17 highlights
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According to three people with knowledge of the matter, the 42-year-old entrepreneur is moving on from WhiteHar Jr, the education technology company he founded in November 2018 to teach children between the ages of 6 and 14 the fundamentals of coding.
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After this infusion, Byju’s controls 94.3% stake in the company whereas Karan Bajaj’s holding has been diluted to 5.7%.
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Like most entrepreneur-led startups, WhiteHat Jr owes its rapid success, as well as its monumental errors (I really want to say f***-ups), to Bajaj’s aggressive and growth-at-all-costs attitude.
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But still, the biggest question right now is about the future of other entrepreneurs—the likes of Aakash Choudhry, Zishaan Hayath and Mohan Lakhamraju—whose companies have been acquired by Byju’s in the last year.
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What happens if/when these entrepreneurs who have spent years building their businesses don’t see a future together and decide to leave?
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WhiteHat Jr is the story of the pandemic year in edtech. Not Byju’s, which raised north of $1 billion in 2020, or Unacademy, which has grown 10x in valuation to over $3 billion in the last 18 months. The way WhiteHat Jr rose from obscurity, tore through the industry that was growing at a rapid clip during the pandemic-induced lockdowns, only to land in a pool of allegations of false advertising, unfair business practices, lack of ethics and a toxic workplace, all within a year, is remarkable.
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In many ways, events at the coding startup summarized the turbulence that the industry was going through—uncertainty, followed by unprecedented expansion and growth in record time, only resulting in an even faster contraction in which every company seems eager to take the money on the table and leave.
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In August, Byju’s acquired the company for an eye-popping $300 million, an unheard-of valuation for such a young company, making it the biggest deal in edtech.
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The deal was followed by a phase of expansion so intense that the company started bursting at the seams.
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The company was mired in allegations of exploitation, racism and sexism. It became a startup hell. WhiteHat Jr’s response? It moved fast to silence critics on social media, taking a cue from its parent company.
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Bajaj’s stint at the Indian arm of American broadcaster Discovery Inc., which he joined in July 2016, was nothing less than eventful.
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Bajaj introduced a sports channel to the portfolio. He shifted focus to original, local programming. He forged digital programming partnerships with YouTube, Reliance Jio and Vodafone Play. His biggest bet, though, was a move into general entertainment with a channel called Jeet. From a scripted series on yoga guru Ramdev to a show on a Sikh battle, the programming was supposed to be skewed towards male audiences. Think Star Plus for men.
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Jeet was launched in early 2018 and turned out to be one of the biggest failures in the history of Indian television. The immediate challenge died, just like it seems to have in the case of WhiteHat Jr. A few months later, Bajaj’s three-year itch kicked in and he moved on.
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So I don’t think I embark on any activity with a time frame in mind. So even when I dropped off the yoga thing, it wasn’t because I had said, after ten months I will return. I just felt like I had reached a point where I had learnt all I had to learn. So I move on only when I feel like I have done everything here that I wanted to. Sometimes it happens sooner, sometimes later.
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“It is a loss for Byju’s,” says the second person quoted above. “I am sure Byju would have wanted him to stay. There is no reason why he would want Karan to leave.”
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WhiteHat Jr is not a well-oiled machine like, say, Aakash Educational Services Ltd, which Byju’s acquired in April this year. AESL has built a successful business over a few decades, and over time, the model has emerged as the star. If Aakash Chaudhry decides to move on tomorrow, Byju’s can still find a leader for that business and AESL will survive because of the systems in place. In growth-stage startups like WhiteHat Jr, this is not the case and a leadership change can literally make or break the company.
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So acquisitions come with golden handcuffs. Entrepreneurs are given deals that they can’t resist and, in return, all the payouts are based on time spent and milestones achieved. Some entrepreneurs opt for an accelerated vesting route, but that depends on the kind of leverage one person has over the other and varies from case to case. There is no universal rule and, therefore, it is more like a lottery.