Byju’s Cuts Valuation Ask by 99% in Rights Issue Amid Cash Crunch

Indian edtech giant Byju’s is taking drastic measures to secure capital and meet its liabilities amid a severe funding crunch. The company has launched a rights issue, seeking to raise $200 million at a significantly reduced valuation.

A Sinking Valuation

Byju’s, once the world’s most valuable edtech startup, has seen its valuation plummet from $22 billion in 2022 to a mere $220-225 million in the current rights issue. This represents a staggering 99% drop in valuation, making it an unprecedented move for the company.

A Rights Issue to Save the Day

The rights issue is an opportunity for existing investors to participate and support Byju’s financial struggles. The startup has been struggling to raise funds since its plans to go public through a SPAC deal were put on hold due to market conditions worsened by Russia’s invasion of Ukraine in February 2022.

Founder Byju Raveendran Appeals for Support

In a letter to shareholders, Byju Raveendran emphasized the importance of securing capital and expressed his personal commitment to the company. He stated that he and other founders have invested $1.1 billion into the startup over the past 18 months and are seeking continued support from investors.

"We have made immense personal sacrifices for the sake of the company. We have spent our lives building this company, and we are fervent believers in its mission," Raveendran wrote.

A Quote to Endure

Raveendran’s letter concluded with a quote from William Ernest Henley: "I am the master of my fate, I am the captain of my soul." The quote underscores Byju’s determination to navigate through these challenging times and emerge stronger.

Byju’s Funding Crunch Deepens

The rights issue comes as Byju’s faces an unprecedented funding crunch. Despite raising over $5 billion in equity and debt from prominent investors such as General Atlantic, Silver Lake, Peak XV, Lightspeed, Chan Zuckerberg Initiative, BlackRock, UBS, Prosus Ventures, and B Capital, the startup has struggled to secure new funds.

A Year of Struggle

Byju’s was preparing to go public through a SPAC deal that would have valued the company at up to $40 billion in early 2022. However, market conditions worsened, forcing Byju’s to put its IPO plans on hold. Since then, some investors have publicly aired concerns about the startup’s business decisions and governance.

A Way to Part Ways

The rights issue provides an opportunity for Byju’s to part ways with existing investors who have become naysayers. Those who do not participate in the rights issue will lose their entire equity position in the startup.

Conclusion

Byju’s slashing of its valuation ask by 99% in the current rights issue is a testament to the company’s desperation to secure capital amid a severe funding crunch. The move highlights the challenges faced by edtech startups and the importance of sustainable business models.

As Byju’s navigates through these challenging times, it remains to be seen whether the startup will emerge stronger or succumb to the pressures of a rapidly changing market.

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