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Byju’s valuation down 99%: India’s edtech decacorn seeking $200M at $225M valuation, what exactly happened?

Byju's valuation down 99%: India’s edtech decacorn seeking $200M at $225M valuation, what exactly happened?
Byju Raveendran Founder & CEO, Divya Gokulnath, Co-Founder

Byju’s, initially recognised as the undisputed giant in the education sector, has undergone a tumultuous journey from soaring success to a significant downturn. Founded in 2011 by Byju Raveendran, the company gained prominence for its innovative approach to learning, seamlessly combining technology and education. Recent developments, such as a substantial decrease in valuation and challenges encountered by its US wing, have prompted questions about the sustainability of Byju’s success.

From its rapid ascent to its recent funding round, where it secured funds at a fraction of its peak valuation, Byju’s, once hailed as the undisputed giant of India’s ed-tech scene, now stands at a crossroads. This is Byju’s story, exploring its rise, highlighting its current challenges, and examining the starkly contrasting funding rounds that symbolise its critical journey as well as edtech’s landscape in India.

Byju’s rapid rise to prominence

Founded in 2011 by Byju Raveendran and Divya Gokulnath, Byju’s commenced as a personalised offline tutoring platform, later transitioning to online learning in 2015 with the launch of its mobile app and content library expansion. 

Byju’s began as a small startup in Bangalore, India, offering online tutoring services. Leveraging cutting-edge technology and interactive content, the platform quickly gained traction among students and parents seeking an alternative to traditional classroom learning. The company’s adaptive learning model, personalised for each student, received praise for its effectiveness in enhancing academic performance.

A crucial factor in Byju’s rapid ascent was its ability to attract substantial funding, securing investments from prominent backers like Sequoia Capital and Tencent Holdings in the early stages. Capitalising on the surge in demand for online education, Byju’s raised significant amounts in subsequent funding rounds.

By 2020, Byju’s achieved unicorn status with a valuation of $10.5 billion in a funding round led by BOND. The company’s success was attributed to aggressive expansion strategies, diverse course offerings, and partnerships with educational institutions. This shift fueled growth, attracting substantial investments and partnerships. Key milestones include:

2017: Raised $50 million from Sequoia Capital, entering the unicorn club (startups valued over $1 billion).
2019: Acquired WhiteHat Jr., a children’s coding platform, and Gradeup, a personalised learning platform.
2020: Became the title sponsor of the Indian Super League football club, Kerala Blasters FC.
2021: Secured a massive $1 billion investment from B Capital, Baron Funds, and XN, valuing the company at $18 billion.

Despite its impressive growth, concerns arose amidst an aggressive acquisition spree. The company faced financial strain, reportedly struggling to integrate diverse platforms and manage mounting debt. Critics questioned the sustainability of its marketing blitz and high customer acquisition costs.

Byju’s valuation decline and recent funding

Byju’s acquisition streak continued in 2022 with the purchase of the US-based kids’ digital reading platform Epic for $500 million. However, the same year witnessed a series of challenges, including declining investor confidence, financial issues, and a strategic shift:

Declining investor confidence: As recent as in January 2024, BlackRock slashed Byju’s valuation by 95%, reducing it to about $1 billion from its peak of $22 billion.

Financial issues: Delayed financial reports and reports of missed interest payments on loans raised concerns.

Strategic shift: Cost-cutting measures and layoffs indicated a change in strategy.

These developments have sparked concerns about Byju’s sustainability and growth potential. In the most recent funding round, the company secured funds at a valuation 99 percent lower than its previous valuation – a stark decrease from $10.5 billion to approximately $100 million. This significant reevaluation reflects investors’ doubts about Byju’s ability to sustain its growth amidst heightened competition and evolving dynamics in the ed-tech space.

Reports suggest that investors are particularly wary of Byju’s revenue model, heavily reliant on subscription-based services, as free alternatives gain popularity. The company’s challenges underscore the volatile nature of the ed-tech industry and raise questions about its future strategies to navigate this shifting landscape.

The latest turn: Funding round at massive discount

In January 2024, Byju’s reportedly was said to raise $200 million from existing investors at a valuation of $225M, highlighting a 99% drop from its previous round which valued the company at $22 billion. This significant valuation downgrade underscores the company’s current challenges.

Beyond valuation: Filing for bankruptcy in the US, restructuring and scrutiny

Byju’s faces internal restructuring, ongoing financial scrutiny, and a competitive landscape. While it boasts over 150 million registered students and a strong brand presence, questions remain about its profitability, debt burden, and long-term strategy.

Moreover, in a move reflecting the broader financial turbulence surrounding Byju’s, its US subsidiary, Byju’s Alpha, filed for Chapter 11 bankruptcy in February 2024. This decision follows a period of escalating debt, investor scrutiny, and potential legal challenges for the parent company. 

With reported liabilities between $1 billion and $10 billion and assets valued between $500 million and $1 billion, Byju’s Alpha was unable to secure sufficient funding, leading to the bankruptcy filing. The development raises questions about the future of Byju’s US operations and its overall strategy in the competitive edtech market. While the company seeks to restructure its US branch, this event underscores the complexities and potential risks faced by even established players in the education technology sector.

Founder’s response to recent crisis and employee salaries

In response to the valuation decline, Byju’s founder Byju Raveendran took an unconventional step. In January 2024, he announced that he would forgo his salary for the month and use the funds to cover the salaries of all Byju’s employees. This move, while garnering praise for the founder’s commitment to his team, also raised questions about the financial stability and future prospects of the company.

The decision to cover employee salaries from the founder’s personal funds sparked speculation about the company’s financial health. Analysts noted that such a move is unusual and may indicate internal challenges, prompting concerns among investors and stakeholders.

What we think about Byju’s journey

The rise and fall of Byju’s serve as a cautionary tale in the fast-evolving ed-tech industry. While the company initially disrupted the traditional education system and attracted significant investment, recent challenges have cast a shadow over its future. 

The significant decrease in valuation, founder’s salary decision, and struggles in the US market underscore the volatile nature of the sector and the importance of adaptability in the face of changing circumstances. 

Byju’s failure can be attributed to a combination of factors, including aggressive acquisitions leading to financial strain, integration challenges, mounting debt, and a revenue model heavily reliant on subscription-based services facing increased competition from free alternatives.

Investors and stakeholders now eagerly await Byju’s next move in this high-stakes game, as the intrusive whispers of uncertainty loom large over the future of this once-dominant player. 

Will Byju’s rise from the ashes, armed with adaptability and strategic restructuring, or is it destined to become a cautionary tale etched in the annals of the ed-tech revolution? Only time will reveal the answers, but for now, the industry holds its breath, eagerly anticipating the next chapter Byju’s may be planning for.

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