Understanding: What caused the downfall of Byju’s, which was previously valued at $22 billion

Byju’s is run by Byju Raveendran along with his wife Divya Gokulnath. The company’s valuation reached $22 billion in 2022 due to its popularity in offering online and offline education courses. Byju’s journey started in 2003 when Byju helped friends crack the MBA entrance exam CAT. His teaching skills gained attention, leading to the formal launch of Byju’s classes for the CAT exam in 2006.

In 2011, the company expanded into the school curriculum, using interactive videos and real-life examples to teach fundamental concepts. By 2015, the Byju’s learning app was launched, catering to students from kindergarten to class 12. By 2019, Byju’s had become India’s first ed-tech unicorn, valued at over $1 billion. The company’s innovative educational approach and use of interactive videos and technology, along with celebrity endorsements, propelled its valuation to $22 billion.

However, during the Covid pandemic, cash-flow problems and a dispute with creditors over a $1.2 billion loan arose. Rapid expansion led to allegations of a toxic work culture and pressure on employees to acquire more customers. By June 2023, Byju’s valuation was cut by 75%, leading to layoffs and allegations of financial mismanagement. Byju’s parent company, Think & Learn Pvt Ltd., faced scrutiny for not paying PF money to employees and was suspended by Google and Facebook for non-payment of ad dues.

Byju’s revenue remained steady, but its losses increased significantly, leading to a $1.2 billion loan default in 2021. The company’s failure to file timely financial reports raised questions about its stability. By November 2023, the founder had to mortgage personal properties to secure a loan for employee salaries. Some investors believe the company’s valuation has fallen to between $1 billion and $3 billion.

In conclusion, Byju’s success in the ongoing capital-raising effort will play a pivotal role in determining the company’s ability to execute a successful turnaround.