National Bank for Infrastructure Development Chairman and veteran banker KV Kamath on Saturday commended online stock trading platform Zerodha, founded by Nithin Kamath and Nikhil Kamath, for being a bootstrapped and cash-flow positive venture, calling it a good model for a business.

Giving his words of advice for startups eyeing the financial sector, Kamath suggested looking at weak points and entering through them. “For instance, online broking was probably the easiest way to enter where barriers to entry were very low. You had somebody like Zerodha come in and within the first year of lockdown become the market leader,” he said at an event organised by VC firm IvyCap Ventures’ IvyCap Day 2022 in Mumbai.

“It's a low-cost platform, he has boot-strapped himself and runs the company. Good for him. (They) run a cash-flow-positive company. This is a good model to understand how the business is run. He is a disruptor because Zerodha has disrupted all incumbents who were there for the last 20-25 years.”

On the dichotomy of value and valuation, Kamath said, “Startups should focus on becoming either cash-flow positive, or have it in their line of sight, then you take to the public market.” Otherwise, it’s a risk not just for the startup, but it could also create an environment of distrust, he added.

Saying that the fintech space will see the most disruption happen, the veteran banker advised founders to exercise patience in chasing valuations. “Value creation in your platform you have done. If you are impatient to create valuation, you will hurt yourself.”

There are plenty of opportunities for fintech players as the incumbent banks still do not have modern technologies, he said. “But if a startup tries to leapfrog into the valuation game, it will get crushed because the market will see that you’re still not in a positive state. Now you need money, but you will not get that money, whatever shoots of opportunities you have to grow, gets crushed. The idea you have and that you are a disruptor is a given. Have a little bit of patience.”
Source: BusinessToday
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