BYJU’S: An Empire That Was

Byju Raveendran is racing against time to save BYJU’S. Once India’s most celebrated tech entrepreneur, Raveendran & family, have seen a massive fall from grace and BYJU’S is battling insolvency proceedings from multiple corners. 

Addressing employees this past week, Raveendran attempted to show that the company is on track to overcome this tough period after months of uncertainty. 

“I want to remind all of you that we are still the largest edtech platform globally with 150 Mn students using our products and services every month. Despite the recent challenges faced, this organic user base has doubled over the last two years. Indeed, BYJU’S is transitioning to a sustainable business model that serves millions of students across India and employs thousands of people,” the CEO wrote to employees, several of whom have not been paid for months. 

This is not the first time that Raveendran has tried to rally employees to get behind the company, however, BYJU’S is in a more precarious position than ever before. 

While the leadership has been out of India for most of the past year, the company is on the brink of bankruptcy. The odds are stacked against Raveendran and his wife and cofounder Divya Gokulnath, and it all seems to be going awfully wrong. 

But where did the BYJU’S story begin? And will this saga have a bitter end with Raveendran being forced to relinquish the giant he built, and which many accuse him of bringing down as well. How did the highest valued startup in India at one time reach this nadir?

The Early Days: Byju Before BYJU’S

It was 2010, and Raveendran was a noted teacher for the Common Admission Test or CAT, an exam one is required to take to enter the IIM B-schools. 

Raveendran began with classes at Jyoti Nivas College in Bengaluru’s Koramangala area, and his classes were said to be running chock-full. So much so that Raveendran had to book stadiums and college auditoriums to teach thousands of CAT aspirants. 

These ‘Byju’s’ classes were a rage in most of the southern Indian states, where convention came second to outcomes. Raveendran, a self-educated teacher and learner as he likes to call himself, had appeared for CAT and topped the exams twice. He is said to have received and rejected offers from the six IIMs between 2005 and 2007. Instead, he joined a UK-based firm where he worked for three years, before pursuing his calling as a teacher in 2010. 

By then, Raveendran had taken his individual brand and incorporated a company Think & Learn Private Limited to run operations. And two years after this journey began and with considerable attention surrounding his classes, Raveendran was introduced to Ranjan Pai, the chairman of the Manipal Group, and Infosys’s former CFO Mohandas Pai, who also ran venture fund Aarin Capital.  

Ranjan Pai and Mohandas Pai wrote the first cheque for BYJU’S in 2013 for a combined stake of 26% and the juggernaut started rolling on. 

Byju Raveendran Wears The Founder’s Hat

After that first investment, there really was no turning back. In fact, it’s a theme we will revisit time and again when it comes to BYJU’S

Even though the early years for BYJU’S were around offline classes, the startup launched its first smartphone app in 2015. By then more investors had joined the company’s cap table. Aarin Capital invested in the $25 Mn Series B, before the company raised a massive $145 Mn in 2016, and another $70 Mn in the next year. 

Armed with more capital than most Indian startups see in their lifetime, BYJU’S went about acquiring students by millions. Massive ad campaigns were launched featuring superstars such as Shah Rukh Khan, Mohanlal among others. 

Naturally, BYJU’S was also a very attractive employer. It was offering unprecedented pay — at the time for Indian startups — and the company became a workforce and sales engine. Raveendran often threw people at the problem, employing basic graduates who could sell tablets preloaded with BYJU’S courses 

By 2019, nearly a decade after Raveendran began his solo adventure, BYJU’S was now a massive empire with more than 50,000 employees. Offices were set up in India, US, UAE and it seemed like Raveendran wanted a global domination in edtech. 

The growth was unparalleled and even the big corporate firms in India were a no match at that point. In fact, Raveendran was the poster child for the burgeoning Indian tech and startup ecosystem, making the covers of magazines across segments. 

The aggressive sales strategy was something that caught everyone’s eye. Raveendran and other senior leadership often dealt with accusations of a high-pressure and somewhat toxic work environment. Between 2018 and 2019, the edtech decacorn reported a 173% increase in revenue from INR 500 Cr in FY18 to INR 1,366 Cr in FY19, becoming the first edtech startup to breach the INR 1,000 Cr mark. 

It also helped that the company raised nearly $650 Mn in 2018, and the resulting push on the growth side definitely put Raveendran in a league of his own. Despite the teething issues around the toxic work environment and a sales-first culture, BYJU’S was on the up. 

The company was alleged to have hired a low-cost workforce to deliver emotional sales pitches to parents, and this strategy of tapping into the fear of missing out or FOMO was working well. 

However, many also wondered whether BYJU’S was pushing its products on to unsuspecting parents in ways that could have severe legal implications. 

For instance, those who could not afford BYJU’S tablets and courses were brought on board with EMI payments for surreptitious loans availed by BYJU’S from NBFCs. Many parents claimed they were not aware of BYJU’S signing them up for loans. The company faced a lot of hue and cry over this strategy, but its sales targets kept growing.

This particular concern snowballed later on in the company’s journey, as BYJU’S had to re-recognise some of its past revenue and ended up showing higher loss and lower income for some previous years in 2021. 

Edtech’s Pandemic Boom

But looking at 2021 would be jumping the gun a bit — the beginning of 2020 changed everything for edtech, and gave unicorns like BYJU’S a misplaced hope about the future of online learning. The highs of these two years and the funding boom was soon followed by gloom. 

Even before the pandemic, the edtech story being sold to global investors was simple: India is a market of 150 Mn students and internet penetration is increasing due to cheap cost of mobile internet. Plus, Indian parents have always been willing to spend for education outside the classroom. .

It wasn’t just BYJU’S selling the edtech dream — Unacademy, WhiteHat Jr (before the acquisition by BYJU’S), Vedantu and a host of other startups had sprouted up to capitalise on the growing market. The pandemic sent this edtech brigade into overdrive.  

But BYJU’S was easily the biggest of the lot. It raised well over $1 Bn between July 2019 and October 2020. The pandemic effect and the zero interest rate policy across the world had brought in a whirlwind of investments. The valuation zoomed by more than 22x from 2017- 2021 and this was the mercurial growth no startup in India could match. 

Till date, BYJU’S has raised more than $5 Bn in capital from over 120 investors. Meanwhile, Raveendran, his wife Gokulnath and brother Riju Ravindran still have a cumulative 22% stake in the decacorn once valued at $22Bn.

At this point, Raveendran was far from the teacher and educator he was once known to be. Inc42 spoke to some employees who worked closely with the CEO during this hyper growth period. 

One such employee told us that as a CEO, Raveendran often wondered why student enrollments declined from time to time. When the CEO was told that rival companies were signing up these students, Raveendran apparently told his team to ‘buy them all’, the source added.

Indeed, BYJU’S was an acquisition machine. Between 2017 and 2021, BYJU’S went on a shopping spree and acquired 17 companies within five years, which is a record three and a half companies every year

“The hunger to throw money at everything and anything was well known within the company. Sales people were spending nights in the office to meet targets and get incentives. We brought new NBFCS on board for EMI customers. The pressure to perform grew so much that sales numbers being botched up did not surprise anyone. Even the finance team was not surprised when there were discrepancies. Everyone had to deliver like Raveendran wanted,” a former senior manager told Inc42 about the months leading up to 2020. 

The biggest shock came when BYJU’S former auditor refused to sign the audited FY22 results due to an alleged unethical accounting practice that would recognise unrealised revenues for a financial year on the account of sales made on the paper. The dodgy sales numbers came back to bite BYJU’S later in life. 

Though how it escaped the notice of investors and auditors such as Deloitte for so many years still remains a mystery. 

Becoming A Marketing Machine

Despite raking in billions of dollars, BYJU’S focus was to appear on every TV commercial and sponsor every major event. 

It was already the biggest edtech company in the world, but it wanted to sustain the lead. In 2019, BYJU’S signed up as the main sponsor for the Indian cricket team at a steep cost. The edtech giant agreed to pay INR 4.61 Cr per bilateral match and INR 1.51 Cr per match featuring India in an ICC event.

It also splurged $40 Mn for being a sponsor of the FIFA World Cup 2022 in Qatar, besides continuing to pay celebrities for endorsements. 

The company roped in football superstar Lionel Messi for a $5 Mn-$7 Mn per year deal for its non-profit arm. When this deal was announced in 2022, social media was swamped with outrage as the company laid off 2,500 employees just weeks before this deal. 

“To have the biggest superstar of Indian cinema like Shah Rukh Khan endorsing your brand for years on TV commercials is no small feat. They were spending crazy dollars. Every agency was chasing them. Everyone thought they are doing INR 10,000 Cr business every year,” a Bengaluru-based ad agency founder told us. 

The Beginning Of The Downfall

In public and going by the claims in the media, BYJU’S seemed to be growing from strength to strength, but even by late 2022, the cracks had begun to appear. For one, the pandemic 

An internal crisis was brewing inside the company as parents questioned the quality of the online learning courses, and demanded refunds. This issue also became a matter of debate in the Indian parliament. 

While BYJU’S wanted to project the image of an international edtech brand globally, back home it faced a big blot on its reputation with allegations of cheating students and parents, especially those from lower economic stratas.

Besides this, many of its acquisitions were proving to be a burden rather than a boon. BYJU’S wanted a presence in test prep, K-12, text books, language and coding skills, higher education and the offline learning vertical. While it got this through acquisitions, several of them tanked. 

WhiteHat Jr, bought at a cost of $300 Mn in August 2020, created a lot of initial buzz but the product-market fit fizzled out after the pandemic, and WhiteHat became a huge weight around the group’s shoulders.  

Industry analysts claim that at the time, the strategy was sound. BYJU’S was cash-rich and instead of waiting for the market to be built, it went after startups. “Raveendran’s intent was twofold. First was to build a world-class edtech company and second to somehow reach that elusive INR 10,000 Cr revenue mark which will justify the big investments.”

Neither happened. By 2023, even after the high-profile $1 Bn acquisition of offline coaching giant Aakash Educational Services, BYJU’S had not managed to live up to the expectations of investors. 

Aakash, which continues to hold promise today along with Great Learning, has wrested back most of the control from Raveendran and the parent company. Incidentally, BYJU’S first investor — Ranjan Pai — is now the largest shareholder and is slowly disassociating from BYJU’S. 

Great Learning, sources claim, is also looking at a buyback from BYJU’S led by the company’s cofounders. The fate of US-based Osmo and EPIC hang in balance as the creditors have hounded BYJU’S to dissolve both companies to repay debt. 

“Was Raveendran transparent with his investors when he went on these acquisition sprees? That is the question they have been asking. We cannot neglect their complacency too when there was an edtech boom especially when the biggest investors were from the US and BYJU’S was looking to buy companies there,” a veteran investor associated with BYJU’S said. 

And Now, The Cookie Crumbles 

Empires fall. And that seems to be the fate for BYJU’S too. Raveendran seemed to have it all at one point. But through reckless business planning, overambition and perhaps even some hubris, the giant is now in a punier state. 

After scaling back from online learning, shedding nearly 90% of its workforce and cutting costs for everything from office space to SaaS tools, BYJU’S is a shadow of the force it once was. Investors have given up on the company in all likelihood, and the likes of Prosus are staring at a $500 Mn loss from their bet on BYJU’S. 

With just the offline learning vertical as a saving grace — along with some ownership in Aakash and Great Learning — BYJU’S is in a tough spot that’s about to get worse. The company is close to shutting down nearly half of its 250+ BYJU’S Tuition Centre outlets. 

In a bid to control its expenses amid the ongoing cash crunch and legal troubles, the company has started sending notices to the head of its tuition centres for terminating lease contracts for the properties. The move is likely to result in it shutting 120 offline centres, sources told Inc42.

Raveendran remains bullish though. In an email to employees this week (August 20, 2024) Raveendran claimed that the company is on the verge of a turnaround and investors are ready to back the firm in its journey

The cofounder said the startup is on the brink of reversing the negative business cycle that began two years ago and with BYJU’S 3.0, the company will offer an AI-driven, hyper-personalised educational platform that will be high on impact, but low on cost. 

However, not many believe this will be the case. “Raveendran has many friends in the UAE and even some allies in the US. But slowly everyone is coming after him because this is how bad businesses meet their fate,” the investor who worked with Raveendran during BYJU’S heyday said. 

It is not like Raveendran did not try to repair the damage — he introduced leaner sales and business models, but it’s all proving too little, too late. The corporate governance challenges persist and even if BYJU’S figures out a way out of its current predicament, it will take a lot to get there. 

 The BYJU’S saga bears an eerie resemblance to another big corporate scam in India in the recent past, aka the Satyam Scam of 2009 where Byrraju Ramalinga Raju, the founder and CEO of the IT services company, was accused of syphoning off more than INR 7,000 Cr from the company coffers. 

Satyam’s books and accounts showed profits that had never existed, while the company’s share price surged, and Raju then sold shares for personal gains. Raju then confessed that the books were cooked, and six years later, he was among those found guilty by court and sentenced to imprisonment. 

But in BYJU’S case, the outcome is uncertain. As the founder of an edtech skilling startup company puts it, “There are people chasing Byju Raveendran — from lenders, hedge fund managers to his own employees. But then India also has a bad track record when it comes to bringing wilful defaulters back to the country. It needs to be seen what the SC’s will do after the insolvency proceedings.”

Despite an uphill task of convincing the country’s top court, foreign lenders and investors to give him some more time for settling pending dues, Raveendran is in no mood to give up. His latest communication indicates just that.

“Over the past 29 months, [our] only source of capital was the founders. Founders together have infused approximately INR 7,500 Cr in the company for various operational needs. I guarantee this: When we regain control, your salaries will be paid promptly, even if that means raising more personal debt. We have investors ready to back our turnaround story. They see what I see – enormous potential and inevitable growth,” Raveendran’s email to employees said.

However, thousands of employees have been promised many times over the last year and a half and are now contemplating fighting one more legal battle against Raveendran and his fallen empire.

[Edited By Nikhil Subramaniam]

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