After spending seven years investing in Indian startups as a venture capital investor at multiple VC firms, including Fosun RZ Capital and Temasek’s Vertex Venture Management, Ajay Lakhotia floated his own startup last year.
During his stint at Fosun, Lakhotia looked at investment opportunities in fintech companies and realized most of the partners were either writing checks to digital payments companies or lending firms. No investors, including Lakhotia, showed interest in startups that were enabling users to trade in India’s stock market, which has USD 2 trillion in market cap and is the eighth largest stock exchange globally.
Once he realized this gap, he started to analyze these companies, their users’ journeys from novice to full-time stock speculator, and the challenges they faced in the process.
Within two months, he pinned down the common problems across these platforms: the jargon—terms like board lot, convertible securities, and call option—was often dense for newcomers, and experienced investors who could show people how and where to begin were often absent. Also, new hands were cautious about making decisions that might lead to losses.
To solve these issues, in January last year, Lakhotia incorporated StockGro, a mobile-based platform where users can learn the nitty-gritty of investing in stocks, like when to sell or buy shares, but without spending real money. StockGro gamifies trades by allowing users to spend virtual money on stakes in listed companies.
“When users sign up on the platform, we give them INR 1,000,000 [in a virtual balance] to start investing and building their portfolio. While the investment money is not real, the buying and selling prices of stocks are based on live trading of that day,” Lakhotia told KrASIA.
StockGro doubles as a platform where users can build a connected community by inviting friends or interacting with other users on a chat forum and get investment advice from experts.
“New investors, especially the younger generation that is exploring stock market trading via online platforms, don’t understand jargon, and hardly spend any time on understanding the fundamentals of investing, reading brokers’ reports on companies. Their investments are largely based on recommendations by friends, family, and brokers,” Lakhotia said.
The founder claimed there are many users on the platform who are well versed with stock market investments and offer their knowledge about reading stock movements. They also explain technical terms for other users’ benefit. “We have made the app in such a way that one can create a close social community. We think new investors need a trust circle where they can learn and get inspired from people who are actually making money in the stock market,” he said, adding that many of these stock market experts use the platform to create their own fan followings.
To stoke users’ interest in buying shares and make the process more exciting, StockGro conducts investment challenges. Users pay an entry fee to compete in these leagues, and the trader with the most gains takes cold cash home. The entry fee is low, starting at INR 10 (USD 0.13 ). The chance to win the pool of buy-in money attracts up to 15,000 users at a time, all of whom try to build a portfolio that will place them well in the green by the end of the day.
On average, the company distributes more than INR 800,000 (USD 10,800) per week in winnings. StockGro claims its app has more than 200,000 users, of which 70,000 participate in paid challenges every day.
Lakhotia founded StockGro just as the pandemic started to spread in India. As infection numbers climbed and the economy ground to a near-halt, he wondered if he should shut down the company. New employees who were about to join StockGro had doubts about whether leaving their jobs would be the right move. Stocks in India tanked when a nationwide lockdown was put in place in March last year.
“The capital commitment that I had received also started to get delayed. I was almost in the situation where I asked myself should I even start this company now. The only reason I kept going was that if I don’t do this, someone else would,” Lakhotia said.
By July, India’s stock exchanges started to show signs of recovery when the Nifty 50, an index that represents the weighted average of the 50 largest listed companies in the country, yielded 7.49% returns. That same month, StockGro’s app went live. “From 400 users last year, we grew to 110,000 users by January 2021,” Lakhotia said.
Investors acknowledged Lakhotia’s tenacity to develop his company during a difficult time by pouring INR 6.5 crore (USD 873,000) into StockGro. The investors behind this angel round were the founder’s own VC friends and other entrepreneurs, such as Fosun RZ’s Tej Kapoor; angel investor Abhishek Nag; and Vivekananda Hallekere, the founder of ride-sharing startup Bounce.
The company is in the process of partnering with online stock brokerage firms to enable StockGro’s users to make real-life trades. “Our vision is to become the default gateway for young investors to invest in different asset classes,” Lakhotia said.
This article is part of KrASIA’s “Startup Stories” series, where the writers of KrASIA speak with founders of tech companies in South and Southeast Asia.