India startup Byju has gone through a serious upheaval these past few months. The company was once heralded as among the most valuable start-ups in the world. It also attracted a host of investors at the height of the pandemic. But now it’s struggling with a host of financial and operational issues.
Consultant Shriram Subramanian describes the company as growing too fast and too soon. Meanwhile, many experts are saying Byju is experiencing a necessary correction. This often happens in the aftermath of a bull run.
Byju was already around in 2011. It rolled out its learning app in 2015 with impressive results. By 2018, Byju already had 15 million subscribers. It took a short time for the edtech firm to become a unicorn or a company with a valuation of one billion.
Byju underwent a massive expansion campaign during the pandemic. The lockdowns saw millions of students turning to online classes. But things started to take a downturn in 2021. The company posted a $327 million loss. This was 17 times higher than what it experienced in 2020.
The tech giant’s problems have continued since then. It was reportedly valued at $22 billion last year. Now the company’s largest investor Prosus NV has cut its valuation down to $5.1 billion in 2023.
Subramanian said there was always going to be a downturn post-pandemic. The problem was that Byju kept growing. Investors also kept funding it. They didn’t see the warning signs of an impending slump.
Aniruddha Malpani described the company as having “paper fortunes.” The angel investor also said there’s a large gap between Byju’s value and valuation.
Too Much Too Soon?
Byju went on a spectacular acquisition binge in 2021. It acquired fellow ed-tech companies like Aakash, Epic, and Great Learning. It also spent some serious cash to secure WhiteHat Jr and Toppr. Byju invested more than $2 billion to get these companies. The move could’ve been due to the growth it experienced in the throes of the pandemic.
Byju soon surpassed Paytm to become the top startup in India. The digital payments platform was the most-valued tech firm before Byju came on the scene.
Byju's also funneled millions into its marketing campaign. It pulled off a coup when it came to brand ambassadors. The company was able to get Shah Rukh Khan and Lionel Messi onboard. Byju also stood as one of the top sponsors of India’s cricket team. It was also one of the official sponsors of the 2022 FIFA World Cup.
The Downward Spiral Begins
2023 saw the company pursued by many complaints. Parents have been accusing the company of not meeting its promises. Many of these complaints detailed how it coerced them into buying expensive courses. But the company couldn’t provide them with the services they’d paid for. Some customers even said the edutech firm used predatory practices.
It’s not only customers who are unhappy with Byju. Many former employees complained of an unhealthy work culture. They said the company set unrealistic targets. This resulted in a high-pressure sales environment. The startup had a massive layoff the past year to cut down costs.
Byju has denied all these allegations. This hasn’t stopped the Indian government from investigating the company though.
The startup firm’s Bengaluru office was already raided by Indian authorities. The action was reportedly due to alleged violations of foreign exchange policies. The company has denied any wrongdoing. It also reassured workers that it complies with the law.
Meanwhile, lenders filed a lawsuit against Byju in a US court back in May. They accused the company of defaulting on payments. The complaint also stated it breached the terms of the loan agreement. This included the prolonged delays in releasing financial statements. The company was also accused of funneling funds through Alpha, one of its US subsidiaries.
Byju has also denied these claims. The company also filed its lawsuit against the lenders in June over harassment. The company also fired close to a thousand employees in the aftermath.
The hits kept on coming though. Auditing firms Sells Llp and Deloitte Haskins have parted ways with Byju. The two companies said they’re no longer the firm’s auditors. They said the delay with financial statements compromised their work. They can't assess its books.
Three of Byju’s board members resigned as well. But CEO Byju Raveendran and his wife Divya Gokulnath remain as board members. They’re joined by the CEO’s brother, Riju Raveendran.
What’s the Takeaway?
The embattled start-up is now said to be in talks to reconstruct its debt load. There are also reports that shareholders were demanding the CEO's resignation. No one has stepped up to confirm these claims.
BigBasket founder K Ganesh said Byju's failed to hold itself to a specific standard. The famous entrepreneur said companies of that size have to meet these standards. He added that it was also unacceptable for Byju to delay the filing of its financial statements.
Ganesh also hinted that Byju isn’t alone in this ordeal. The angel investor said many underwent rapid expansion during the pandemic. They're now struggling. It’s because they overestimated their potential during the crisis. But the return to normalcy was more drastic than expected.
Ganesh also said many of these startups were then valued at an unrealistic level. This was because of the pandemic. But now their values are down to realistic levels.
Experts are also saying there’s more to education tech than mere technology. You also need a safe space for students. This should be somewhere where they can enjoy peer-to-peer learning with adult supervision.