Until recently, the rise and rise of Byju Raveendran and his eponymously named billion-dollar company had been described as nothing short of inspirational, revolutionary, and remarkable. The edtech founder’s story could easily inspire a Bollywood movie plot. Born to teachers in the coastal village of Azhikode, Kerala, he studied engineering in a government college before joining a multinational shipping company.
Academically bright Raveendran discovered his passion for teaching when he prepped friends for MBA entrance exams on a terrace. His style of teaching won praise, pushing him to teach full-time. He soon started charging for his classes and recorded videos of courses. He met his now wife Divya Gokulnath in one of those classes and she became the co-founder of his company.
‘Greed is good’
In 2011, Raveendran launched Think & Learn, the parent company of Byju’s, and its online offering ‘The Learning App’ four years later. Soon he was making bigger moves, raising his first funding of $4.6 million from Aarin Capital in 2013, and embarked on an increasingly furious pace of growth and expansion over the next decade.
The edtech offered lessons across ages — from kindergarten to Class 12, and onward to entrance tests for engineering and medical colleges, and civil services. Meanwhile, funding continued to flow from investors and the company kept diluting its equity, with the promoters retaining around 22 per cent (see table). Cumulatively Byju’s has raised $5.9 billion across 29 rounds of funding till now.
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The ultimate boom came in 2020, thanks to the pandemic. As schools were shut, online learning was widely adopted, helping the established edtech capitalise on it in a big way. Revenues doubled to ₹2,800 crore for the financial year ended March 2020, and profits stood at ₹50.76 crore, though these figures were revised later. Byju’s became India’s second decacorn (valued beyond $10 billion) after Paytm.
Then followed a brisk phase of acquisitions — WhiteHatJr, Aakash, Toppr, Epic, and Great Learning — at ‘high’ valuation. While some of these did add to the kitty, others such as WhiteHatJr have sparked buyer’s remorse.
Revenues struggled to keep up with the scorching pace of fundraising and acquisitions. “His intentions were good. However, Byju could never say no to more money, even when it was not needed. Greed took over,” rues a former senior executive requesting anonymity.
Challenges and setbacks
Byju’s began missing its step in a post-pandemic world as kids went back to school and logged out of online learning. Its revenues in FY21 dropped to ₹1,551.64 crore, with a loss of ₹2,702.14 crore, on a standalone basis. Its delay in filing financial results for FY22 provoked the exit of its auditors Deloitte Haskins & Sells. Byju’s has promised investors that the financials will be filed in September.
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Shriram Subramanian, Founder and MD, InGovern Research Services, a proxy advisory firm, says, “Byjus grew too fast too soon. Given that they are unable to raise new funding and the burn is high, I believe that is biting them now. Byju’s has to focus on profitability.”
Valuation is plummeting, too, from the high of around $22 billion in October 2022, after a $250-million funding round. Recently, its single largest shareholder after the promoters, the Netherlands-listed investor Prosus, recorded the fair value of its 9.67 per cent stake at $493 million, effectively valuing the company at $5.1 billion. This, however, remains contested.
Byju’s selling tactics are under the scanner after parents complained on social media that they faced huge expenses and distress after signing up for Byju’s.
Its employees have complained of a toxic work culture and unrealistic sales targets. Amogha (name changed), a former sales executive, says, “I remember skipping meals because of the pressure and torture... if the unrealistic goals weren’t achieved, they would ask us to resign in the next 15 days.”
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From 13,764 in 2020 to a peak of 58,292 in 2022, the staff count is sub-25,000 today, following layoffs.
The company faced flak for failing to deposit the provident fund (PF) of several employees in FY24, as reported by Businessline. The company later claimed it had deposited most of the due funds.
In the last six months, Byju’s has landed in multiple fiascos. It sued lenders led by Redwood in the New York Supreme Court, challenging the acceleration of the $1.2-billion Term Loan B after missing the quarterly interest payment of about $40 million. The lenders dismissed the case as “meritless” and a ploy to circumvent regulations.
Three board members — GV Ravishankar of Sequoia Capital (now Peak XV Partners), Vivian Wu of Chan Zuckerberg Initiative, and Russell Dreisenstock of Prosus — resigned over differences with Raveendran on operational issues.
Road ahead
Experts and industry watchers call for a change in Byju’s management style to help steady it. Harish Bijoor, a marketing and branding consultant, says, “The start-up is fumbling and compromising on key things such as corporate governance and ethics. It faces issues both internally and externally. Byju’s has to put checks and balances in place.”
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InGovern’s Subramanian says “The VC ecosystem is also to be blamed for the current position of Byju’s as, in the hype cycle, investors kept raising the valuation of the start-up for their own benefit. Byju’s has to hunker down, sell off some businesses or raise more funds at lower valuations. It should also start adopting good business and financial practices, and treat customers, employees and investors fairly.”
As the former senior employee puts it, what Byju’s requires is adult supervision. “It would be good if family members stepped back a bit and a seasoned hand is brought in as CEO to stabilise things. Raveendran himself needs to acknowledge mistakes and think back on why he started this company. Otherwise they will limp from crisis to crisis.”