Amid the slow deflation of the global startup bubble, a little-known edtech company seems to be defying all odds on its way to decacorn status.
Think and Learn, the owner and operator of learning app Byju’s, expects the platform’s revenue to reach about US$200 million for the year to March this year. That’s more than a three-fold jump from the about US$64 million revenue it earned a year earlier, chief operating officer Mrinal Mohit tells Tech in Asia.
If those claims look a little tall, imagine this: Byju’s expects its revenue to double to about US$400 million by March 2021.
Mohit says increasing demand for tech-based educational aids in India is boosting Byju’s growth. “Every year, we realize that the segment is much bigger than what we thought before,” he says.
There are some 500 million people in India aged between 5 and 24 years old, according to the India Brand Equity Foundation (IBEF) – a government think tank. “This provides a great opportunity for the education sector,” it says in its industry report.
India is now the second-largest market for e-learning after the US, IBEF reports. The e-learning segment is expected to reach over US$1.9 billion by 2021, with around 9.5 million users.
The profit mantra
Byju’s has set a blistering pace of revenue growth, and its operating margins are at about 30%, Mohit says. That’s an enviable number for most global startups that are struggling to turn profitable. Margins are high due to the low cost of production relative to the scale, says Mohit.
The pivot toward profitability for tech startups came in the wake of the WeWork fiasco, when the co-working startup pulled its initial public offering after struggling to sell shares at a reported valuation of US$10 billion.
In 2019, total funding for technology startups dropped by 22% from a year earlier, according to research by startup accelerator HexGn. Asia “bore the brunt” with investments down 47%, and deals down 27%, it said.
But education tech companies are defying this trend.
About one-third of edtech companies attracted venture capital funding in 2019, with 1,019 firms raising US$14 billion cumulatively, according to research firm RS Components. Byju leads the pack.
In February, the 15-year old company was valued at about US$8.2 billion, following a fresh US$200 million funding by private equity firm General Atlantic in its series F round.
Handling the pressure
Byju’s content is strong enough for the company to not cut corners despite a lofty valuation, says Mohit. Other startups have been in the news of late due to dodgy practices used to clock aggressive growth.
Unlike legacy educational institutions using rote learning, Byju uses online visual aids to explain fundamental concepts in science and math, the COO says.
Given its four-year head start, Byju’s has a strong content pipeline. “Byju’s had literally no competition [at the time],” says Mohit.
It also helped that the initial 300 content producers who joined the company were mostly former students. The team was also focused on the product instead of raising venture capital, says Mohit.
“At the end of the class, if I can solve a geometry question, that is what matters to me,” he shares.
The company’s flagship product, its learning app for grades four to 12, has over 42 million registered users of which 3 million buy annual subscriptions, the company claims. A student spends an average 71 minutes on the app, it says.
The company’s founder, Byju Raveendran, had previously worked as an engineer in a Singapore shipping company. On his trips back home to India, he would coach friends who were taking the notoriously difficult entrance exam to the Indian Institute of Management.
As word spread, Raveendran started teaching more students, often with as many as 800 pupils at a time. On one such occasion, Raveendran was teaching a group of students in a hotel’s banquet hall.
The sheer rush of people to the hotel prompted Ranjan Pai, a partner with Aarin Capital, to inquire with the hotel staff what the fuss was all about.
“Where is the math teacher?” asked Pai. He was surprised to realize that there was no teacher but just a video playing on a large screen, recounts Mohit.
Pai decided to invest in the company to help it scale, Mohit says. Aarin Capital invested US$9 million at the time. Pai did not respond to Tech in Asia’s request for comment.
People always pay you upfront.
Unlike other startups, Byju’s wants to remain focused on its core target audience, Mohit says.
It will double down on the K-12 segment, Mohit says. Even with a projected revenue of about US$400 million in 2021, Byju’s would have only tapped less than 2% of the addressable market, he says.
And it helps to be profitable too. Byju’s is India’s only profitable unicorn. “In education it is easy,” Mohit says. “People always pay you upfront.”
On top of this, the team’s middle-class values mean Byju’s has been penny-pinching in spending the money raised, says Mohit. While declining to share numbers, he says the firm has used only a fraction of the amount.
In January of 2019, Byju’s acquired US-based Osmo, a maker of educational games, for about US$120 million. It was founded in 2013 by ex-Google engineers Pramod Sharma and Jerome Scholler. The acquisition will help Byju’s develop a mobile app that will allow students to scan questions and get answers via the platform, says Mohit. Moving forward, acquisitions will be selective and rare, he says.
Byju’s will expand its medium of instruction from English to seven major Indian languages, says Mohit. That will help it dominate and scale in its home market of India.
In 2020, the firm will also concentrate on becoming a primary source of learning instead of mainly being an education aid. “This year, the vision is to become an at-home learning company rather than just a learning app,” Mohit says. Byju’s will also introduce solutions allowing students to ask questions on the platform, he says.
According to the firm, it won’t be expanding into high-growth and emerging markets such as Southeast Asia and Africa at least for a year. “We don’t want to spread ourselves too thin,” Mohit says.