đ« Byju's: What the Bejesus Happened?
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Hello,
Happy July. đ
As youâll know, Iâm often mystified by what I see in the tech world. Many a global dinner table has been regaled with tales of my mystification, I like to imagine.
See, itâs easy to feel overwhelmed - even intimidated - by what we see in technology. We are led to believe that if a company is âvaluedâ at some exorbitant number, they must be doing something right. All of the language and imagery are designed to create awe.
Iâd like to say Iâve overcome this and metamorphosed into a Nietzschian Ăbermensch, ready to dish out reality in limpid prose. Actually, I fall into the same traps.
Iâm building my own startup, Novela, and I am perhaps excessively simplistic about things. I want to, you know, bring in money from happy customers and use that money to make the product better and then find more soon-to-be-happy customers. (Do get in touch if youâd like to know a little more, by the way!)
It doesnât seem like this is how tech businesses function these days, and I find it difficult to understand how some of them remain a going concern. But, I assume somebody must know what theyâre doing, right? Itâs probably some complicated financial model I canât understand.
Except sometimes, they really are just chancers. Other times, theyâre worse.
Iâll be looking at a couple of such businesses, my detective hat askew and my monocle firmly in place, in todayâs edition of hi, tech. đ§
However, we shouldnât forget that these companies only operate in the way they do because thatâs what the system rewards. They arenât doing it out of an ideological commitment to the grift. Lâarnaque pour lâarnaque, as the French might say but never actually did.
One cannot help but be reminded of Ciceroâs turn of phrase: âPoliticians are not born; they are excreted.â
One could say the same of the so-called unicorns, if youâll forgive the imagery.
First up: Byjuâs.
Whatâs Byjuâs?
Given how big they are in India, itâs surprising how little-known Byjuâs is - in Europe, at least. They sponsor all manner of sporting events, including the 2022 World Cup, and theyâre all over Indian cricket.
The most common theory Iâve heard among European sportswatchers is that itâs probably something like Wish.com. They could Google it, sure, but whereâs the fun in that?
Founded in 2011, Byjuâs is an e-learning platform. It is backed by Mark Zuckerberg (*alarm bells ringing*) and it was started by Byju Raveendran and Divya Gokulnath. Yes, he named it after himself. Is anyone surprised? Honestly, that should have been enough to scare everyone off.
Iâm just imagining if my partner and I started a business and I called it Clarkâs. It wouldnât happen, and not just because some shoe company already owns the company name.
Byju saw how big the e-learning opportunity could be while he was teaching maths to schoolkids in sports stadiums. Yes, 25,000+ kids were attending stadiums to learn their algebra. He figured, not incorrectly, that he could reach even more people by going digital.
The company secured big-name backing from international investors within its first few years, then expanded very aggressively within India.
>75% of Byjuâs self-reported income still comes from India, but it has partnered with Disney to enter the US market:
Byjuâs has been a significant promoter of the horrific âphygitalâ portmanteau, but basically it believes in the âblendedâ learning experience. As the Disney image shows, the child works with a standard notebook but they also have an iPad-style device that gives guidance.
Youâll notice the little red clip-on appendage on the iPad in the image. Byjuâs bought Osmo for $120 million; the latter creates computer vision technology that can view the childâs workbook and assess their progress.
They claim to have over 150 million students today and the focus on school-age children. There are 1-on-1 tutoring sessions, classes, and supposedly âpersonalised learning pathsâ.
I have always struggled to get a grasp on how they can possibly justify a valuation of >$20 billion. It had over 58,000 staff in 2022 and in its last financial records (FY21), its losses were more than double its annual revenues. Those revenues were estimated at roughly $630 million at the time.
We still donât know what the figures are for FY22, which brings us to the apex of this story.
The recent scandals:
So, Byjuâs has taken a leaf out of the standard âblitzscaleâ VC playbook. It took on a huge amount of investment (Crunchbase reckons over $6bn of the stuff) to try and seize control of a nascent, tech-driven market. Like a lot of businesses, it somehow assumed that the pandemic trend of âonline-first everythingâ would continue.
Instead, it has found itself in a vicious cycle. It continues to take on more investment to try and chase its losses in a shrinking market. The company is now trying to cut costs, which reduces its capacity to grow its revenues, all while its interest payments to lenders swell.
Things must be gloomy: Byjuâs own auditor, Deloitte, resigned because the former wouldnât share its financial records for FY22. And most recently, every non-family member of the Byjuâs board stood down. The companyâs new valuation is closer to $5bn, and thatâs before we see how itâs really doing. The company says itâll get round to filing those records in September.
The signs were all there, nonetheless. But thereâs more money to be made inflating a bubble than bursting it.
For example Byjuâs has used âquestionableâ sales tactics - hereâs the opening of just one 2022 article:
âIndiaâs federal child rights commission has accused the countryâs biggest online education company, Byjuâs, of harassing parents and their children through cold-calling and threatening and forcing them to subscribe to their courses.â
I say âquestionableâ, but these ethics would raise eyebrows in the court of Caligula.
Byjuâs was buying the phone numbers of parents - and when it could, the phone numbers of children - to harass them into subscribing. Parents then ended up with unexpected, exorbitant bills. One victim posted on Twitter, âI've decided now to expose Byju's fraud to every parent".
Another shared their Byjuâs experience:
âAfter taking up the online classes with Byju's my daughter has a lot of mental pressure, which is also taking a toll on her health. I tried cancelling the subscription but of no use.â
And then the staff got involved - one posted on social media:
âI remember skipping meals because of the pressure and torture... if the unrealistic goals werenât achieved, they would ask us to resign in the next 15 days.â
Theyâve been doing more than asking people to resign recently, too. The company was under fire in October 2022; in the same month it hired Leo Messi as a global ambassador (when has he ever turned his nose up at grubby money?), it fired 3,500 staff. Priorities, eh?
Things are so bad today that one employee says, "Right now, the situation is so dismal, subordinates are sitting with their managers and job hunting."
No-one knows how many staff remain, but the running estimates put it below 25,000 now. The company has defaulted on some loan repayments and is now suing some of its New York creditors.
What this all means for Byjuâs and EdTech:
Iâm slightly more sympathetic to this individual company than it might seem. Iâve been reading about it a lot and the word âpressureâ is prominent.
A former Byjuâs executive said recently, âByju could never say no to more money, even when it was not needed. Greed took over.â
I wouldnât seek to explain away their toxic work culture or horrendous sales tactics. However, I can see how a company gets caught in this trap and cannot get out. I have met casually with a few VC types over the past few years and we talk a little about my Novela business, although Iâm always very distant about it.
The VC people of course tell me how Iâm not solving a âVC problemâ, not that I asked. I have to see it as being worth many, many billions to get their investment. If I did want their investment, itâs easy to see how I would get it. Tell them what they want to hear.
They do know most of these founders will turn out to be wrong; they just need one to tell the truth, whether by accident or otherwise. That will handsomely pay for all the failures along the way.
I can see why other people are inclined to play this game, in the hope of figuring out the details later and making the business model work. And once youâre in, youâre in. The pressure mounts. Pressure makes people do quite awful things.
To my mind, one huge problem for Byjuâs was that education and the traditional VC growth model have contrasting purposes. VCs want to treat education in the same way they would treat âdisruptingâ the hotel industry, or dating, or sports apparel.
That explosive growth in users can hardly align with substantive education. It is also not how people make decisions about their education, hence the ridiculous pressure from Byjuâs on its own salespeople and customers to try and bludgeon their products into a VC-friendly sales cycle.
There are questions about corporate governance now too, but in reality nobody was looking into Byjuâs before it all went really wrong. I wasnât even writing this article.
Some very serious investors got involved in Byjuâs, including Sequoia Capital (of course) as well as the Chan Zuckerberg Initiative. These are influential institutions who can sell a story to the media, all in the name of shoring up their investment - and hopefully selling it to someone else at a profit in the future. Any questions can have a damaging ripple effect, since the whole thing is ultimately a house of cards.
This status quo might be set to change, out of necessity. Rising interest rates mean VCs canât get hold of cheap money to fund cash-burning start-ups. For now. I donât believe any systemic lessons have been learned through this process, though.
So we will have some talk about âfundamentalsâ and a realistic path to profitability, but the incentives are still there to attract the next Byjuâs.
On that note:
Google Accused of Deceiving Advertisers Over Video Ad Placements
A new report finds that:
âAdvertisers including Fortune 500 brands, the US federal government, and many small businesses may have been misled for years about Googleâs proprietary TrueView skippable in-stream video ads. This misalignment may have cost media buyers up to billions of digital ad dollars, which were ultimately spent on small, muted, out-stream, auto-playing or interstitial video ad units running on independent websites and mobile apps.â
The report shares examples of huge brands, for whom only 16% of their video ads were running on sites that met Googleâs own quality standards. On average, they reckon most brands are misled about 80% of their video ad spend.
And as we move towards the black box of âPerformance Maxâ, this will only get worse.
Hereâs how one American Express ad was running, when the brand thought it was running full-screen on YouTube:
Apparently, âThis discovery has sparked outrage among advertisers who were under the impression that their ads were being displayed in safe and reputable digital environments.â
Were they? I understand that they are the victims here and Googleâs monopoly leaves them with few alternative advertising options, but Iâd be surprised if anyone in-the-know were clutching their pearls over this. Itâs a swindle thatâs been hiding in plain sight for over a decade now.
Hey, Itâs Not All Bad! đ
They think theyâve found a picture of an ancient pizza in Pompeii:
They didnât have tomatoes, but it does look like some sort of flatbread dish. And a previous discovery found what looked like a proto-pizza parlour, too. đ