The Rise and Downfall of Byju's: From $22 Billion Valuation to Financial Crisis

In 2013, Delhi's Indira Gandhi Stadium hosted 14,000 people—not for a concert, but to study math from Byju Raveendran, a charismatic teacher who would later build India's largest EdTech company, BYJU'S.

Born in Kerala in 1980 to teacher parents, Byju had a passion for sports and math. After completing engineering in 2000, he worked in a shipping firm but soon found his calling in teaching when his friends preparing for the CAT exam asked for his help. Raveendran not only taught them but also scored 100% in the exam twice, earning the title of "CAT topper."

In 2006, he launched BYJU'S Classes, initially focusing on CAT preparation. His practical, concept-driven teaching style led to high enrollment in paid classes. By 2009, BYJU'S expanded to 9 cities. The increasing demand and large class sizes prompted Raveendran to digitize the content, making his lessons accessible nationwide.

This digital transformation set the stage for BYJU'S rise as a dominant force in India's EdTech industry. However, the story also includes challenges and Byju's downfall, which would come to define the company's trajectory.

In 2009, Byju Raveendran adopted V.S.A.T. (Very Small Aperture Terminal) satellite technology to broadcast his lectures to 45 cities. This marked a significant step in scaling his teaching model and laid the groundwork for a large EdTech enterprise.

In 2011, he established Think and Learn Pvt. Ltd. to expand further. The company ventured into the school tuition market, targeting India's 25 crore school-going students. Realizing the potential of mobile technology, Byju began developing a learning app to reach this vast audience.

In 2013, BYJU'S secured ₹50 crore funding from the Manipal Group for a 26% stake, accelerating the development of its mobile app. The app was designed to cater to diverse learning styles, incorporating videos, texts, and practical exercises. Byju believed education should be as engaging as entertainment, leading the company to hire expert teachers, motion graphic artists, 3D designers, and musicians to create high-quality content that resonated with students.

Finally, the BYJU'S Learning App launched in 2015, along with preloaded courses on tablets and SD cards. Both products received excellent responses, leading Sequoia to invest $25 million in June 2015, followed by a $50 million investment from Mark Zuckerberg’s organization in 2016.

Focusing on sales, BYJU'S built an aggressive team of fresh engineering graduates. The process started with TV ads prompting parents to download the app, followed by a sales call to book in-person counseling sessions. During these sessions, students were quizzed on difficult topics, shown videos to improve understanding, and re-asked the same questions, impressing both students and parents. This emotional strategy, coupled with attractive offers like scholarships and refunds, secured sales.

BYJU'S rapid growth made it India’s first EdTech unicorn in 2018, valued at over $1 billion. By March 2020, its valuation rose to $8 billion, driven by 40 million users. The COVID-19 pandemic further boosted growth, with BYJU'S offering free classes, leading to a 60% increase in app usage.

During the EdTech boom, BYJU'S captured nearly 50% of sector funding. It leveraged billions in investments to acquire startups like WhiteHat Jr ($300M) and Aakash Institute ($1B), alongside others like Tynker and Toppr, to expand into coding education and international markets. By March 2022, BYJU'S peaked with 150 million users, 58,000+ employees, and a valuation of $22 billion.

However, this growth began to stall as the effects of the COVID-19 pandemic wore off. BYJU'S faced a serious issue: its sales were not growing at a rate proportional to its valuation. To address this, the company pressured its sales teams. Employees at the Bengaluru office were working 14-hour shifts, with lunch breaks denied unless targets were met. Sales targets became unreasonable, with each salesperson required to bring in ₹1.5 lakh in sales weekly. A new rule implemented in 2022 stated that any salesperson failing to meet 50% of their target would be fired immediately.

This pressure led to unethical practices. Salespeople resorted to misleading customers, offering false information, and even covering down payments out of their own pockets to close deals. Customers also faced difficulties canceling subscriptions and obtaining refunds. As the stories of mis-selling and exploitation emerged, parental trust in BYJU'S plummeted.

Despite the sales, BYJU'S financials revealed a troubling picture. Their unit economics didn’t make sense, as the company was losing money on every sale. On average, a salesperson brought in ₹2.76 lakh per month, including cancellations and returns. After deducting salaries, incentives, and expenses, the net revenue per salesperson was only ₹1.6 lakh, and after marketing and product costs, it was reduced to ₹57,000. After factoring in rent, overheads, and other costs, BYJU'S was incurring massive losses.

In late 2022, the company adjusted its sales model to reduce expenses, shifting to phone and Zoom-based sales, but this also led to a drop in conversions.

In a shocking move, BYJU'S announced plans to invest $200 million in opening 500 offline tuition centers across India. This shift to offline learning raised questions, as BYJU'S had initially been a champion of online education. The change was driven by the fact that students, after two years of pandemic-induced online learning, were fatigued with the medium. Parents also noticed that their children struggled to focus in online settings, leading them to revert to offline education.

The company’s troubles were further exposed in its 2021 earnings report, which revealed a stark financial picture. Despite generating ₹2,428 crores in revenue, BYJU'S lost ₹4,564 crores that year, with 80% of its revenue coming from tablet sales, not course fees. This suggested that BYJU'S was, in essence, a tablet-selling business rather than an EdTech company.

The revelation sent shockwaves through the industry, leading to mounting problems. Funding began to dry up, and BYJU'S was forced to delay employee salaries and halt payments to vendors. Legal issues emerged when its U.S.-based lenders sued the company for defaulting on a $1.2 billion loan. In April 2023, the Ministry of Corporate Affairs launched an investigation into BYJU'S financial practices. By mid-2023, the company had cut its workforce by more than half, from 58,000 employees to under 25,000.

To stay afloat, BYJU'S sold its U.S.-based platform, Epic, for $500 million, a loss of $500 million from its initial $1 billion acquisition. The company also faced insolvency proceedings initiated by the BCCI in September 2023. To make matters worse, in October 2023, the Enforcement Directorate accused BYJU'S of ₹9,000 crore FEMA violations. As of January 2024, BYJU'S valuation had plummeted to $225 million—a staggering 99% drop from its $22 billion peak.

Today, aside from its Bengaluru office, BYJU'S has closed all other offices in India. Acquiring new paid customers has become a struggle, and the offline tuition centers have not been successful. The companies BYJU'S acquired, except for Aakash, are now operating at a loss. Ultimately, BYJU'S has almost collapsed, with little hope for recovery. The company’s downfall serves as a cautionary tale about the dangers of prioritizing growth and valuation over a sustainable business model focused on quality education.