6/6/2024: $22B to Zero

Rise and Fall of BYJU'S

Despite the soaring stock markets, things are still quite gloomy at the startup land. According to TechCrunch, a research note published by HSBC estimates that the Indian edtech (ex-)decacorn, BYJU’S, once valued at $22 billion, is now worth zero. For those who don’t know, BYJU’S is basically a paid version of Khan Academy in India. It was immensely popular and helped prepare a lot of Indian kids for college entrance exams. I actually heard the founder/CEO, Byju Raveendran, speak in an in-person event back in 2018. He was an impressive guy. The company seemed to be on a roll. India, like China, is very academic focused and getting kids into a good college is a big big business. I thought they were on a trajectory to great success.

The company did go on to have big successes, raised $5B+, reached a $22B valuation and served 100M+ students. But after the company raised tons of money with insane valuations, they started to stray from their original business, spending $2.5B+ on acquisitions and sports sponsorships. They set money on fire so rapidly that by the end of 2023, they needed to raise money again. But the funding environment has changed and investors became a lot more cautious. On top of that, the company has some accounting issues that resulted in its auditor resigning. It appeared the company sent $500M+ to a hedge fund that registered in an IHOP address and the way they recognized revenue is a bit unusual.  Their private equity lender then said the company was in default and demanded the company pay back the $1.2B loan plus interest. The company said the lender was acting in bad faith. The BYJU’S board lost confidence in the founder/CEO and tried to force him out but the founder said they couldn’t do that. The existing investors walked away. The company eventually raised $200M on a $225M post money valuation!! Investors who got in before 2022 basically have their investment completely wiped out. It was a bloody mess. 

Had BYJU’s focused on its core business and remained financially disciplined, I believe BYJU’s will still stand tall as an ed tech giant today. But it appears the founder was drunk on easy money and squandered away the golden opportunity he was given to build a solid business empire while helping educate hundreds of millions of young talents in India. It remains to be seen whether BYJU’s can overcome its current financial struggle. It would be tragic if it fails to do so.