In this flop era of Startups, Zoho & Zerodha are like the shining stars for India and its people. Where we can see startups just trying to make money and increase their valuation by taking people’s money, Zoho & Zerodha are one of the few startups which genuinely focused on their company and tried to provide a better service instead of just running for the valuation.
In India’s startup ecosystem, these two bootstrapped businesses stand out for choosing the less-traveled route to success and profitability by concentrating on raising money for the company rather than chasing valuations.
According to their records with the Ministry of Corporate Affairs, both businesses turned a profit in the previous fiscal year as well, and they have subsequently expanded on their achievements. Investor money has not yet been raised by any company.
Trading has become feasible without barriers thanks to the business Zerodha. It is the first discount brokerage firm in India.
Zerodha has made a name for itself in the stockbroking sector in this digital age. The business has expanded solely based on technology by providing worthwhile services to its clients.
On the other hand, The corporation “Zoho Corporation Private Limited” has impacted nearly every aspect of software development and web-based business activities, starting with a Network Management company called AdventNet Inc. in 1996 and offering “Zoho Remotely” to facilitate “work from home” in 2020. In 1996, Zoho, an Indian software development firm and IT business corporation, started operations.
Zoho was founded by Tony Thomas and Sridhar Vembu. Recently, Sridhar Vembu was awarded the prestigious Padma Shri on the occasion of India’s 72nd Republic Day (2021).
Even though both of the companies didn’t take a single penny from others, they are still profitable companies since day 1.
Due to increasing demand for online trading during the epidemic, Zerodha recorded a substantial increase in operational revenues. Operating revenue for Zerodha Broking Ltd increased to 2,729 crores FY21 from 938.45 crores in previous years. 1,122 crores in net profit saw a 160% increase.
The profit of Zoho Corporation Pvt. Ltd. increased notably in FY21, rising from 800.8 crores to 1,918 crores. While the company’s operating income increased by just over 22% for the year to $5,230 crore, expenses were reduced by more than 10% to $3,024.2 crore, lifting profit.
The CEO of Zerodha, Nithin Kamath, stated on Twitter that the reason not to have an IPO is that it creates excessive expectations, and I quote, “For a stock to do well, you have to outperform.” Sridhar Vembu, the CEO of ZOHO, retweeted the comment and said, “I cannot run a public company with the kind of hyper-inflated values that are usual today.”
The robust earnings of both companies come at a time when public shareholders are questioning their road to profitability in comparison to their new-age technology competitors.
Dooming Indian Startup Ecosystem
Even though India’s startup ecosystem is one of the top producers of unicorns worldwide, many of the most well-known companies are losing money. The number of the top unicorns are estimated to start their initial public offerings (IPOs) soon (IPOs).
Over 100 unicorns, or firms with a valuation of more than $1 billion, are based in India. 21 startups became unicorns this year. Indian unicorns are currently valued at $341 billion as a group. Although there has been much talk about a “funding winter,” these companies have raised over $94 billion in the capital.
The Indian startup dream appeared to be coming to an end in 2022, despite taking off in 2021. The cost of doing business has altered as a result of shifting trends, and some organizations have even engaged in reckless spending. Legal compliances have also increased.
A never-before-seen trend, new companies, and IPOs in a variety of industries marked 2021 as an abnormal year. About 46 unicorns were created in India in 2021 as a result of the $42 billion in the capital that Indian entrepreneurs received from foreign investors. Since 2016, India has seen 50,000 new, reputable businesses, employing about 6 lakh employees as of June 2021. 16,000 new startups were added in 2021–2022. Of them, more than 100 businesses became unicorns, or businesses valued at $1 billion, or Rs 7,760 crore.
But in 2022, it looks as though the seasons have abruptly changed and winter has arrived. Startup issues are on the rise in 2022, including unanticipated mass layoffs, funding wells drying up as investors pull out, mounting losses, a shift in trends, and so on. According to India Today, since 2022, 5,800 startups have been shut down.
Companies that went public last year, including One97 Communications Ltd.’s Paytm, PB Fintech Limited’s PolicyBazaar, Zomato Ltd., and others, have frequently announced quarterly losses. Since January 1, the value of these companies’ shares has decreased from 22 to 36%. All three firms are currently trading below their IPO prices.
Paytm and Zomato, according to AK Prabhakar, head of research at IDBI Capital Markets, have reached the point where they must burn cash to stay afloat. “Paytm and Zomato satisfied a niche population’s requirement. However, they now need to expand and bring on new clients, which will cost you a lot of money. I don’t believe these companies will turn a profit for at least five to six years, therefore I will avoid buying their stocks and instead invest in businesses with which I am more familiar.”
In contrast, according to Prabhakar, Zerodha and Zoho were concentrating on their core businesses, and since they did not raise any money from the private markets, their main goal was to become profitable.
Zerodha employs a unique business strategy. Nitin Kamath never sought private equity funds. Either his family or his money owns everything. His top aim was to increase earnings by focusing on the company’s core business. I also believe that broking was a previous idea. By going entirely digital and building an asset-light company, they upended the market.
Tony Thomas and Sridhar Vembu created Zoho in 1996. However, the business was formerly known as AdventNet (1996-2009), not Zoho.
The Zoho team originally intended to use the domain name “SOHO” to create SOHO.com to target small offices and home offices. However, after learning that the name was already taken, the business chose to use Zoho.com instead, which was still somewhat similar but more expensive. Finally, the name “Zoho” was chosen, which became the foundation for Zoho Docs and CRM.
The USP of Zoho Docs and CRM was to take advantage of the extensive offerings they bragged of at low costs. To do this, a sizable staff of developers was required, but Zoho didn’t provide one.
When Salesforce, the industry leader, had only 100 engineers, the business had 600 engineers on staff. Today, Zoho recruits and develops hundreds of engineers straight out of high school, guiding them through the schools the firm has created for them.
The Zoho Schools of Learning pay their students to attend their schools while also providing them with the skills necessary for software development. Talented engineers are eventually developed from the students, who are kept on by a combination of location and a big R&D budget.
In 2010, Zerodha, a provider of financial services, was established. It is an online discount broker whose major goal is to give customers lower prices.
Additionally, it provides brokerage services to stock market participants and is a member of the NSE, BSE, MCX, and MCX-SX.
Five individuals made up the first team of Zerodha, which currently numbers more than 1,200. The Kamath brothers’ original concept and excellent use of technology have elevated this startup to the position it holds today.
It is the top stockbroker in India, and the most well-known and significant online broker, and it provides services for investing in equity, foreign exchange, commodities, initial public offerings, and direct mutual funds.
Since they were the first discount broker in the nation when it began operating, the company, which has its headquarters in Bangalore, has amassed a sizable customer base.
Additionally, the company consistently develops novel concepts supported by various approaches and consistent efforts, which has kept things exciting for the business and contributed to its success.
Aiming to certify retail traders and investors, Zerodha also conducts several well-known open online education programs.
edited and proofread by nikita sharma