Byju Raveendran accepts worth as ‘zero’ and here is the million-dollar lesson

Once the poster child of the Indian startup ecosystem, Byju’s free fall from a $22 billion peak to ‘zero’ is a start-up drama, not witnessed too often. For those watching Byju’s matter unraveling over the last year, there have been a multitude of twists and turns until the flat-out collapse. Nevertheless, the washout of the ed-tech platform leaves lessons worth millions. And what are the mistakes?

First, a drive for over-expansion. It is not just about Byju’s but most companies that scale out too fast, often spread their resources thin. Byju’s went for a rapid expansion both at home and overseas. Billions were spent in acquisitions. In 2021, the company spent around $950 million to acquire Akash Educational Services followed by $300 million on the coding platform Whitehat Jr. and yet another $600 on Great Learning. The aim was to generate rapid diversification and fuel fast growth. But as it happens in fast scale-ups, operational inefficiencies started creeping into the system. Sustainability, therefore, became the core issue leading to the first chink in Raveendran’s armour.

The second blunder was to overspend on marketing and sales which consumed almost half of the company’s expenses. In FY21, the official recorded revenue of Byju’s was around Rs2,428 crore but the company’s net loss ballooned to Rs 4,588 crore – a massive increase from the Rs 262 crore loss in FY20. Despite the revenue growing by 80 per cent, the cost of acquiring customers and maintaining the of acquiring customers and maintaining workforce outstepped growth.

The third biggest error on Byju’s part was its lapse in terms of financial reporting. The audited results of the company for FY21 were filed over 18 months late. Such delays and transparency issues led to an erosion of trust. The revenue recognition practices drew further criticism with the Blackstone Group writing down the company’s valuation by 6 per cent.

Finally, a major issue with Byju’s was its dependency on external funding.  Byju’s raised more than $2 billion worth of funding from investors like Tiger Global, Sequoia Capital, and Bond Capital. However, the global economic crunch post the pandemic hit led to a funds crunch and Raveendran could no longer afford the cash-burn spree. By then, the charm of online education too started wearing off. Customers at many places also started asking for refunds as the company was failing to meet expectations.

Relentless focus on hypergrowth, rapid scaling with an unsustainable model, and a leadership that has failed to gauge the complexity of managing a global business led to the washout of Byju’s and its unceremonious death. While Raveendran admits to his ‘zero worth’ and speaks of turning around his fate with a promise of a possible comeback, there’s a lesson in his journey on business prudence worth a million bucks.