with a rather positive buzz about its brokerage services. Additionally, Zerodha's low operational costs meant the company didn’t take on any debt, a common roadblock to profitability. Accordingly, the company is now among only a handful of unicorns with a billion-dollar valuation and a profitable business. It's fair to say that the ‘Low Margin and High Volume’ business model played out as planned.
Zerodha is a compelling example of how startups can grow organically without the help of investors. A clearly defined business model with the right supporting cast and adequate research is enough. Of course, good ideas and innovations are the basis of a startup, but they are only just the start. The absence of other factors is the reason why two-thirds of startups don’t deliver positive returns for their investors. So, when looking to invest in startups or start your own, remember what it truly takes for a startup to succeed.
Comments