He was the billionaire founder of India’s most valuable startup. Now his firm has lost 95% of its value—and shareholders just voted him out

Last week, on Feb. 23, shareholders of Byju’s, the edtech firm that was once India’s most valuable startup, did what once would have been unthinkable: They voted to oust founder and one-time billionaire Byju Raveendran as CEO, accusing him of mismanaging the online tutoring company into a downward spiral that has nearly stripped it of its unicorn status and made it India’s quintessential pandemic-era flameout.

Raveendran is clinging to power; Byju’s has argued that shareholders don’t have enough voting rights to enact a leadership change, and the matter is headed to court. But investors’ formal renunciation of Raveendran marks a stunning fall for the founder of the startup once valued at $22 billion who became a sort of savior to Indians during the country’s darkest days.

When the pandemic shut India’s 1.5 million schools in March 2020, Raveendran made his online learning app free for tens of millions of school-aged kids. The gesture won goodwill among parents and teachers and gave Byju’s—by then backed by the Chan Zuckerberg Initiative, Tencent, and Tiger Global—a jolt into the mainstream. By April that year, it reported a 150% increase in new users. By June, it became the only Indian app among the world’s 10 most-downloaded education apps on Google Play.

“Children, teachers and parents are accepting [edtech] more as a mainstream format now, maybe because there’s no other option right now,” Raveendran said in a May 2020 TV news interview. “But it’s here to stay.”

Byju’s had staying power—at least for a while. By August 2020, Raveendran claimed that Byju’s was nearing $1 billion in annual revenue for the first time. Over the next two years, Byju’s acquired 19 companies for a total of $2.88 billion. It enlisted big-name brand ambassadors, including Bollywood superstar Shah Rukh Khan and Argentinian footballer Lionel Messi. By late 2022, it had reached its $22 billion valuation, making it India’s top startup and crowning Raveendran, now 42, one of India’s youngest billionaires.

But months later, Byju’s started plummeting back down to earth. Audited financials cast doubt on its past claims of supersonic growth. It clashed with lenders who, in September 2023, claimed that Byju’s had hid half a billion dollars in a hedge fund that was once registered at a Miami IHOP. Its auditor quit last summer, as did three board members representing Byju’s investors. And Byju’s first-ever CFO, who was supposed to steer the startup through financial tumult, resigned in October after six months on the job.

Karan Anand joined Byju’s sales team in 2019 fresh out of college. “It really stood out in the sea of startups,” said Anand, who, like others in this story, asked to speak anonymously or go by a pseudonym for fear of risking chances of future employment. But months in, “it became very clear to many, including me, that this was all a hype, an illusion,” said Anand, who left the company after less than a year.

Anand and several other former employees claim they were subject to a hostile work culture, pressured to engage in over-aggressive sales tactics, and harbored doubts about the quality of Byju’s products.

Byju’s has denied it suffers from “systematic” workplace problems and says it’s overhauled its sales practices to ensure they’re respectful of customers. “We are genuinely dedicated to addressing concerns, improving our practices, and fostering a positive and inclusive learning environment for all,” a Byju’s spokesperson said.

Byju’s isn’t the only one reeling. India’s startup scene is grappling with the company’s fall from grace and contemplating how it got so swept up by the charms of a tutor-turned-entrepreneur.

“For too long, Byju’s was the golden blue-eyed boy of the startup industry,” says Aniruddha Malpani, an Indian edtech investor (with no ties to Byju’s) and a vocal critic of the startup. “What you see today highlights the cost of the exponential growth model, where you start caring more about selling to the market than the product itself: Education.”

“Byju’s,” he says, “is now a cautionary tale.”

A founder-turned-demi-god

The cult of Byju’s was built around Raveendran, whose rags-to-riches journey enthralled the global press, investors, and customers.

Born in a small coastal town in Kerala to educator parents, Raveendran grew up a math whiz. After college, Raveendran moved to the U.K. to work as a service engineer but would regularly help friends back home study for entry exams for the Indian Institutes of Management (IIM), India’s version of Ivy League business schools. Friends eventually convinced Raveendram to take the test himself and, Raveendran claims, he achieved a near-perfect score—twice.

(Byju's did not make Raveendran available for an interview for this story.)

Instead of pursuing an IIM degree, Raveendran moved home to tutor IIM candidates full-time. His first class in Bengaluru in 2000 had 40 students. By 2005, he was teaching 1,000 students at once.

Raveendran’s style of instruction focused on teaching students the fundamentals, rather than resorting to shortcuts. “You learn the best when you start asking questions, not to teachers, not to parents, but to yourself,” Raveendran told the Hindustan Times. Soon, he outgrew the classroom and started conducting concert-style sessions at auditoriums and stadiums that Indian media described as “part rock-concert, part evangelical sermon.” A chance 2007 encounter with Indian billionaire Ranjan Pai led to an $8 million investment in what is now Byju’s parent company, Think & Learn Pvt Ltd. 

In 2015, Raveendran launched the Byju’s learning app, which aimed to introduce Raveendran’s methods to India’s 250 million students. Within a year, the Chan Zuckerberg Initiative, Sequoia Capital, and Belgian investment firm Sofina had all invested in Byju’s. (The company has raised $5.08 billion to date.) In 2018, it became a unicorn.

Within the company, Raveendran was a demi-god, two former employees told Fortune. “He’s extremely ambitious and charismatic,” adds Pradip K. Saha, author of The Learning Trap, a book about Byju’s. “His earliest public image of him teaching tens of thousands of students held a promise for many investors: The promise of the Indian market.”

Selling at all costs

Raveendran’s personality wasn’t Byju’s only draw. The platform offered an alternative to the rote, grades-obsessed education system that has disenchanted Indians for decades.

Today, Byju’s offers tablet-based learning, live online lessons, and in-person instruction. Students range from age 9 to mid-career professionals seeking skills-based programs. Its freemium model hooks users on free lessons but requires payments to complete programs. The app had 115 million users in 2022—up from 1.7 million in 2018. “If you go to India’s smaller towns, you’ll find nearly every kid on the streets carrying a backpack with Byju’s logo. This is how extreme its penetration is,” Anand says. Still, only 7.5 million of its 2022 users were paid subscribers, suggesting that most of those who downloaded the app weren’t using it regularly.

Byju’s biggest money-maker are lessons delivered via SD cards or storage devices that are a common but dated part of India’s tech landscape, where poor connectivity is common. Byju’s 2020-2021 financial report shows that these storage device cards accounted for 80% of annual revenue, equal to $225 million.

During Byju’s COVID boom times, it went on a spending spree. It acquired high-valued edtech startups, including California-based Osmo and Epic!, as well as India’s legacy tutoring institute Aakash Educational Services Ltd. It sponsored India’s men’s and women’s cricket tournaments and the FIFA World Cup. In November, the Board of Control for Cricket in India took Byju’s to court for failing to pay dues of $20 million, suggesting the company was spending more than it could afford.

In a comment to Fortune last year, a Byju’s representative defended the spending, saying that this period of “hypergrowth” was one where the company “had the opportunity to create impact at scale.”

But former Byju’s employees say that hypergrowth was the result of unethical sales practices. Sheila Matthews, who worked at Byju’s for over two years until early 2023, said she once encouraged a low-income mother to mortgage her jewelry to pay the registration fees, which range from $30 to over $1,000 per course. She watched another customer sell his bike to cover an upfront payment. Multiple former employees told Fortune that they were subject to bullying and abusive language as part of Byju’s sales-obsessed culture. “I remember during the pandemic, when people were struggling to find hospital beds, we would call them and sell Byju’s to them anyway,” Anand says.

In December 2022, the National Commission for Protection of Child Rights ordered the company to conduct affordability tests on their customers and tweak its refund policies after reports that unhappy customers were unable to get their money back.

Byju’s has always denied allegations of inappropriate tactics and has modified its sales program “to achieve better customer identification, more transparent communication, and a stronger guard against any mis-selling practices,” a spokesperson told Fortune. There were “sporadic issues” that "were resolved immediately,” the spokesperson said.

Pradeep Poonia, an engineer and edtech critic, says the company’s faltering fortunes are proof that its COVID-era growth was the result of aggressive and unethical sales tactics, rather than a transformational product. (Byju's WhiteHat Jr. business sued Poonia for defamation in 2000 but later dropped the case.) “Byju’s really doesn’t have a product that can save the company,” Poonia said.

A source at Byju’s, who declined to be identified more specifically because they’re not authorized to comment officially, told Fortune that such criticisms are from “a select section of disgruntled people.” “Byju’s stands by the quality and efficacy of its products,” the person said.

‘Deserting a sinking ship’

Then a Deloitte audit blew the whistle on other Byju’s practices. After an 18-month delay, the firm published Byju’s audited 2020-2021 financials report in September 2022. It reflected an overhaul in how Byju’s recorded its income and revealed the full scope of its cash burn. Byju’s had been booking revenue from contracts upfront even if those contracts spanned multiple years. It had also recognized sales booked on credit before customers had paid in full. The resulting report showed more than half a billion dollars in losses between 2020 and 2021—the company’s supposed boom time—led by outsize marketing costs and losses at its struggling WhiteHat Jr business, which teaches kids to code. Even during the pandemic edtech surge, Byju’s revenue had essentially flatlined at $277 million in 2021, a fraction of the $1.2 billion Raveendran had predicted for that year.

After instituting accounting changes, Deloitte resigned as Byju’s auditor in June, citing the startup’s delays.

Others were fed up too. That same month, representatives from three top Byju’s investors—GV Ravishankar from Peak XV Partners (formerly Sequoia Capital India), Vivian Wu from the Chan-Zuckerberg Initiative, and Russell Dreisenstock from Prosus—resigned from the startup’s board, leaving only Raveendran, his wife Divya Gokulnath and his younger brother Riju Raveendran as directors.

Byju’s top leadership “regularly disregarded advice and recommendations” on “strategic, operational, legal and corporate governance matters,” Prosus told Fortune in a statement. Dreisenstock “was unable to fulfill his fiduciary duty to serve the long-term interests of the company and its stakeholders.”

Peak XV and the Chan Zuckerberg Initiative didn’t respond to Fortune’s request for comment. Media reports attribute their departures to Byju’s refusal to improve transparency and “differences” with Byju’s management.

Malpani says the former board members deserve some blame for Byju’s troubles. “Everybody turned a blind eye to the company’s misgovernance until recently,” he said. “They’re essentially deserting a sinking ship.”

That ship is still taking on water. Byju’s laid off hundreds of workers last year. In October, Ajay Goel, the CFO Byju’s had hired in April to strengthen its financial operations, resigned and returned to his former employer. Other top leaders left as well, including the chief legal and compliance head, its India CEO, its CTO, and its chief business officer. The Byju’s source attributed the exits of the CEO, CBO and CTO to “restructuring efforts” and characterized Goel’s departure as a personal decision.

Byju’s is reportedly considering selling some of its acquired firms, which would help it repay a $1.2 billion loan that’s now the subject of a U.S. lawsuit. Lenders in September sued Byju’s for allegedly transferring $533 million to a Florida hedge fund—which once listed its registered address as an International House of Pancakes restaurant—in a bid to conceal the cash. Byju’s countersued, refuting lenders’ claims that it had defaulted on the loan and accusing them of harsh negotiating tactics. Earlier this month, Byju’s Alpha Inc, a non-operational U.S. subsidiary named as the borrower, filed for bankruptcy, a condition of continued funding by the lenders. The Byju’s source calls this a “pressure tactic” against the company.

Byju’s 2022 financials were delayed more than a year. When Bjyu’s finally filed them in November 2023, the report only covered Byju’s flagship business (and none of its acquired firms) and revealed a $288 million loss, 6% lower than the year before. Revenue doubled to $430 million but was still far short of Byju’s unaudited projection of $1.25 billion for the group.

Investors have slashed Byju’s valuation; BlackRock was the latest to do so in January. The asset manager cut Byju’s value by 95% to $1 billion.

In early February, Raveendran told shareholders he’d spent $1.1 billion of his own money to cover the firm’s payroll and operating expenses.

Finally, at an emergency meeting last week, a group of shareholders unanimously voted to overhaul the board “so that it is no longer controlled by the founders of [Raveendran’s] Think & Learn,” and to remove Raveendran as CEO, Prosus confirmed to Fortune. They also filed to block a rights issue to raise $200 million that Raveendran said on Feb. 21 was “fully subscribed.”

On Feb. 24, Raveendran told employees in an email that the shareholder vote will not change his role as CEO or the makeup of management or the board.

“I am not taking any of these allegations lying down and will challenge these illegal and prejudicial actions,” Raveendran said.

The matter will go before a high court in India’s Karnataka state, where Byju’s headquarters are located, in March.

A meltdown in the industry

Byju’s financial and regulatory woes have spooked foreign investors who are the primary source of funding for India’s startup ecosystem, the third-largest behind China and the U.S.

Last year, funding for Indian startups reached its lowest level in five years, according to Tracxn, an intelligence provider. As of Dec. 6, Indian tech startups had received $7 billion in funding for 2023, a 72% drop from 2022. Investing in startups is down globally, but not as sharply; U.S. startups garnered 30% less funding in 2023 from the year prior.

Byju’s distress has weighed on India’s edtech industry in particular. The sector received $712 million in funding in 2023, down from $2.9 billion in 2022 and $5.3 billion in 2021. Since schools reopened in 2021, demand has plummeted, causing startups to lay off workers or shut down completely.

“In 2021, after China’s crackdown and regulation of edtech companies, the funding was widely expected to come to India—the next big market,” Saha says. “It did, but now the sector is in trouble and Byju’s has had a big role to play in this.”

Poonia, an edtech critic, is skeptical that the industry will recover from the Byju’s debacle to fulfill its promise. “Companies will keep coming up with fancy new ideas, tablets, online classes and so on, as long as there’s big money involved,” Poonia said. “But what these will never fix will be our education problem. The amount raised by Byju’s could have alternatively been used in setting up top-notch educational institutions, the dearth of which is the main problem.”

Malpani is more optimistic that Byju’s meltdown will cause some soul searching in India’s startup scene: “Maybe this episode will make people stand up and take notice. I’m hopeful there will be a bit of cleanup in the startup ecosystem, and, maybe, the education system at large.”

This story was originally featured on Fortune.com