[YS Learn] Make peace with your losses, says Zerodha Co-founder

The coronavirus pandemic has bludgeoned economies around the world, some to the brink of recession. Businesses have taken massive hits due lockdown restrictions, and some have even had to shut shop.

A recent survey by SBI research said the Indian economy may contract by up to 40 percent by the end of this year. Credit rating agency Moody’s has already slashed its ratings for India.

In the startup space, investors have tightened their purse strings since the pandemic began, are backing out of commitments, deferring term sheets, and taking longer than usual to close deals.

It’s not all bad news though. Several startups in different sectors have seen growth, or even acceleration of growth. Edtech companies are coming out of the lockdown quite flushed with cash, and so are health tech companies.

Zerodha, India’s largest brokerage firm, also saw very strong growth during the lockdown, as customers, buoyed by a fall in stock prices, signed on to the company’s platform.

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In a recent social media post, Nithin Kamath, Co-founder and CEO, Zerodha, explained the growth:

"Seeing this happen for the first time in my 15 years of broking. Account openings going through the roof after a crash in the markets, new customers being smart, not panicking and telling that it is a good time to start buying for the long term. It is unreal!”

While the company’s success is definitely one for the books, getting there took Nithin some huge personal losses.

Nithin started his trading journey at the age of 17, and soon ended up losing all the money he had made, overnight.

“I personally have three major upheavals and losses with large debts. But there is a science to it. I knew I would make up the money,” he says.

To start building capital again, he started working at a call centre during the night, and continued to trade stocks during the day.

“I do something only when I can make peace with the maximum loss,” says Nithin about the most important lesson his losses have taught him. 

He advises entrepreneurs to function as though the next two years are going to be bad for the company’s business, and ruminate about the maximum loss the startup can make and deal with.

“I always think: what is the maximum loss I can deal with and then I think can I make peace with this loss. If you can make peace with that loss, you will be level-headed and sane. Else, you will end up doing irrational things. And this is the one big learning I had with the stock market. In trading, you need to make quick decisions, and make peace with the decisions and their consequences.”

As a founder, one cannot let ego, or procrastination, come in the way of making tough decisions, he says, adding now that the impact of COVID-19 is clearer for businesses, it is best to keep a level head, make peace with the situation, and come up with a plan.