Why is BYJU'S raising $250 million at a lower valuation
BYJU'S, the world's most valuable edtech company, is in the advanced stages of raising $250 million. Earlier when the company raised the same amount, it was valued at $22 billion. This time, however, the company reportedly plans to raise $250 million at a lower valuation. BYJU's has been struggling for the past few months with mounting costs and losses.
Why does this story matter?
The post-pandemic world has been brutal on edtech companies, particularly BYJU'S. The company has been struggling to find new revenue streams as students left the comfort of their homes for schools and physical coaching centers. Rising costs have not helped the company's case. It plans to shut down its loss-making coding platform WhiteHat Jr, which it acquired for $300 million, to cut costs.
BYJU'S requires capital infusion to stave off potential debt issues
BYJU'S latest funding round comes amid the company's quest to repay a $1.2 billion term loan. Earlier this year, the company sought more time from lenders to renegotiate the loan. The company requires capital infusion to stave off potential debt issues. In February, it was reported that BYJU'S wanted to keep its valuation steady, but raising funds at that valuation proved to be difficult.
The company hasn't been able to achieve profitability
Last year, BYJU'S CEO Byju Raveendran, after firing 2,500 employees, said the company plans to become profitable by March 2023. It has been taking steps at the group level to achieve the same. The company even fired another 1,000 to cut costs. However, it hasn't been able to put a stop to growing losses. And profitability by March 2023 seems a distant possibility now.
BYJU'S struggles are making it hard to increase the valuation
Companies usually raise funds at a lower valuation when they cannot get a higher or flat valuation from investors. This indicates that the firm's financial performance has not improved significantly from the previous round. In BYJU'S case, the edtech giant's struggles with profitability and losses are well documented. Therefore, it is unsurprising that the company is going for a lower valuation.
The company's losses jumped by 19 times in FY21
BYJU'S struggles are out in the open. In the fiscal year that ended on March 31, 2021, the company's losses jumped by 19 times to Rs. 4,588 crore. The edtech major has also been under the scanner for its mass layoffs and accounting practices. The company would be hoping that the latest funding round would help it deal with some of the critical issues.
