As Groww raises money; Zerodha CEO refuses to raise more [here's why]

It is natural for startups to keep a target in sight, and earning the coveted "unicorn" tag is a common goal for most startups. Even though COVID-19 pandemic hit many startups in 2020, the ones that survived powered through to new heights of success. In fact, a recent report revealed that India has a 100 unicorn startup with a valuation of $1 billion or more.

Recently, Investment platform Groww raised $83 million in a Series D round led by Tiger Global, in which the existing investors took part. With this, Groww became the latest member of the unicorn club with over $1 billion valuation, which is up from $250 million in a $30 million Series C funding in September last year.

"The new capital will help us invest in new products, acquire talent, and continue building our financial education platforms," Lalit Keshre, chief executive officer (CEO) and co-founder, Groww, said of the new funding round.

Groww helps users invest in stocks, direct mutual funds, exchange traded funds (ETFs) and digital gold. As for those who are unaware of this five-year-old startup, it is in direct competition with Zerodha, which is the largest brokerage firm in India with over 33 lakh active users. With Groww's latest funding round, Zerodha's founder and CEO had some counterintuitive reasons on why he refuses to raise funds.

Zerodha refuses to raise more

In a series of tweets, Zerodha's founder and CEO Nithin Kamath made some interesting points on why he refuses to raise more funds for his 10-year-old company. In fact, he goes on to say that "Right now, is probably the stupidest time for fintech firms like Zerodha to be raising money." It's not like Kamath is not in short of offers and deals from investors, but what's keeping him away from VCs temptations? Let's find out.

We don't need the money, so there's no point in raising money just because someone is ready to give it to you. We are profitable, have zero debt. And we don't spend on marketing and advertising which is probably the single biggest reason for folks raising money."

We don't want to grow just for sake of growth with random businesses. We want to build things around our core competency, do it well. We are partnering great founders for any adjacent opportunities through Rainmatter and fostering innovation in a highly regulated market."

Our business performance is directly linked to fortunes of the stock market. The hotness of our industry can disappear overnight with a 20% fall in the markets. As a founder, it is hard to take on the investor obligation to continuously keep growing in an industry like ours."

Building a business requires a moat. Be it a better product, deeper pockets (investors), or the ability to stay customer focussed at all times. In an industry like ours, what is right for the investors (VCs) is hardly ever right for the customer (more trades, loans, etc)."

Our bet is that in a fight of deep pockets, the ability to do what is right for the customer will be our edge. For eg, the focus now is to help traders be profitable using Nudge. Each nudge reduces our trading volume and revenue but is the right product for the customer."

Finally, Kamath concluded his post saying "all of these theses may be wrong. But the freedom of not being obligated to an investor is much more valuable than the biggest cheque."

What is your biggest takeaway from this?