These days, every other forward I get is a link to an article explaining what a big mess India's largest ed-tech company Byju’s is, and how it ended up in a sorry state.
This is not going to be one such.
Sure, hindsight is 20/20. Everyone can speak now, with perfect vision, on how it was always clear to them that Byju’s was going to be in trouble. I remember raising one of those flags myself 3 or 4 years ago.
But let’s go past all that.
Let’s talk about what Byju’s could do to navigate its way out of whatever fix it is in. This is always the harder path.
I had the dubious honour myself of having to work really hard over a few years to try and save a tiny online tutoring startup I’d invested in. This was 2 decades ago. So long ago that the field wasn’t even called ed-tech then.
But it did kinda work out somewhat in the end- though I got a big haircut on the deal and learnt a lesson that online tutoring just doesn’t scale like all the consulting firm numbers say it will.
I’ve invested in a couple more education businesses since – and know that they will take decades – not years – to exit. Even if they’re run by some of the finest people in the field. That’s the way the education business works.
Harvard is almost 400 years old. Oxford is almost a 1,000. And they’re still not quite global successes. Byju’s is barely 10. This business takes time.
To start with – is there a way out for Byju’s?
If I was a Martian and had just landed on earth and was blissfully unaware of missed loan repayments and problems with fiduciary non-compliance and mis-selling and Aakash and whatever else they’re writing about, I’d start by seeing what assets Byju’s has.
Two things stand out for me. One, that Byju’s seems to get 6 times the organic traffic that Harvard does. And 5 times what Khan Academy does. Depending on the sources I look at, that’s between 100 million and 200 hundred million monthly visits.
Sure, a lot of that is from India – but the interesting thing is that Byju’s gets more traffic from the US (20 million a month) than either Harvard or Khan Academy do.
And if you look at search volumes- you’ll see that Byju’s is right up there with Harvard and Oxford. Despite coming many hundreds of years after them.
Sure, one reason for this is crazy SEO – they’re indexed on some 12 million keywords. Even Amazon.com is barely on half as many.
The second reason is that World Cup Football sponsorship made its mark. Today, the site gets more than a million visits a month each from the US, the Philippines and a significant bunch of traffic from other countries where it barely does business: Brazil, Qatar, Canada, Nigeria, Mexico, Australia, the UAE.
So, there’s a strong start point – there’s a base to build a big global brand.
But is the firm worth the $ 5 billion of whatever they’re valuing it at now? That’s not important to me.
Can it be worth more than that much if things are put right? Sure, without a doubt.
The key inequality – the market
Sure, Byju’s get’s 3/4th of its traffic from India – but the average Indian family’s spend on supplementary education is a tiny fraction of what families in the US, Canada and even the Philippines spend on their kids.
My belief is that if Byju’s plays its cards right, it could work to get three-fourths of its revenues from outside India.
Sure, this means a mass shift in the market, the marketing and the sales. But it’s not a massive shift in the product - the academics part of Byju’s.
Many of Byju’s teachers can be pushed and trained to shift their focus from Indian boards and subjects to IB and other global boards. The asset base remains – thousands of trained and online-experienced teachers on their rolls.
Balancing the sheet – making the numbers work
The fact is that you can’t make a unicorn-scale school work where you pay teachers and sales folks more than what other Indian schools do – and then earn less than what other Indian schools do – and still survive.
Which is what Byju’s is trying to do in its current business.
If I had a say – and I do want to clarify I don’t – I’m not an investor or stakeholder in Byju’s in any way – I would look to cut rupee costs in India and grow dollar revenues outside India.
While this may sound like an indictment of the Indian market, it isn’t. It’s just that:
Going from hard-sell on-phone to soft-sell on-line
Let’s say Byju’s continues to get 50 million non-Indian visitors to its site every month. And let’s say even half of these non-Indian visitors are from monetizable countries. So let’s leave aside Pakistan and Nigeria and the like. That leaves us 25 million visits a month. Let’s assume, charitably, that the average punter visits twice a month. That’s 12.5 million unique visitors we’re looking at.
Let’s say we work to convert a small number of them – 1% to start with – into customers who are okay to pay $80 a month or close to $1,000 a year. Let’s say we take 36 months to do it.
If we pull if off, we will be adding 125,000 new customers every month, each paying $1,000 a year. Put another way, that’s $125 million added to the company’s revenue every month, resulting in $1.5 billion new revenue at the end of the year.
Coupled with the company’s current revenue, it will make Byju’s a $2 billion company, about six times bigger than it is today.
And they can do it across the range of school subjects for 10% of the world’s schools. That alone will lead to billions more in potential revenue streams.
Underpaid teachers creating underperforming students is a global issue of concern to billions of parents. Byju’s can use the dollar-rupee inequality (82:1 and going to 100) to pay good teachers in India well who can teach students better in the US, Australia, UAE and the rest of the world.
Even if 1 teacher in India, earning $500 a month teaches 12 students a month, each paying the firm $80, it’s a great business for the firm to be in.
What will it take to do this?
One, a mea culpa to the fraternity: ‘Sorry, folks, we have made some errors, but are fixing it and moving on. We’re bringing quality education to all kids on this planet.’ Get the business press to love the firm again. Be the underdog. People don’t like overdogs.
Two, a reset of exit pressure and dreams. We’ve talked earlier how VC fund cycles are too short for lasting companies to grow properly – and inorganically. The stake-holders should understand that it’ll take another 10 years at the least for Byju’s to reach exit-able orbit, and sit back. And let the company grow its core product - tutors and tutoring tech – especially using AI, to create a likeable – even lovable learning experience. They’ve got the traffic. They can build the product to match.
Three, a hard-core walk-back from sell-or-die bucketshop sales teams. I started life at Eureka Forbes, selling vacuum cleaners door to door and can attest that, no matter the heroism you feel internally about making some artificial sales target number by hoodwinking the buyer – the customer doesn’t end up liking you very much.
And she won’t buy your product for her second son – or suggest it to her neighbour’s daughter. If you have a 10 year runway, you don’t need to meet some nonsensical quarterly target placed by a clueless investor.
Four, a large dose of luck. Not many firms get a second chance. PayTM did, after its ill-advised IPO – and is clawing its way back. Byju’s can get one more shot at the crown. Not more.
It needs a clear focus, a sharp set of moves – and a bunch of luck for things to swing its way.
Here’s hoping they have it all.
(Mahesh Murthy is an entrepreneur and investor)