Sour grapes was my first thought after Bengaluru ed-tech giant Byju’s announced one morning this January that it has raised yet another round of funding at a valuation of $8 billion — up from its last valuation of $5.3 billion in July 2019 — and all other industry players I spoke to appeared dismissive. How does a company increase its valuation by $2.7 billion in a matter of five months? How was that even possible? How many Fortune 500 companies had managed such a feat?
Ed-tech players argued that the valuation increase was “absurd”, far in excess of the actual value created. Players were also concerned that as and when this Byju’s “bubble” bursts, the entire sector will pay the price.
Finding the ed-tech players answers dissatisfactory, I decided to turn to those involved in the valuation game. This brigade explained that valuation, like beauty, lies in the eyes of the beholder. They explained that if I set out to sell you a matchbox that cost Rs 10 and you agree to pay me Rs 1,000 for it, the value of the matchbox is Rs 1,000! They said that valuations — as we have seen with ShopClues, Snapdeal and of course biggies like WeWork — were based on very little logic but more on the buyer’s perception of what the balance sheet could look like in the future and how early you have got into the game. Moreover, investors in Byju’s are without any third party impact evaluation, a normal yardstick that the industry uses to back its claims.
I was determined to get to the bottom of it all, so I decided to knock directly on the door of the magician: Byju himself. He naturally was too busy to answer my queries but his chief of strategy Anita Kishore got onto a phone call to explain how they had achieved that magical feat. She said the company had three million paid subscribers for their primary products since the launch of the app in August 2016 and had reported Rs 20 crore net profit in 2018-19, within two years. She added that the reason for the high investor interest is that “we have created a high-growth profitable business by using less than $300 million in primary capital”. In terms of paid subscribers, it had just scratched the surface. That’s why it had been able to attract pension and sovereign funds and not just the growth-stage tech investors.
Meanwhile, I also began to search for these three million paid users: Students, parents, principals, academicians, teachers who were raving over the app and how much it had helped improve learning outcomes and clarify concepts. With investors so excited and this unfolding in our backyard, Byju’s must be the new rage in town. I could perhaps understand this phenomenon straight from the horse’s mouth.
No such luck! I have been writing aggressively on education for over five years now and have a reasonable database, many in smaller cities, so I knocked on many doors. Oddly, I got no leads. Almost everyone denied knowing a child who had used the app. The most charming response was from Abha Adams, former head of school of TSRS, who suggested I could ask Shah Rukh Khan (he’s brand ambassador, lest readers think he’s using the app to decode fractions or algebra!). Anita explained this by arguing that most of their children were not in the metros but in 1,700-plus towns and cities of the country and therefore not easy to pin down.
Despite her discouraging words, I refused to back down and intensified my search for at least one student who was using the app. Lo and behold, I did finally find one boy in Shiv Nadar School, Noida, whose father confirmed that he had subscribed to the app for his son. Excited to finally hit upon success, I asked the father to explain the virtues of the product and how it had changed the boy’s perception of maths and so on. You can therefore gauge my disappointment when the father said that after six months of using the app, the boy had lost all interest. He had since dropped the subscription.
Even as I continued to run around to make some sense of how the company had managed what it had, it raised its 14th round of funding to the tune of $200 million in February at god knows what valuation. So I’ll just end by saying this: Byju Raveendran
is the poster boy of a nascent sector trying to find its feet and a lot now rests on his capable shoulders as a consequence. How, what and when he delivers could eventually seal this infant’s fate.