Byju’s co-founders Byju Raveendran and Divya Gokulnath
Byju’s, India’s most-valued startup, has been surrounded by controversies since last year as the edtech titan came under fire for a number of reasons including accounting irregularities, alleged mis-selling of courses and mass layoffs.
In fact, the last six to eight months have particularly been tough for the company, with its founder Byju Raveendran having sleepless nights amid rising criticism over its accounting controls and sales strategies.
However, Raveendran, and his wife and co-founder Divya Gokulnath are confident of turning the tide and are anticipating a “much better” 2023 for the world’s most-valued edtech firm. Raveendran and Gokulnah expect Byju’s to turn profitable on the company level over the next quarter and achieve profitability on a consolidated level by the next fiscal.
In a candid chat with Moneycontrol, on the sidelines of The World Economic Forum 2023 annual meeting in the Swiss ski resort town Davos, the two founders talked about what’s in store for 2023 and how they see Byju’s evolving in coming years. They also said that the FY22 (2021-22) revenue and profit numbers of Byju’s will “surprise everyone”. Edited excerpts:
Can you give us a sense of how 2023 is turning out for Byju’s because for startups in general, the year has started off on a weak note with many companies laying off in masses?
Raveendran: 2022 has been a tough year for us. So 2023 can only be better for us. We are fast moving towards sustainable long-term growth, with strong fundamentals. So 2023 is going to be a much, much better year for us in terms of both India as well as some of the core segments which we have started scaling up in other markets.
Gokulnath: In terms of building, we’re building for the way in which students are learning now — the new way of learning, which is hybrid. So we launched 300 hybrid learning centres last year and we plan to do 300 more this year. We are adapting quickly to the new normal, and if anything, I think the last six to eight months have been very nice for us in us going deeper and going broader as well in terms of what we have to offer students.
What kind of traction are you seeing for your core service, which is online learning?
Raveendran: Unlike the Covid pullback that you see in certain segments of edtech, our core segment which is K-12 and learning at home, we see continued momentum. We saw growth from 2021 to 2022 and that’s continuing in 2023. We have added (offerings) to make sure that all types of students can learn from us. We have added more formats, and that’s what we were talking about in terms of even hybrid centres.
After seeing the success of the hybrid model in Aakash, after the Aakash acquisition, we saw that there is an opportunity to scale that even for K-10 (kindergarten to class 10) segment.
There are certain sectors in edtech, not necessarily in India but in other parts of the world, where there is a Covid pullback. There’s a narrative going around that people are earning more so they are not learning. But those things are not applicable. This is a recession-proof segment. Beyond that, I feel these are very early days for edtech. The pandemic did accelerate edtech penetration, but even then it’s still a single-digit penetration in terms of the number of students that are learning from online platforms.
Would you say the worst is over for Byju’s? Or is there some cleaning up still left?
Gokulnath: If I have to say that in one sentence, we have learnt a lot in 2022. We are pioneers in edtech and not in perfection. So there are a lot of things we have learnt. We have learnt as we have grown, we have built on first principles, there was no rule book to go by.
What the pandemic did solve was awareness. Post the pandemic, we have a lot of awareness and so we are also shifting to a new model where we don’t really need to go to someone’s house to create more awareness. We are able to do all of this centrally. So we are bettering our processes, we are learning as we are growing and if anything, you will only see us getting stronger in 2023.
In one of our earlier interviews, you said you had sleepless nights. Has it gotten any better for you this year? Has the pressure reduced?
Raveendran: People always ask me what gives me sleepless nights. I tell them that when you’re privileged to make such a big impact, there is no scope for complacency. So it’s not necessarily because of the pressure that was there for the last six months but it’s rather the excitement. We are in all segments of edtech now. Starting from K-12 where we have Byju’s learning app and Byju’s tuition centres, with Aakash acquisition we entered the test preparation segment, Great Learning acquisition is doing quite well.
Everyone talks about the one acquisition that has not worked well (WhiteHat Junior). But I feel there’s a strong product market fit. But just in new markets we have not figured out the go-to-market strategy, so the customer acquisition cost is high but otherwise, all our acquisitions, including bigger ones, are growing very nicely. At the company level, with a clear focus towards efficient and sustainable growth, by the end of this quarter or by early next quarter, our aim is to achieve profitability. Most of the subsidiaries have already turned positive.
So you will be able to achieve company-level profitability by which financial year?
Raveendran: On a company level, by the end of this quarter or early next quarter we will be able to achieve profitability. On a consolidated level, we will be profitable by the next fiscal year. One thing which I will call out here is, in the first five years you could see a clear trend towards growth.
We were very close to profitability in 2020 and then we focused a lot on faster and inorganic growth, we made six large acquisitions, there were a lot of one-time acquisition costs, apart from the revenue recognition change which made the loss look much higher than it is. You will see both moving in the right direction. Continued growth and losses coming down, where we will start hitting profitability.
Last six years, our focus was also on creating leadership position in most of the segments, where we prioritised growth. Now we are making a shift towards a balanced approach where we still grow but with more efficiency, and that’s in the DNA for us as we were bootstrapped for the first 10 years.
You have taken a lot of measures to cut monthly burn recently, just like many other startups. You laid off about 5 percent of staff last year and also made changes in performance policies. What else are you going to do in the coming quarters? We have heard that there could be another round of layoffs so we wanted you to clarify on that as well.
Gokulnath: If you look at cost optimisation, there are three big areas. One is marketing and branding spends, and then there is operational spend, and then finally there’s the cost which is associated with the so many acquisitions that we have done. So there’s a lot of role duplicacy involved. That’s why we went with that three-pronged approach to ensure that we achieve profitability by the coming year.
For us, if you look at the marketing, we have a huge top-of-mind recall. So we are going to focus more on ensuring more people understand what value we have to offer. We have products from three-year-olds all the way to 40, so there’s so much length and breadth to the offering. So we want to focus more on educating people about the value that Byju’s adds.
We’ve seen that from students who are using our products regularly (that Byju’s adds a lot of value). The NPS (net promoter score) is as high as 70. So the indicators are very strong in terms of the usage, the outcomes, the grades and the love for the product. So now, what we want to do is ensure that it reaches more and more people. So the focus is going to be on ensuring that we move towards that path.
Raveendran: So there’s optimisation possible still across all fields. But the biggest optimisation that you will see over the next few months is that you will see us significantly cutting down branding because we think we have achieved the kind of brand awareness which is required for the segment as well as for the company. So you will see us exiting some of those branding contracts.
We won’t renew some of the partnerships. We have multiple partnerships with BCCI (Board of Control for Cricket in India), ICC (International Cricket Council), and FIFA and by taking out these branding initiatives, by not renewing them, that’s where you will see a lot of improvement.
So, the core business is profitable. Aakash has always been profitable, Great Learning is a bootstrapped company where we created additional growth.
In terms of growth, are Aakash and Great Learning growing at a faster pace than core?
Raveendran: Core has a much bigger base. So comparing the two might not be right because the core business is like multiple x of the size of Aakash. On a lower base, Aakash is growing slightly faster than the core business but if you put all together also you will see us growing at a very good pace.
We’re still figuring out how to find that balance between growth and still keep it profitable but you will see us growing over the next many years. Actually, last year was good. Most of the things that got reported were based on the previous year. So 2021-22 numbers, once they are out, you will see.
Talking about the numbers, when are you filing your FY22 results?
Raveendran: I’m not gonna give a timeline on that but the numbers will come out soon and everyone is in for a surprise.
But you will be doing it when? This quarter, next quarter?
Raveendran: I am not commenting on the timelines but you will see both revenue growth and loss moving in the right direction.
There was a lot of expectation around Byju’s hitting the public markets soon, there was speculation that Byju’s might take the SPAC (special purpose acquisition vehicle) route. We reported on Aakash’s listing plans. So where are things as far as Aakash’s IPO is concerned, in terms of the valuation, where does it stand?
Gokulnath: It’s too early to comment on the exact details of everything but I should tell you that we have the luxury to decide when we want to list and including all our subsidiaries and how and where. So maybe when we have a little more clarity, we will give you all the details.
Raveendran: Basically there are so many options. Because Byju’s is not a single company. We have six brands and a listing of Aakash is something which we are seriously considering and you will hear about it sooner than later.
How are you going to reassure your various stakeholders and I’m not just talking about the media but investors, employees, former employees and other stakeholders that Byju’s is going to be this enduring enterprise that will last for the next five years, 10 years or even 20 years?
Gokulnath: The question is more relevant to the people that are closer to the action —employees and investors. If you look at the core team, from the first 300 employees, 260 people are still with us, nobody from the founding team has left, none of the investors have left.
So if you ask me, the people closest to the action, those who know the reality, who know how it’s growing and as an organisation and as a group of companies, we know that we are stronger than ever and I mean even though the macro is changing so much, we have a strong enough foundation because we were not built for the pandemic or we were not built for a situation like this, so education has always been recession-proof or any proof I would say even pandemic-proof, and those closest to the action actually see this.
Raveendran: Those who are closest to the action are not anxious at all. What do you see when there are real issues on the ground? What’s the first thing you see? You see top-level exits. There has not been a single top-level exit in the last 12 months even with so much noise in the media.
Let the world think that edtech is struggling, Byju’s is struggling, give us six months and take it from there.
We have segment-leading offerings across important segments in edtech. Challenging times like this is a big advantage to the segment leader. So now the macro is very challenging but we have changed our focus towards achieving profitability. And in the next three to six months, you will see that. Out of the 70-plus investors that we have, there’s not a single exit.
Gokulnath: If companies have to fail, it’s more often due to internal reasons than external reasons.
So Byju’s is not going to fail?
Raveendran: There is a strong founder mentality. It’s not just about me or Divya (Gokulnath). What helps us face all these challenges is the fact that there is a lot of ownership in the company. We have significantly improved the founder mentality.
Gokulnath: We have also added in subsidiaries with founders who add to the compounding fundamentally so we have top founders who are now with us in the same mission of making sure we add more value.
Raveendran: If you’re building this just as a business, just to make money, then after some point of time, founders themselves lose founder mentality. We are here not as sellers, we are here as buyers. You give me money I will put that back into Byju’s.
And, you are doing that we believe. Why the move to buy back shares in Byju’s?
Raveendran: For buying back I also need to find sellers, we have increased ownership by infusing more primarily in the last six to eight months, we have added 400 million ($400 million) back into the company. So we are clearly increasing our ownership, which is now close to 25 percent. Now, if someone is giving me money, there’s only one place I’m gonna invest, it’s Byju’s and only Byju’s. Because what we are trying to build is something which will last for decades.
We have strong support from our core investors and it’s a long way to go. When there’s so much to do, when you know that you are privileged to make an impact, there’s no scope for complacency.
Now, I don’t know how long it will take for us to become successful in some of the new areas and markets but there’s no time pressure, it could be 10 years, 20 years, 30 years. If you take that kind of view, everything will work.
Gokulnath: We started as teachers but we are also learners ourselves. We learn every day. We have never given up that learning spirit. So we take every day as it comes, every month as it comes and then we are growing and also the responsibility is so much.
We are a team of 50,000 people, we have millions of learners with us, and on the other end of the spectrum, we have five-and-a-half million students who are learning for free from the remotest parts of the country.
Over there their marks are improving, their grades are increasing, they are falling in love with learning. The responsibility is too much. If it was 100 percent, we will put in 200 percent and we will make it happen.
