The economic growth of India largely depends upon the various sectors of industry. Approximately 4-5 per cent of GDP is contributed by startups. Where we aim to be the world’s third-largest economy, the onus lies on Indian organisations as one of the key determinants of microeconomics. The governance and product in any organisation confirm significantly to frame a sustainable model for any startup, be it bootstrap or funded.
Recently, one of the famous startups, Byju’s, has made everyone’s eyes roll. Byju’s was founded in 2011 by Byju Ravindran and Divya Gokul Nath. The famous online education and learning app started with the value proposition of being a learning app for their customer. In 2018, the app was able to gather many customers and subscribers. As per the sources, the venture-funded startup earned revenue of $188.8 million in 2018-19 and unapologetically boomed during the Covid-19 pandemic. The shift to an online mode of work made Byju’s attract potential customers. The pandemic made the industry witness VUCA and drifted both external and internal environments in edtech. Students and parents as their stakeholders and other potential customers were looking for quality engagement because of available time. As per industry experts and economists, the tutoring industry was seen garnering big revenues per their services. A transition from ‘In Person Learning’ to ‘Virtual Learning’ made Ravindran expand his entrepreneurial journey by acquiring small fishes of the industry. Was that a wise decision?
The acquisition cost of White Hat Junior was $300 Million, Aakash $950 Million, Great Learning $600 Million, EPIC $500 Million. So, all in cost was 200 billion dollars. The venture-funded startup has a series of top investors like IFC, Aarin Capital, Qatar Investment Authority, Owl Ventures, Tiger Global Management, CPPIB, Black Rock, CZI, and many other global stellar lenders, so even had Lenders; these investors look for high standards of Corporate Governance, Ravindran invested in marketing and branding with his ambitious goals.
The operating costs and expenses were optimised at the cost of their employees by the easiest and most convenient practices of Lay Offs. By 2022, they have laid off 2,500 of their task force. Although Lay off is considered to be normal in the industry, it normally happens when investors decline to fund and invest, so the expenses should have been looked after. These are the Red Flgs in Venture Funded Startups and if the auditing and governance form a strong foundation of startups, they are able to mend their ways.
Byjus also failed to envisage that environment was bound to take a complete U-turn after the pandemic, as everyone was looking for a comeback to offline mode. Although Byju’s attracted lots of glamour by collaborating with Shahrukh Khan and Lionel Messi (they also claimed to be the official sponsor of the FIFA World Cup in 2022), all that glittered wasn’t gold.
An Indian Startup Byju’s was roaring to the heights as a top unicorn and Ravindran was one the top business tycoon, yet, there was a decline in the value proposition of Byju’s. Customers were furious and felt cheated by the decline in the quality of the services. Various reports suggest that employees were found forcing customers to buy certain programmes. Entrepreneurship flows on the sentiments and values of their local stakeholders. Never forget the most infamously famous cases of Sterlite Copper- Vedanta and Satyam. Both have their strong reasons for failing to look after their stakeholders and failing in audits and governance. As per the sources Prosus NV, one of the earliest investors, left his board seat because of a lack of governance and not listening to the board of directors. The unicorn posted a loss of 327 million dollars which is 17 times more than the previous year. It lost its reputation and trust when the parents reported the legal issues and scandals. The investors in the US also filed suit against them, and it fell into deeper financial troubles.
Ambitious Indian startups look for funding to expand and once the investors fund the venture, corporate governance plays a big role in fortifying the interest and trust of the investors. Budding startups and entrepreneurs must draw lessons from such misadventures and develop their entrepreneurial mindset to strike a balance between cost, stakeholders, and governance to sustain in the ever-competitive environment.
