Ed-tech companies have had a torrid time of late with layoffs, slashing of management salaries, and forced restructuring of loans, and it’s finally showing in company valuations.
Investment firm BlackRock has slashed the valuation of Byju’s to $11.15 billion. Byju’s had last raised money at a valuation of $22 billion, so this represents a 50% haircut in its valuation. BlackRock has less than 1% stake in Byju’s.
BlackRock had invested in Byju’s at a valuation of $12 billion in 2020. Byju’s had then raised funds at a valuation of $22 billion in March 2022. But since then, BlackRock has been cutting the valuation of Byju’s for its internal calculations. In April, BlackRock had valued Byju’s at $17.8 billion, and in October, it had valued Byju’s at $13.5 billion. In December, BlackRock had valued Byju’s at just $11.15 billion, which essentially slashed its valuation in half in 12 months.
Byju’s has had a difficult few quarters. It has fired at least 3,500 employees across multiple rounds. Allegations around it misselling its products to financially vulnerable parents also reached India’s parliament, and the government had even stepped in to ask why the company hadn’t filed its financial results on time. Byju’s CEO was also summoned by India’s child rights body for alleged sales malpractices. Byju’s losses also zoomed to Rs. 4,588 crore in FY21 compared to Rs. 262 crore in FY20. Somewhat incongruently, amidst all this, Byju’s announced that it was roping in football superstar Lionel Messi to be its brand ambassador, and even sponsored the Football World Cup.
The broader ed-tech space hasn’t fared much better. Fellow unicorn and bitter rival Unacademy has fired over 1,500 employees over the last few quarters, and has cut management salaries in a bit to cut costs. Vedantu too has fired over 400 employees. Some ed-tech firms, such as Lido Learning, have shut down entirely.
The ed-tech space is in crisis because the momentum it had garnered during Covid has fizzled out as lockdowns have ended. During the pandemic, students had gravitated from offline coaching institutes to online options. Seeing the surge in usage, ed-tech firms had aggressively hired employees, and looked to grow their businesses. But as the world opened up, these companies discovered that most students returned to offline classes, leaving ed-tech companies — and their investments — in the lurch. It remains to be seen whether BlackRock’s internal valuation of Byju’s affects its valuations at the next fundraise, but the halving of the valuation of India’s most valuable startup indicates the pain that Indian’s entrepreneurial ecosystem is currently going through.