Byju’s, the leading education technology company in the world, is facing financial and legal challenges, resulting in the need to cut 1,000 jobs. Despite having 150 million students, Byju’s has been struggling and has already laid off several thousand employees as it integrated acquired rivals. Once seen as a shining star in India’s startup sector, Byju’s has faced financial difficulties due to the decrease in investor interest in loss-making startups during the pandemic.
Nirgunan Tiruchelvam, head of consumer and internet at Aletheia Capital in Singapore, commented on the situation, stating that investors are looking for Byju’s to demonstrate profitability. This demand is not uncommon for companies that received leniency during the low interest rate years. The job cuts come at a time when Byju’s is also embroiled in a legal dispute with holders of its $1.2 billion dollar-denominated term loan. Byju’s has refused to make a $40 million payment and is counter-suing lenders.
Despite raising over $2.5 billion in equity and achieving a valuation of $22 billion, Byju’s financials for the year ended March 2021 showed stagnant revenues and increased losses. The pandemic-era rush for online learning was not sustainable once schools reopened, leading to a drop in demand for educational technology companies.
Byju’s had already reduced its workforce by 2,500 employees last year and has implemented additional staff cuts this year. The company’s founder, Byju Raveendran, claimed in a January interview that they had optimized their workforce and did not need to do much to achieve financial sustainability. However, Byju’s has yet to release its results for the year ending in March 2022, making it unclear if they have been able to contain losses and justify their valuation.
Some investors, such as BlackRock, have significantly reduced their valuation of Byju’s. BlackRock now values its investment at $1,774 per share, down from $2,243 per share when they first invested in 2020. This adjustment would give Byju’s an implied valuation of under $8 billion. Sanjay Swamy, managing partner at Prime Venture Partners, noted that many companies raised funds at inflated valuations and are now undervalued.
The funding of Indian startups has also seen a significant decline, dropping 75% to $2.8 billion in the first quarter of 2023 compared to nearly $12 billion the previous year. This decrease is attributed to companies overhiring during the hype cycle of the pandemic. While online education gained popularity, parents now want their children to return to school and reduce screen time.
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