Screw Ups

Byju’s had humble beginnings. Byju Raveendran, a hopeful and talented tutor to his peers, began Byju’s with his wife, Divya Gokulnath, in 2011. Before that, he was a service engineer who learnt of his teaching penchant by helping his friends crack the CAT exam in 2003. 2007 is when he decided to expand his services. The company started with a much smaller class size but saw significant growth. The focus was on online video-based learning programs catering to K-12 and preparations for competitive exams. In 2015, Byju’s launched an app, Byju's: The Learning App, as smartphone screen sizes grew. They also launched a Parent Connect app and a kid-oriented app. But more importantly, they expanded to the United Kingdom, the United States of America, and other international markets. They estimated at least 150 million users, 900,000 paid users, and an average of 71 minutes of screen time in 2018. They became the first Ed-Tech unicorn in the same year, earning $1 billion in revenue. We have observed all this success in the past but they seem to be on the news all the time and not for good reasons. So where did Byju’s go wrong? Follow up with our Instagram series, Saturday Screw Ups: Byju's Byju Raveendran COVID-19 and The Struggle to Catch Up Ed-Tech undeniably rose during the COVID-19 pandemic and Byju’s was a leading example for the Ed-Tech industry. They acquired several Ed-Tech startups, including those in the international market. Byju’s expanded but at what cost? Their expansive plans created major cash-flow problems and a $1.2 billion loan caused disputes with their creditors. More seriously, there were allegations of a toxic work culture. Employees were unable to leave until 10 pm, sick leaves were not a concept, and verbal abuse was a daily observation. There was immense pressure to acquire more customers by any means to regain revenue. In 2023, their valuation of $22 billion in 2022 was cut by 75%, causing layoffs as well as accusations of financial mismanagement. Their parent company, Think & Learn Pvt Ltd., was scrutinised for being unable to pay PF money to their employees. Moreover, Facebook and Google discontinued their ads after they failed to pay their ad dues. Also Read: The Decline of Yahoo Aggressive Marketing and Sales Practices Relating to the COVID-19 pandemic, the disaster at Byju’s continued strong. Seeing their online presence getting strong, they went all out with marketing. However, their strategies were overwhelming. They were endorsed by Shah Rukh Khan and included several advertisements featuring the superstar. But in 2023, Shah Rukh Khan and Byju’s did not want to be associated with one another and mutually ended their contract. Byju’s had already moved on to Lionel Messi as their brand ambassador in 2022 with a 3-year contract. However, this move was met with severe criticism by the public. Employee layoffs were at a peak with 2,500 losing their jobs. Their deal with Messi backfired as their previously mentioned financial mismanagement caused them to have inadequate funds. They have now kept Messi’s ambassadorship on hold. We don’t see chances of it recovering. They ended up sponsoring several events, like the Indian Premier League and FIFA. After the lockdown and COVID-19 restrictions had been lifted, students began to prefer and resume offline classes. Being physically present has proven to be the more effective method of studying. Byju’s method of learning turned out to be less relevant with this sudden change. They had no game plan and resorted to an aggressive style of marketing. Messi's sponsorship of Byju's Loan Fraud: They Went That Far As mentioned earlier, employees were pressured to acquire customers through any means. An example of this is a report of an employee telling parents their children would fail if they didn’t subscribe to Byju’s program. This is incredibly manipulative but not unheard of for businesses. There were other strategies, like following up constantly with people they forced to download the app as well as opt for the 15-day free trial. Again, following up is a common strategy. However, if you fail to live up to those expectations, that’s another story. The quality of Byju’s classes also took a major fall with their financial struggle. Students and parents felt cheated and misled. Moreover, their courses cost as much as 1.35 Lakhs. Pushing these courses onto people, especially those of low income, is unjustifiable. It also turns out that lower-income customers were taken advantage of and taking loans to afford these courses. Considering it is incredibly tedious to get a loan in India, it was questionable how their customers would be able to get a loan. Byju’s had lending partnerships and essentially acted as guarantors for their customers. This strategy is known as the First Loss Default Guarantee (FLDG). In short, if the customer fails to pay, Byju’s is held responsible and pays for them. Massive Financial Mismanagement and Legal Issues Byju’s acquired companies as if it were a hobby for them. They acquired Aakash Institute for $950 million, WhiteHat Jr for $300 million and 17 other companies. This made them face an increase in expenses, not making it worth the increase in users. Except for Aakash Institute, not all of them were profitable. Byju’s faced significant losses because of their overzealous acquisition. Byju’s also failed to repay a $300 million loan from Singaporean firm Redwood Global Investments but was undertaken after a deal of a $500 million loan was given in 2022. However, these financial mishaps caused Deloitte to pull back from Byju’s and subsequently Prosus, Sequoia, and the Chan Zuckerberg Initiative also left Byju's board. Byju’s fell into legal trouble due to these factors, facing a lawsuit filed by Redwood Global Investments. Moreover, as of February 2024, Byju Raveendran has a lookout notice issued to him by India's economic intelligence and law enforcement entity Enforcement Directorate. What are the key lessons learned from Byju’s and how can you apply them to your business? Proper accounting practice: To especially avoid financial irregularities and legal troubles, businesses should maintain a healthy cash flow and debt ratio, keep contingency plans in place, and avoid overwhelming their assets. Byju’s were overzealous in both marketing and taking out loans to meet dues. This is a terrible move that can sink your company. Maintain trust and respect: Byju’s lost respect in two important ways: Respect of their customers and their board members. Not only did parents and students feel completely cheated, but their board members were frustrated by their financial incompetence. Choosing quantity over quality can jeopardise the trust you keep with your partners. Healthy work culture: The employees make the company. Treating your employees like robots will get you nowhere and Byju’s proves that. Pressuring them, keeping them until 10 pm, no sick leaves, and verbal abuse are the only public knowledge we have of Byju’s deeds. Make sure your employees have a great work-life balance and maintain a patient attitude.

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