Byju's Raveendran breaks into tears as crises engulf ed-tech startup
4 min read 26 Jul 2023, 07:36 AM ISTByju Raveendran, founder of ed-tech startup Byju's, reportedly broke down in tears after a probe agency raided the company's offices, linking it to possible foreign exchange violations. The company has faced a series of crises including allegations of financial irregularities and legal battles.
PremiumByju Raveendran, founder of ed-tech startup Byju's reportedly broke down in tears in April when a probe agency raided the Bengaluru offices of the company and linked the world’s most valuable education-technology startup with possible foreign exchange violations in April this year.
An ocean away, Byju Raveendran, the firm’s eponymous founder and chief executive, paced his condo in Dubai, downing cups of black coffee and fielding calls from top investors. With a planned $1 billion equity fundraise from Middle Eastern investors still in limbo, Raveendran broke down in tears defending his company, reported Bloomberg, quoting people who attended the calls.
Crises have gripped Byju's as once high-flying tutoring startup failed to file its financial accounts on time, skipped an interest payment on its term loan, and triggered a legal fight with its creditors. Several US-based investors accused Byju’s of hiding half a billion dollars, prompting lawsuits.
Allegations against Byju's
Yesterday trouble mounted for Byju's as Prosus NV, an investor in the edtech startup, asserted that the company's reporting and governance structure did not evolve sufficiently for an entity of this scale and it "regularly disregarded advice" by the Dutch-listed firm.
"Despite repeated efforts from our director, executive leadership at Byju's regularly disregarded advice and recommendations relating to strategic, operational, legal, and corporate governance matters," it said.
This year, Prosus slashed the valuation of Byju's to $5.1 billion from $22 billion last year.
Raveendran’s rise from a private tutor to the leader of a $22 billion company captivated global investors, including Sequoia Capital, Blackstone Inc., and Mark Zuckerberg’s foundation. The firm ordered a majority of the ed-tech market during the Covid pandemic.
But after classrooms reopened, concerns about Byju’s finances pricked at the firm’s reputation. Investors questioned why Raveendran delayed hiring a chief financial officer for years and acquired more than a dozen companies across the world at break-neck speed. Scores of employees have either left or been fired. Board members have resigned. And many teaching centers are nearly empty, Bloomberg reported.
What critics say
Raveendran's closed one attributed missteps to the enthusiasm and naivete of an inexperienced founder who grew too quickly. Critics say he acted recklessly by withholding information about finances and failing to rigorously audit accounts.
The rise and fall of Byju's
Born in a small village in Kerala, Raveendran attended a local school where his father taught physics and his mother maths. After completing his school, he studied engineering.
Raveendran began coaching students at a college in Bengaluru. Enrollment doubled every week, and Raveendran eventually moved classes into a sports stadium. Lessons were projected onto giant screens for thousands of students.
Raveendran’s teaching methods stood out in India, where good instructors are scarce and methodologies antiquated.
Raveendran recruited his best students to teach alongside him and opened 41 coaching centers. In 2011, he registered to Think and Learn Pvt Ltd. — the parent company of Byju. He co-founded the firm with Divya Gokulnath, a biotech engineer and former student whom he later married.
In 2015, Raveendran digitized his business, launching a self-learning app focused largely on math, science, and English for primary school students.
“I’ve always enjoyed learning things on my own and also taught myself to hack exams, so it was easy to tutor others," Raveendran said in a 2017 interview with Bloomberg News.
As tech spending surged during the late 2010s, investors lined up to support Raveendran.
Ranjan Pai, who runs one of the nation’s largest healthcare and education empires, said he agreed almost immediately to fund Byju’s.
Among Byju’s early backers was Sequoia Capital, which came aboard in 2015 and invested 4.8 billion rupees ($58 million), according to data from Tracxn.
As capital flowed through the firm’s accounts, Raveendran acquired more than a dozen educational companies in India and abroad.
But by the middle of 2022, problems began to compound.
Employees questioned Raveendran’s business instincts: Even as the lifting of Covid restrictions battered ed-tech, he sought to raise more equity — rather than conserve cash and target profitability.
Besides, Indian officials sent queries to Byju about why the firm couldn’t close its financial accounts for the fiscal year ending March 2021. India’s enforcement directorate, which investigates money laundering and forex violations, sent a summons to company officials.
Eighteen months after the financial year’s close, Byju’s finally released audited statements. They showed losses of 45.7 billion rupees — a 13-fold jump from the previous year.
The firm’s finances alarmed investors. Some creditors, including Blackstone, offloaded their holdings.
In June, Byju’s skipped a $40 million interest payment and filed its lawsuit in New York, accusing the lenders of “bad-faith negotiating."
Besides, representatives from three big investors — Peak XV, Prosus, and the Chan Zuckerberg Initiative — recently quit Byju’s board. Deloitte Haskins & Sells also resigned as Byju’s auditor, citing the firm’s spotty financial records.
Earlier this week, the edtech giant got a breather after the steering committee of lenders announced they have agreed to amend a $1.2 billion term loan with Byju's by August 3, 2023.
But despite Byju’s rocky few months, many remain bullish, pointing to the firm’s strong assets, including 150 million customers.
(With Bloomberg inputs)
