🪓BYJU'S: A Billionaire's Brothel...
[#11] Tale of Chaos: Bankruptcy. Backstabbing. Billion Dollars. All BURNED to the ground. And now shareholders want 'Byju' out of Byju’s. What do you expect from an EDtech that's going DEADtech now?
“…Vengeance Is An Idiot's Game
Be Loyal To What Matters
I Have To Insist
We Ain't Both Gonna Make It
I Gave You All I Had
John Made It...
Face Me To The West So I Can Watch The Setting Sun And Remember…
The Fine Times We Had That Way.”
Arthur Morgan, Red Dead Redemption II
Morning, iKyu’s inKredible subsKriber, Welcome to a ‘Brothel’. Yes. A place where you sell your dignity in exchange for metaphysical pleasure. Sounds familiar? Don’t worry if it doesn’t.
We have our own, high-rated, desi-version of a brothel. A brothel means barter. A brothel means to sell. A brothel means Business. Or do they?
This Desi Brothel Rise and Fall is the most exciting, juicy, hardcore story of 2024…
“Byju's wins award for best mobile app in education” —Business Standard.
“Is Byju's the next Infosys of education?” —ETPanchayat
”Byju's: Transforming the way India learns with personalized learning” —Yourstory
“Byju's: Changing the way India learns” —India Today
”Byju's eyes global expansion after raising $85 million” —Entrepreneur India
“BYJU’s $22 Billion valuation SLASHED by 90%” —Reuters
“BYJU’S US unit files for BANKRUPTCY” —Bloomberg
”BYJU’s Investors seek to remove Edtech group’s founder, Byju” —Techcrunch
The moment BYJU’s was crowned as the ‘Most Valued Startup of India’, their downfall started. BYJU’s became a synonymous grocery-name for all traditional media houses to satirize with and gain views.
THE (K)EY NOTES:
The (K)urrent: A BYJU’S CRISIS
The (K)réme: A BYJU’S CRASH
The (K)inK: A BYJU’S CHAOS
The pandemic was their catapult. What were they not? A Typical Indian Entrepreneurial Dream? An ed-tech Hegemony? A Sales Slaughter?
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To mark a remembrance of what NOT to do as a Startup founder, in India.
Let’s breakdown🪓 the ill-practiced. ill-cultured. ill-posterboy of the Indian Startup Ecosystem; The name you should know, the story you don’t want to know…
Aakash Coaching Institute.
The man behind all of this, along with his wife has built a fortress of financial filth. It sometimes feels like with BYJU’s at its peak, they were running a “Trinity Test” with their moat of selling courses.
Yes. BYJU’s was not an Edtech. It was fundamentally a Pressure-cooker sales company. Don’t believe me. Read for yourself…
When a startup is mauled down, you look for the flaws in its fundamentals. That’s where they rot first. Core of the business; the model of the business; their product or service; their addressable market, their team and lastly their founder. History denotes most of the startups that became a victim and got bucketed as “Grifter” Startups/Companies are flawed at the bottom of the funnel. Starting from the Founders.
The entire crisis of BYJU’s is with how the founder’s incompetency is resulting in insolvency for his business. There are a couple of crises for which BYJU’s have to take a stand for. Apart from being the main muse of memes in the Indian startup community, BYJU’s have left a lot of questions unanswered.
In 2 years, BYJU’s went from sponsoring the Indian cricket team to not even gaining the trust of their ‘OWN’ team. Circle back to the basics. Business Fundamentals. But before we understand why BYJU’s is collapsing, we need to understand the ‘what’.
What are these crisis that caught BYJU’s dumbstruck, or was this fall anticipated and we, as business builders were kept in the dark?
A STALEMATE BY VC’s
Every entrepreneur’s worst nightmare is sharp dilution. In ELI5 terms, Losing the money they raised. The same disco is happening with BYJU’S Investors!
2 weeks ago, BYJU’s initiated a rights issue at an astounding 99% discount compared to its last post-money valuation of $22 billion. Byju’s aims to raise about $200 million through this issue. Why now? It’s a crucial financial boost to address the liquidity challenge the company is currently facing. The rights issue allows current shareholders to acquire new company shares at a significantly reduced price for 30 days.
A lot of low-hanging politics is going on in the playground of BYJU’s. The chieftain leading this VC Chess facade is Prosus. Within the group of disillusioned backers is Byju’s largest institutional investor, the Dutch internet group, Prosus. Prosus is faced with an unenviable choice. If the rights issue proceeds as planned, the global investment giant—which has already invested well over half a billion dollars in Byju’s—would have to pony up an additional $18 million simply to maintain its existing shareholding. Opting out, on the other hand, would see its shareholding in the company wiped out for all intents and purposes. One might assume that deciding on such an investment is straightforward, especially for an investor who has already committed so much capital to the company. But the path forward for Prosus is far from clear-cut.
BYJU’s, operating under Think & Learn Pvt Ltd, has initiated a strategic financial manoeuvre to secure $200 million through a rights issue, marking a pivotal moment in its corporate journey. This decision involves a drastic recalibration of its pre-money valuation to $20 million, a figure starkly contrasted against its 2021 zenith of $22 billion. This adjustment positions BYJU'S post-money valuation at $220 million, encapsulating a near-unprecedented 99% valuation contraction.
“RIGHT’S ISSUE” A NECESSARY DESPERATION
The rights issue, exclusively targeted at existing investors, is a critical juncture for BYJU'S. It necessitates investor participation to mitigate the risk of substantial dilution of their equity stakes. This move, often termed a "cram-down round," is characterized by financing terms that could potentially diminish existing shareholders' stakes if they opt not to inject additional capital. Such rounds might also incorporate a "pay-to-play" clause, further jeopardizing shareholders' rights in the absence of their financial contribution. The rights issue has garnered the approval of BYJU'S board, predominantly composed of the founders, who are also the principal shareholders. Key investors like Prosus are poised to invest a minimum of $18 million to maintain a 9% equity stake, while General Atlantic is anticipated to contribute $10-12 million to preserve its 5.9% stake. These commitments underscore the critical nature of this funding round in maintaining the investor equilibrium within BYJU'S financial architecture.
The infusion of $200 million is earmarked primarily for settling outstanding liabilities, amid growing calls from various quarters, including creditors of a $1.2 billion term loan B and the Board of Control for Cricket in India (BCCI), which is owed Rs 160 crore, for initiating bankruptcy proceedings against BYJU'S. With total liabilities standing at $120 million, the company has judiciously reduced its monthly cash burn rate to $5-6 million, reflecting a strategic pivot towards financial prudence and operational sustainability.
In a communication to shareholders, BYJU'S CEO Byju Raveendran emphasized the indispensability of this capital raise to avert further value erosion and to furnish the company with the requisite resources for a strategic rebuild and scaling. Over the past 18 months, Raveendran, alongside other founders, including Divya Gokulnath and Riju Raveendran, has injected $1.1 billion into the company, manifesting a profound commitment to its revival and long-term success.
BYJU'S decision to recalibrate its valuation and pursue a rights issue is a symbolizing the dynamic and often tumultuous landscape of the tech startup ecosystem. This strategic pivot not only aims to stabilize the company's financial footing but also sets the stage for a potential resurgence. As BYJU'S navigates through this critical phase, the outcome of this rights issue will be instrumental in shaping its future trajectory and its position within the global EdTech sector.
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What do all of these have in common? Their Sponsor and Endorsement. BYJU’s. If you’re thinking you can avert this crisis and hit a reset button for BYJU’s, you’re late. If you think these big names in the industry can save your ass, a fool’s paradise makes the right gin & tonic!
Many of the company’s largest investors, though, aren’t just against the entire operational failure, they’re pushing for CEO-founder Byju Raveendran’s ouster and calling out an extraordinary general meeting (EGM) is the final nail to the coffin, to thrash things out with Byju’s management
On the records, Think & Learn Pvt Ltd books are speaking another fable for all of us. They navigated a tumultuous fiscal year from April 2021 to March 2022, marked by a heavy reliance on debt financing to propel its operations. This strategic choice has come under scrutiny following a detailed review of the company's audited financial results, which revealed significant challenges in revenue recognition and cash flow management.
The company's filings with the Ministry of Corporate Affairs, submitted after several missed deadlines, unveiled an inability to recognize a substantial Rs 1,050 crore in revenue for the fiscal year. This issue was twofold:
Deferred Payment Terms Revenue (Rs 789 crore): A portion of Think & Learn's revenue was derived from loans offered to customers under "deferred payment terms" for purchasing its online courses. However, these transactions failed to meet the requisite accounting criteria for revenue recognition, primarily due to doubts over the collectability of these payments.
Middle East Sales Revenue (Rs 260 crore): Think & Learn faced challenges in booking one-third of its Middle East sales as income, attributing this to the low probability of collecting dues. The company operates in this region through More Ideas General Trading LLC, which is not classified as a related party, despite the latter receiving a 50% commission on sales, some of which contributed to the unrecognised revenue.
The fiscal year saw Think & Learn's liabilities skyrocket nearly sixfold, from Rs 3,116 crore in FY21 to Rs 17,678 crore in FY22. A significant portion of this increase was attributed to a $1.2 billion term loan B secured in the United States. This surge in liabilities also encompassed debts incurred to support domestic operations and settle outstanding payments related to acquisitions.
The company's aggressive acquisition strategy, including high-profile purchases like WhiteHat Jr and Osmo, was a double-edged sword, contributing to 40% of its total losses, which surged by 81% to Rs 8,245 crore. This was further compounded by an 83% increase in employee costs, totalling Rs 3,522 crore, and significant marketing expenditures.
Despite the financial strain, Think & Learn witnessed a 120% surge in total revenues, reaching Rs 5,015 crore. Sales from educational content alone rose by 57% to Rs 2,901 crore, representing income that could be immediately recognized. Revenues from courses delivered through classroom teaching and live streaming experienced a nearly fivefold increase, amounting to Rs 2,113 crore. This segment of income will be recorded over several years as the services are rendered.
Now it’s just about time when we experience the bursting of the Edtech bubble with BYJU’s leading the front crusade!
“Internet piK of the week”
“…BYJU’s IS BEING SCHOOLED” (A BYJU’S
Is this just another plotting for a new docu-drama series or it’s much deeper well than we think it is?
You’ve already heard the obvious of why BYJU’s is a scam. When the end consumer starts to suffer from a linear product you made, which had no lifetime value. That product/service SUCKS.
That’s exactly what has happened with BYJU’s.
BYJU's, What the hell have you done? Indian startup community needed this blow to WAKE UP to reality! The whole Indian startup ecosystem has been watching. The world has been looking up to you, BYJU's. The problem is that BYJU's never tried to be a startup or an ethical business from the start.
Let's swallow a Brutal truth: If you build a startup as a temptation, you've already failed. They just wanted to raise funds, add bucks to the bank, increase, NO, inflate their valuation and ditch the stock on the poor retail investor. All for what? To retire and sip a single Malt on a Super Yacht and throw some shades and muscles? BYJU's you could do better!
Hope they become a lesson to every Indian entrepreneur who is running and licking the idea of VCs and fundraising.
This blow in the Indian startup scene is necessary. We need to get out of this SHITTY circus of valuations; and actually, build something. We don't need more headlines for fuck sake!
America had its walk of shame with WeWork, Enron and Worldcom. India needs to have it BYJU's walk of shame.
Let me pause this mayhem for you with a question:
“Which side of the chicken and egg problem do you reside on?”
The chicken side where risk management for any budding startup becomes the foremost ground to secure in an education sector or the egg side where fundamentals of the business should be rectified with each layer of progress; the lust for hypergrowth killed the cat inside out the box or throwing all of this out of the window as all of this looks sweet on paper, but the mathematics of power law doesn’t support any remedy for what BYJU’s has succumbed to? Would you have done anything different?