Byju Raveendran is an Indian mathematics virtuoso who started his career as a teacher and later switched to his startup Byju’s which was once worth $22 billion and loved by global investors. However, since his downfall last year, this time, Byju’s faces the biggest challenge as it sees its valuation plummet to less than $2 billion due to “financial mismanagement and compliance issues.”
Let us explore the reasons leading to Byju’s downfall, and the critical lessons other startups can take from this incident.
The primary factor which played a role in the downfall of the Byju’s is its departure from the underlying motive of the company- that is to offer high-quality education to students through interactive tests and video lectures. Initially, Byju’s started very well with this agenda. However, a few years down the line it became more business-centric as it started prioritizing the sale of its hardware products. This sudden shift dampened the company’s fundamental premise. Byju’s also failed to keep its promise of making learning more engaging. Customers who were once attracted to the original educational propositions were now detaching themselves from the coaching institute.
Byju’s loan defaults, aggressive accounting practices and inadequate cash flow are the three main reasons the company encountered such severe financial difficulties. It relied heavily on loans from banks, venture capitalists and private equity. It wouldn’t have been a problem if Byju’s managed to pay off all the debts, but the inability to do so cost the company so much. The company couldn’t repay a $300 million loan from Redwood Global Investments. It also committed a breach of terms on a $500 million loan which he took in 2022. All these contributed to Byju’s suffering immense financial pressure, legal troubles and obviously- the loss of investor trust and confidence.
Initially, Byju’s attracted a huge user base. However, the platform’s heavy reliance on discounts and promotional offers to draw in new users reduced communications to mere cursory engagements between the platform and the customers. During this time, competitors were offering more inventive and tailored approaches towards learning. It’s obvious why Byju’s couldn’t put up with the competition.
Multiple controversies over data privacy and security issues have been bugging Byju’s for a long time. Users were concerned about how their data was handled and collected. This resulted in legal disputes which crumbled the customers’ faith towards the company. As these issues were adversely publicised, they had a huge impact on Byju’s reputation. Users started to re-thinking their association with the platform.
With rapid advancement in technology and pedagogy, the ed-tech sector is witnessing a prompt transition. Since Byju’s couldn’t keep up with the shifting requirements of the students and educators, it faced a plethora of challenges to survive in the competitive market. The company consistently failed to deliver more innovative and advanced solutions to the users. On the other hand, other lesser-known companies managed to offer exactly what the users desired.
In India, Byju’s grew at a breakneck speed, leading to market oversaturation. As the competition in the ed-tech sector grew fiercer, Byju’s couldn’t keep up with sustaining its lead. Global and regional competitors introduced advanced and innovative services in the market targeting distinct niches. In addition to market oversaturation, Byju’s also failed to deliver and adapt to the regional specifics. This undermined the company’s reputation as the foremost ed-tech platform in the country.
Byju’s, which was once valued at $22 billion, has now dipped to below $2 billion. The mentioned reasons also act as lessons to entrepreneurs from the ed-tech industry.
