The founder of India’s ed-tech company Byju’s is facing a critical situation as the startup experiences significant challenges and potential collapse.
Byju Raveendran, a prominent Indian entrepreneur and mathematics expert, faces a critical juncture in his career following the recent challenges encountered by his education technology company, Byju’s. Once valued at $22 billion by global investors, Byju’s has experienced a significant decline in valuation, currently standing below $2 billion.
The future of the company now lies in the hands of India’s
courts, as Raveendran, the 44-year-old founder, relinquished control of the
company last week due to the initiation of an insolvency process by a tribunal.
The son of educators from a modest village in southern
India, who was once hailed as a symbol of India’s burgeoning startup ecosystem,
is now facing significant challenges due to allegations of financial
irregularities and compliance concerns.
His company, which had previously achieved remarkable
success, encountered difficulties when it failed to fulfill its $19 million
sponsorship commitment to the Indian cricket board. Consequently, a tribunal
suspended the company’s board and mandated the individual to report to a
court-appointed restructuring specialist.
An upcoming hearing on Monday will address the potential
quashing of Byju’s insolvency proceedings. The former billionaire, Raveendran,
asserts the solvency of his company and warns that insolvency could lead to its
closure and job losses for 27,000 employees, including teachers. Additionally,
insolvency would negatively impact Byju’s backers, including Prosus, a
prominent Dutch technology investor.
Raveendran firmly denies allegations of mismanagement and
wrongdoing within his organization. Recent months have seen lawsuits over
unpaid loans and public boardroom conflicts with foreign investors.
A potential Insolvency is a significant and unexpected
development for an entrepreneur. An individual who has collaborated with the
entrepreneur describes them as highly passionate and goal-oriented, but also
prone to adopting a confrontational approach during challenging situations.
Mr. Raveendran projected a polished and agreeable demeanor,
initially appearing receptive to counsel. However, over time, a lack of trust
developed, leading to the resignation of a senior vice president last year.
"He said things are improving, don't worry, we have the
money," the former executive said.
BYJU'S DOWNFALL: 'OUR FAIR SHARE OF MISTAKES'
He initiated Byju's in 2011, offering physical classes after
being encouraged by friends to pursue teaching, despite his background as an
engineer.
Raveendran, who achieved a perfect score of 100 percentile
in a prestigious Indian management exam on two separate occasions, began his
journey alongside his wife Divya Gokulnath, 38, who was once his student.
In the education-focused market of India, Raveendran
achieved significant success by introducing online teaching programs with
prices ranging from $100 to $300. His venture gained substantial momentum when
the COVID-19 pandemic necessitated remote learning for students. At the peak of
his prominence in 2021, Forbes estimated that he and his spouse had accumulated
a net worth of $4 billion.
Currently, the situation has significantly deteriorated.
Executives and advisers who collaborated with Raveendran
attribute the decline in Byju's rapid growth to his decision to override
colleagues, pursue costly acquisitions, overspend on marketing, and delay in
resolving issues like sales agents resorting to aggressive tactics to
improperly sell courses, which tarnished the company's image.
With the support of investors such as General Atlantic,
Prosus, and Mark Zuckerberg's philanthropic initiative, Raveendran invested
millions in acquisitions, leading to the company boasting 150 million students
across more than 100 nations.
"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.
During his management of the recent crises, the CEO also
mentioned that the decisions to reduce the company’s then-50,000 workforce and
cut branding costs would contribute to strengthening Byju’s, which is currently
experiencing financial losses, and turning its cash flow positive.
“Every country requires an organization like Byju’s,” he
stated.