In a stunning turn of events, Byju’s, the Bengaluru-headquartered edtech startup once valued at $22 billion, is now willing to slash its valuation to below $2 billion as it seeks new funding. According to a person familiar with the matter, Byju’s is looking to raise $100 million to $200 million through a rights issue, with CEO and co-founder Byju Raveendran potentially investing as well.
This willingness to significantly lower its valuation is a major shift for Byju’s, which was once considered the shining star of India’s startup ecosystem. In the past year, the company has spent over $2.5 billion acquiring several firms globally. It was even touted by investment bankers to have a potential valuation as high as $50 billion, as reported by TechCrunch.
“Byju’s is willing to cut the valuation is a stunning reversal of fortune for the startup, once the poster child of the Indian startup ecosystem.”
A spokesperson for Byju’s declined to comment on the matter.
The pursuit of new funding has been ongoing for nearly a year, with Byju’s previously in the final stages of securing $1 billion in funding. However, the talks fell through after the company’s auditor Deloitte and three board members resigned. As a result, Byju’s ended up raising far less, only about $150 million, and had to repay the full committed amount to investor Davidson Kempner after a technical default on a $1.2 billion term loan.
Recently, asset manager BlackRock disclosed that it has cut the value of its holding in Byju’s, leading to an implied valuation of roughly $1 billion for the Indian startup.
“The startup’s original plan to go public in early 2022 with a potential valuation of up to $40 billion was derailed by market conditions and global events.”
A source familiar with the matter revealed that the decision to put the IPO on hold was influenced by Russia’s invasion of Ukraine in February, which caused the markets to decline. As a result, Byju’s has also faced increased pressure from investors to address previously unresolved issues.
Over the past decade, Byju’s has been supported by more than a dozen prominent investors, including Peak XV Partners, Lightspeed, UBS, and the Chan Zuckerberg Initiative. The company initially gained popularity in India thanks to its innovative teaching methods, which involved using real-life objects such as pizza and cake to explain complex concepts. In total, Byju’s has raised over $5 billion in equity and debt.
However, the current state of affairs paints a grim picture for the once thriving startup. Along with struggling to secure funding, Byju’s is also facing challenges in meeting payroll and repaying its billion-dollar debt. Last month, the company disclosed that it missed its revenue target for the financial year ending in March 2022. And in July, major investor Prosus publicly criticized Byju’s for not evolving enough and disregarding their advice and recommendations despite multiple attempts.
