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From Unicorn Status to Unraveling
Byju‘s, once a highly valued edtech start-up and a favorite among investors during the Covid-19 pandemic, is now facing a severe downturn in its fortunes due to operational and financial setbacks. This represents a necessary correction in the Indian start-up landscape.
Rapid Growth and Valuation
Founded in 2011, Byju’s launched its learning app in 2015 and quickly gained traction. By 2018, the edtech firm boasted 15 million subscribers and achieved unicorn status with a valuation of $1 billion. The company experienced substantial expansion during the pandemic, capitalizing on the shift to online learning. However, in 2021, Byju’s reported a staggering loss of $327 million, 17 times higher than the previous year.
Valuation Slashed
Byju’s once commanded a valuation of $22 billion (£17.28 billion) last year, but its value has plummeted to $5.1 billion this year, as confirmed by its largest investor, Prosus NV. This significant devaluation highlights the challenges the company now faces.
Acquisition Spree and Milestones
With exponential growth during the pandemic, Byju’s embarked on an aggressive acquisition spree, investing $2 billion to acquire various edtech start-ups and firms. Byju’s surpassed Paytm to become India’s most-valued start-up. The company also made substantial investments in marketing, securing high-profile brand ambassadors, such as Shah Rukh Khan and Lionel Messi, and securing sponsorship deals with the Indian cricket team and the 2022 FIFA World Cup.
Complaints and Controversies
Byju’s has faced mounting complaints from parents, accusing the company of coercive sales tactics, unfulfilled promises, and predatory practices. Former employees have raised concerns about a high-pressure sales culture and unrealistic targets. The company has also faced government investigations and legal battles over alleged defaults, fund diversion, and delayed financial statements. Layoffs have further impacted the company’s operations.
Path to Recovery and the Way Forward
Byju’s is reportedly in talks to restructure its debt load and is under pressure to address its missteps promptly. Critics argue that the company needs to conserve cash, aggressively cut costs, and consider selling off some businesses to raise capital.
Analysts believe that the challenges faced by Byju’s will prompt stricter corporate governance practices in the Indian start-up ecosystem. However, the company’s recovery depends on its willingness to acknowledge its mistakes and take immediate action on various fronts.