BYJU'S, once a global EdTech giant valued at nearly $22 billion, now finds itself facing a stunning valuation of “zero.”

During the COVID-19 pandemic, the online education market experienced exponential growth, but just a few years later, what led to BYJU'S dramatic fall? Let’s explore the details.

What is BYJU'S?

Founded in 2011 by Byju Raveendran and his wife Divya Gokulnath, BYJU'S initially started with Byju’s passion for teaching mathematics in face-to-face classes from 2006. Drawing from his background as an engineer, Raveendran aimed to build an online platform to help students prepare for exams. However, it wasn’t until 2015 that BYJU'S truly skyrocketed, coinciding with the growing accessibility of smartphones in India. That year, they launched the app “BYJU'S: The Learning App,” optimized for mobile use, which became an instant hit.

Focusing on the K-12 education market, they rolled out services where parents could monitor their children's academic progress, and by 2018, BYJU'S amassed over 15 million users. The company’s growth was accelerated further during India’s strict lockdowns, as physical schools were forced to close, pushing more students toward online education platforms like BYJU'S.

By early 2021, BYJU'S user base had surged to over 80 million, and in early 2022, this number had expanded to 150 million. In March of the same year, major investment firm BlackRock, among others, contributed $800 million, propelling BYJU'S to a valuation of $22 billion.

Valuation Collapse: From $22 Billion to Zero

Recently, BlackRock re-evaluated BYJU'S value, concluding that it is now “zero.” This was revealed in a filing with the U.S. Securities and Exchange Commission.

During the pandemic, BYJU'S aggressively expanded by acquiring six companies between 2021 and 2022, investing over $2.5 billion in total. Yet, by the latter half of 2022, with the pandemic subsiding and economies reopening, the demand for online education began to taper off.

BYJU'S Faces Internal and External Crises

The unraveling of BYJU'S problems became apparent in June 2023. Deloitte, their auditing firm, abruptly terminated their contract, which was supposed to run until 2025. Around the same time, three key investors—Sequoia India (now Peak XV Partners), Prosus, and the Chan Zuckerberg Initiative—resigned from the board.

Since October 2022, BYJU'S had already laid off over 5,000 employees, amounting to more than 35% of its workforce, and multiple high-level executives had left the company. These departures led to severe operational management failures, with delays and errors in financial reporting becoming widespread.

Although BYJU'S claimed that Deloitte's exit was part of a planned transition, Deloitte cited the company's delayed and inaccurate filings for fiscal 2021 and 2022 as reasons for ending the partnership. External board members had also provided warnings and advice, but the leadership team failed to take corrective action, leading to their eventual resignations.

Even after the financial reports were filed, the CFO and CTO resigned. Issues surrounding documentation for international transactions also surfaced, resulting in $1.1 billion in penalty notifications. In February 2024, key shareholders held an emergency meeting, where all resolutions, including the proposal to remove the CEO, were passed unanimously. However, BYJU'S dismissed the decisions of the meeting, arguing that none of the founding members attended, thus rendering the resolutions invalid.

Financial Instability Continues

Meanwhile, BYJU'S continued to deplete its funds and had to delay employee salaries, necessitating further fundraising efforts. The company reduced its valuation by 99% and raised over $200 million. However, India’s corporate tribunal ordered that the funds be held in a separate account due to ongoing litigation by four major investors.

Additionally, BYJU'S U.S. subsidiary is embroiled in bankruptcy proceedings, with allegations of financial misconduct further complicating the situation.

As a result, both BlackRock and HSBC, another financial institution assessing Prosus' holdings, concluded that BYJU'S is now worth nothing.

Is there hope for BYJU'S recovery?

BYJU'S is struggling with liquidity issues, including unpaid employee salaries. In an email, CEO Byju Raveendran acknowledged the delays in paying teachers but expressed hope of making a small payment soon, while promising to fully compensate employees once the company’s finances are back under control.

A Lesson in Investment Risk and how investors are Blind

In my view, this entire ordeal is a demonstration of irrational investment behavior. Many investors rush into a company simply because others are investing, often without properly evaluating its true worth. When a company becomes overvalued, as was the case with BYJU'S, these same investors can fail to prevent the excesses. It’s a stark reminder of how dangerous herd mentality can be in the investment world.

The question remains: Can this once-dominant EdTech giant turn things around and recover?