Byju’s Founder Faces Reckoning As Company’s Valuation Drops To $2 Billion
Byju Raveendran, the mathematics whiz who soared from teacher to startup billionaire before his education technology company imploded this year, now faces his biggest test.
The future of Raveendran’s eponymous Byju’s online coaching firm rests with courts after the country’s biggest startup, once loved by global investors who valued it at $22 billion, crashed below $2 billion in valuation. The 44-year-old founder last week lost control of the company as a tribunal kick-started an insolvency process.
Accused of “financial mismanagement and compliance issues”, the son of a family of teachers from a small village in south India faces a reckoning that will test the ingenuity that made him a poster child for India’s startups.
His formerly high-flying company was eventually brought low when it could not pay $19 million in sponsorship dues to India’s cricket federation, prompting a tribunal to suspend Byju’s board and make Raveendran report to a court-appointed restructuring expert.
An appeals tribunal is expected to hold a hearing on Monday on whether Byju’s insolvency process should be quashed after the former billionaire argued in court his company is solvent and that insolvency could shut it down and cost the jobs of 27,000 staff, including teachers. Insolvency also would not bode well for Byju’s backers, such as Dutch technology investor Prosus.
Raveendran denies the allegations of mismanagement and wrongdoing at his firm, which has in recent months faced lawsuits over unpaid loans and boardroom battles with foreign investors that went public.
Potential insolvency is a dramatic turn of events for an entrepreneur described by one person who has worked with him as an extremely passionate and goal-oriented person who might adopt “an abrasive approach” in a crisis.
Raveendran presented a “suave, nice and polished” image, appearing to heed the advice, but “eventually there was a trust deficit”, said another executive who quit last year as Byju’s senior vice president.
“He said things are improving, don’t worry, we have the money,” the former executive said.
Raveendran and Byju’s spokesperson did not respond to requests for comment.
BYJU’S DOWNFALL: ‘OUR FAIR SHARE OF MISTAKES’
An engineer by training, he started Byju’s in 2011 with physical classes after friends urged him to go into teaching.
Raveendran, who aced his management exam “with a score of 100 percentile, not once but twice”, according to the company website, started what would become his empire with his wife Divya Gokulnath, 38, a former student of his.
In this education-obsessed country, Raveendran hit gold by offering online teaching programs priced from $100 to $300. He got a mammoth boost when the COVID-19 pandemic sent students indoors. At the height of his fame in 2021, he and his wife had a net worth of $4 billion, Forbes reckoned.
Now all that is in tatters.
Behind the reversal of Byju’s meteoric success, say executives and advisers who worked with Raveendran, is that he overruled associates and expanded the business through expensive acquisitions, splurging on marketing and being slow to address problems such as sales agents adopting aggressive tactics to mis-sell courses that damaged the company’s reputation.
With the backing of investors like General Atlantic, Prosus and Facebook founder Mark Zuckerberg’s philanthropy venture, Raveendran spent millions on acquisitions, and the company says it has 150 million students in over 100 countries.
“While growing fast, as I’ve accepted multiple times, we’ve made our fair share of mistakes”, Raveendran told an interviewer last year at the World Economic Forum in Davos.
As he battled crises, the CEO also said decisions to lay off some of its then-50,000 employees and slash branding expenses would help strengthen loss-making Byju’s and turn its cashflow positive.