Must Read Blog November 4, 2021

Byju’s: Edtech Holding Company or Operating Goliath?

There is no company that better exemplifies the current moment in edtech (and edtech investing) than Indian consumer giant Byju’s (parent company Think & Learn Pvt Ltd). With (most recently available) reported annual revenue at March 2020 of $350 million and losses of $34 million, the company’s growth has reportedly accelerated since then through both acquisition and pandemic-fueled enthusiasm to 100 million registered users and 6.5 million annual subscriptions. To date the company has raised $3.8 billion and is currently valued at approximately $16 billion.

At the same time, Byju’s has been on a buying spree. Over the past six years the company has acquired 15 companies in the U.S., India, and other Asian countries. In 2021 alone, the company acquired eight companies at a total price of $2.5 billion. The company’s founder Byju Raveendran has said that he sees a multi-billion-dollar global market opportunity for the company and aspires to U.S. revenues of more than $1 billion within the next three years.

To date, the multiple acquisitions made by Byju’s remain independent from its original video-based learning offering, though the digital format and target audience of K-12 families are common features across all the assets. Each of the acquired subsidiaries supplies what could be described as either support for formative instruction or for summative assessment, but all retain their separate brand identities and audience. In the context of the Indian market, all the products in some way are in service of and preparation for India’s high-stakes college entrance examination. In the U.S., where Byju’s presence is still nascent, the content is supplemental and still skirts the mainstream tutoring and test prep markets.

Byju’s U.S. analog is IXL which offers a similar collection of test prep, tutoring, and supplemental content to grades K-12 organized around an exclusively digital format and a shared competency in consumer marketing. Notably unlike Byju’s, IXL assets reach further into schools through institutional sales and include some adult instruction. Both companies, however, share a portfolio approach to the consumer edtech market rather than a unified branded approach.

Apart from the obvious interest for U.S. investors regarding what assets Byju’s might acquire next to achieve its billion-dollar revenue goal (digital tutoring and test prep in the U.S. seem the most obvious) is the fact that its approach to date has been to assemble audience across multiple platforms, rather than to build a large audience from a single platform. There may be some instruction here for U.S. edtech investors as well.

Retaining the disparate brands may be an explicit strategy of Byju’s. Despite the example of other Internet sectors, where scale advantages have led to single-brand dominance (Amazon, eBay, Facebook), edtech has resisted this tendency. Low barriers to entry for education-related services, and perhaps other factors, have led to greater fragmentation. In the U.S. college test-prep market for example, what was once a duopoly consisting of Princeton Review and Kaplan, has become a highly fragmented market in its transition to digital, with dozens of meaningful players. And well-branded analog education companies like Houghton Mifflin and Hooked On Phonics have themselves attempted and failed to build meaningful digital consumer businesses.

Whether this fragmentation in consumer edtech is due to some inherent parochialism among education markets, or its relative immaturity compared to other parts of the digital economy is unclear. Equally unclear is whether Byju’s intends to ultimately consolidate its branding and benefit from the sort of scale benefits achieved by Amazon and others. What does seem clear, however, is that Byju’s is enjoying enormous momentum in its current consolidation effort and that adding a billion dollars in revenue over the next three years means that many U.S.-based consumer-facing education companies may become part of its greater orbit in short order.