Byju’s, the world’s most valuable edtech startup, has initiated a rights issue with a significantly reduced valuation ask in a bid to address its working capital needs. The Indian firm is seeking to raise $200 million through the rights issue, emphasizing the crucial nature of this capital infusion to prevent further value impairment.
Key Takeaway
Byju’s, the prominent edtech startup, has significantly reduced its valuation ask by 99% in a rights issue aimed at raising $200 million to address its working capital needs and prevent further value impairment.
Valuation Reset
The startup, once India’s most valuable, is resetting its valuation to “next to nothing” in the rights issue. All existing investors have been offered an opportunity to participate in this initiative. If successful in raising the targeted $200 million, Byju’s post-money valuation is expected to range between $220 million to $250 million, marking a staggering 99% drop from its $22 billion valuation in 2022.
Founder’s Appeal
Byju Raveendran, the founder of Byju’s, has personally invested $1.1 billion into the startup over the last 18 months. In a letter to shareholders, Raveendran emphasized the founders’ unwavering commitment to the company’s mission and the sacrifices made. He sought continued support from investors to sustain the business.
Funding Challenges
The rights issue comes as Byju’s grapples with a severe funding crunch. Despite having raised over $5 billion in equity and debt from prominent backers, including Peak XV, Lightspeed, Chan Zuckerberg Initiative, BlackRock, UBS, Prosus Ventures, and B Capital, the startup is in urgent need of capital infusion.
Struggles in Capital Raise
Byju’s has been pursuing new funding for nearly a year. The startup’s efforts to secure approximately $1 billion in funding last year were derailed after the departure of the auditor Deloitte and three key board members. Byju’s ended up raising less than $150 million in that round from Davidson Kempner and had to repay the investor the full committed amount after making a technical default in a separate $1.2 billion term loan B.
Market Impact
Byju’s had been preparing for an early 2022 public offering through a SPAC deal, with a potential valuation of up to $40 billion. However, the company had to shelve its IPO plans due to market downturns following Russia’s invasion of Ukraine in February, which adversely impacted market conditions and the business outlook for Byju’s.
