Byju Fiasco: A Blow To Start-Up Ecosystem

Byju's, which arose as perhaps one of the most dominant start-ups after Flipkart, is on a slippery slope. Issues like defaulting on loan settlement, handing over pink slips to thousands of employees, delayed release of FY22 financial statements, the resignation of the auditor, and, the exit of three external board members without giving specific reasons raise serious questions vis-à-vis corporate governance. And it does not augur well for the start-up ecosystem, which has thrived on easy money flowing in from foreign investors. Pathetic governance and scam will put off financiers making it all the more difficult for the honest ones to raise money.

-  Shivanand Pandit

IF the pandemic years had spawned hopefulness for domestic start-ups to make a mark in India, the year 2023 is turning out to be nightmarish for them. Byju's, the most well-liked, homegrown Ed Tech titan, recognized as the flag possessor of India's start-up ecosystem, has run into rough weather. Its action of handing over pink slips to thousands of employees and the exit of external board members did not augur well for the start-up environment. The resignation of the auditor was the final nail in the coffin.

There is a picture being painted by a few industry experts that the whole entity may be sold off to an old-fashioned firm that is considering moving into the education or Edutech business. That raises the vital question: how did Byju's get into this kind of trouble?

It would be comfortable to give an easy answer the problems originate from Byju Raveendran's misadministration of the company, his plentiful unhealthy acquisitions, floppy financial controls, a noxious work philosophy, and other such matter. The hostile tactic for quick development through inorganic direction by acquiring over and above 17 companies across geographies and its failure to stick to accounting and ethical standards in pursuit of expansion should have led to the present sordid state of affairs. Byju's would have gotten into a dilemma sooner or later because of these matters and, the funding winter in start-ups only triggered the crisis. Byju Raveendran's management is no doubt the main cause behind the company's troubles. But the very fact that he could get into this big a mess before things blew up despite warning signals being available for quite some time is a good example of the way Venture Capitalists (VCS) have slanted the start-up playing field.

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