Daybreak - How Byju’s growth-hacked its way to bankruptcy court

Episode Date: July 25, 2024

Once valued at $22 billion, Byju's, is undergoing insolvency proceedings initiated by the National Company Law Tribunal. This is over a $19 million payment default to the Board of Control for Cricket in India. Byju’s could now see a potential buyout or liquidation. It gets worse. A couple of days ago, one of the largest foreign investors in India, the Qatar Investment Authority, requested the Karnataka High Court to block founder Byju Raveendran’s personal assets.To say things are bad is an understatement.The first question that comes to mind is, of course, what happened. But that’s a story that’s been told too many times. Instead, today, we tell you what Olina Banerji, The Ken's edtech expert and writer of our popular newsletter, Ed Set Go, wrote about Byju’s in the latest edition.She took us back to see what made Byju’s the company it became in the first place and the legacy it is leaving behind.Tune in.P.S. – Check out the first episode of the latest addition to our podcast slate, Two by Two, on Spotify, Apple or YouTube!Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Ramon, Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. There was a drinking game for the number of times

that we've heard the words troubled waters and buy juice together. Well, we'd all be drunk out of our minds by now. The company once valued at 20,000, $22 billion is undergoing insolvency proceedings initiated by the national company law tribunal or NCLT. This is over a $90 million payment default to the BCCI or Board of Control for Cricket in India. Bayju's could now see a potential buyout or even liquidation. And it gets worse. A couple of days ago, the Qatar Investment Authority, one of the largest foreign investors in India,

requested the Karnataka High Court to block founder Bayju Ravindran's personal assets. To say things are bad is an understatement. The obvious question that comes to mind then, of course, is what happened? But that is a story that has been told too many times. Instead, today I'm going to tell you what Ullina Banerji, our ed tech expert and the writer of our popular newsletter, Edzat Go, wrote about Bayju's in the latest edition. She took us back to see what made Bayju's the company that it became in the first place and also the legacy that it is leaving behind.

Welcome to Daybreak, a business podcast from the Ken. I'm your host Nick Dar Sharma and I don't chase the news cycle. Instead, every day of the week, my colleague, Rahid Filippo and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 25th of July. It is 2005. You're visiting your hometown and a friend asks you to help them with their cat entrance exam. The NBA bug never really bit you, but you're confident that you can crack the cat.

You do, allegedly, and multiple times scoring in the top percentiles. Your friends are impressed and they tell their friends, their friends tell their other friends, and soon you're teaching people in an auditorium and then a stadium. Where do you go from here? If you are Ravindran, you choose the path least taken. Between 2005 and 2009, the Bayju's lore had grown so much so quickly that the company began to record and sell video lectures to those who could not attend the sessions in person. But why was Bayju's so popular with Kat and UPSC students?

It was the power of the hack. In a long and rather candid YouTube conversation, Arjun Mohan told another entrepreneur that the company's core team of teachers were focused exclusively on how to crack the exam. It was an ability to work backwards from the answer and use a bunch of shortcuts to get the highest score possible. Mohan was Bayju's most recent India CEO, but he's been a part of the company since its inception and he formed the first coterie of leaders at Think and Learn Private Limited, the parent form of Bayju's. He did leave for a bit in between for a stint as Upgrad's CEO. So the hack method is something that Bayju's applied to its kindergarten to 12 school material as well. Bayju's wasn't the first or last education company to teach to the test.

But they were the first to use digital means to scale up. Mohan recalled how the initial team that did the recordings would often work weekends to get the content up and running. In the YouTube interview, he said, and I'm quoting, we recorded 110 hours of content in two weeks, end quote. But why is Zulina bringing all of this up? Because she says hacking through an exam became a metaphor for how Bayju's wanted to hack growth from the very beginning. The initial focus which went into building a superior product shifted quickly to scaling. Had Ravindran never met his first few investors, Ranjan Pai from Manipal Group and Aaron Capital, could this story have looked different? Ravindran has been known to give his at tech contemporaries the same advice at conferences.

Scale as fast as possible, the rest will sort itself out. Stay tuned for more on the start of Bayju's famous or rather infamous sales culture. During the interview, Mohan was pushed. albeit gently on the sales culture that spawned from the aggressive growth targets. He was quick to say that he wasn't there when the alleged fraudulent loan practices were afoot and that there may have been a few cases. Bay-U's representatives have also maintained the few bad apples line despite overwhelming evidence to support the contrary.

What Mohan does lay out in the interview plainly is the plan to target their consumers. No one knew what ed tech or online education was when Bayju started selling its kindergarten to Class 12 product. The sales team could not provide a visual cue over the phone. So Bayju sent its agents into the field. They would knock on doors, counsel parents about the gaps in the Indian education system, and offer byju's as a plug that would fix the hole in their child's conceptual understanding. The demo was home delivered and the consumer was, just had to sit back and watch.

There are two things that Bayju's did here to boost its sales. One, Mohan said, it created a one-of-a-kind loan product with Bajaj to trigger an EMI plan for parents who could not afford to pay it all upfront. This insight came from parents when they asked the Bayju sales staff if they could pay per semester like they did with school fees. Now, we all know how this developed into a massive loan crisis. for Bayju's, but at its inception, the plan helped to sell the product faster. The second and the deeper insight, according to Ulina, was how Bayju's used TV ads to sell an

online product. Mohan said it felt counterintuitive at the time to spend big money to book Shahruk Khan for a TV spot. But Ravindran was convinced that it would work. The idea went something like this. Families gather in front of their TVs in the evenings to watch a soap or the news. It is the one hour in the day that the kid has access to a parent's phone. We're talking about 2015, so phones and data were not as ubiquitous. When the byju's ad pops up, the kid is going to Google the name and sign up. The appeal would lie in the message mouth by the superstar about falling in love with learning. Kids would recognize that this time. of learning online on a tablet was more in tune with their generation.

With one ad, Bayju's was going for brand recall with the parent and lead generation with kids. We can argue about the ethics of selling educational content like you would shampoo, but there is something to be said about the marketing and sales juggernaut that Bayju's built in the early years, which later contributed to the internal combustion of the company. In the interview, Mohan skirted the question about the people. toxic sales culture at Bayju's. But he did venture this. The pressure to sell was directly proportional to the pressure to grow.

He said, and I'm quoting, I estimated there were 5 to 7 million students we could sell to out of the 260 million school-going kids in India. Beyond the first 5 million, students do not pay or pay very little for education. End quote. Ravindran and his team knew this. So, pushing an expert. expensive product to people who could not afford it meant the sales team had to push the loans to.

Mohan said that if Baidu's had done a physics walla and created a cheaper product or followed Anacademy's path of course-wise subscriptions, things would have looked different. What's puzzling about all of this is a question of who is Ravindran listening to as he set himself and the company on this aggressive growth path. Didn't his investors see this cliff coming? didn't his star? Of course, that begs the question, was Bayju's even listening? Stay tuned for more on this. In Mohan's estimation, Ravindran is a visionary. He's an inspiring leader and a manager who gave his team the freedom to experiment with new ideas. But what Mohan said about his former boss

at the beginning of the YouTube interview does not square neatly with the rest of his testimony, indicating that there wasn't that much room to disagree with Reveneran said, and I'm quoting, Bayju's board was family members and a few investors. End quote. Ravindran drove the company into multiple acquisitions in pursuit of unbridled growth. Mohan talked about how there was no conversation about the potential revenue, potential cash flow, there was no control on cost.

But he also suggested that all their tech companies were doing. doing this. Baidu's just did it at a much larger scale. If Mohan was the operational head of the business, Ravindran maintained full control over its financials. And we all know how that went. The top-down way of taking decisions also impacted the bench strength in the company's top ranks. There were just not enough leaders to run operations across 21 countries. At one point, Mohan said he was running six major subsidiaries as the same. CEO, which included the heavyweight acquisitions of Akash and Great Learning. Running such a scaled-up operation needed several leaders with the requisite business expertise

and byju's hadn't really paid attention to anything but growth. The moves to grow were made with exuberance and optimism, but not a lot of deep business insights. The subtext of Mohan's comments is that Ravindran was too preoccupied with growth and no one told him to take a step back until it was too late. Now, Mohan is clear that this growth obsession was not by juices alone. Almost every ed tech company felt prey to it. There is an argument to be made here that the same investors, fueled by competition and formal, drew up the stakes for all the air techs in play.

Potentially, Ravindran got stuck between playing visionary and an operator. On one end, the VCs pumped up his visionary credit. by putting him on a pedestal, but on the other end, he had not created enough leadership or bandwidth for his company to meet his vision. It is too premature to say whether the company will survive, and if it does, in what form? Beyond the BCCI, there are other creditors who need to be paid. Like Olina says, Ravindran has fallen a long distance off the pedestal, and the path to redemption seems hard.

Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-undi offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snigda Sharma and edited by Rajiv Sear.