DST Global, the investment firm led by Israeli-Russian billionaire Yuri Milner, is in advanced talks to lead a $400 million round in online education firm Byju’s at a valuation of $10.5 billion, two people aware of the matter said.
Byju’s is currently the second highest valued startup in India after payments firm Paytm. In June, it raised an undisclosed amount from US-based BOND Capital at a valuation of $10.5 billion.
Online education is one of the few sectors that has received a major boost amid the COVID-19 pandemic as more and more people experiment with virtual learning due to lack of other options.
“They (Byju’s) are raising this round because there is a large acquisition target in the United States, for which they need cash,” said a person aware of the discussions.
Byju’s declined to comment and DST Global did not respond to emails seeking comment.
Byju’s, which started out by providing online classes for students from kindergarten to Class 12 (K12), recently ventured into live classes, test preparation and entrance exams as well.
The nine-year-old company, founded by former teacher Byju Raveendran, has in recent months turned to acquisitions to grow. In January last year, Byju’s acquired Osmo, a US-based maker of educational games, for $120 million.
It has since launched discussions to acquire DoubtNut, a doubt-solving app for school students for $100 million, according to media reports. It is also in advanced talks to purchase WhiteHat Jr, a one-and-a-half-year-old upstart providing coding classes in a $300 million all-cash deal. Moneycontrol first reported about the WhiteHat deal on July 3. “The WhiteHat buyout is done and should be announced soon,” another person familiar with the matter said.
Both persons who spoke to Moneycontrol requested anonymity.
DST Global, is one of the world’s leading late stage technology investors, having pumped money into companies such as Facebook, Spotify, Alibaba, Twitter and Airbnb. For DST, the deal with Byju’s, if it fructifies, may also mark a comeback of sorts to investing in India.
Since September 2016, DST has only invested in food delivery startup Swiggy and business-to-business marketplace Udaan -- catapulting both to the coveted unicorn status, or startups valued at over a billion dollars.
This is in contrast with DST’s track record when it began investing in India in 2014-15. Back then, the investor participated in mega funding rounds, pumping close to a billion dollars in cab-hailing firm Ola along with other investors such as Tiger Global and Steadview Capital, and nearly $2 billion along with others in online retailer Flipkart.
Some of Byju’s existing investors, which include Naspers, General Atlantic, Tiger Global Management, the Chan Zuckerberg Initiative, Sequoia Capital, among others, may also participate in the latest funding round.
Byju’s has also considered raising a large round of debt to finance some of its acquisitions. It has explored raising up to $500 million in debt, and received interest from some banks and financial institutions as well, at an interest rate of 2.5 percent per annum.
“Debt is always cheaper than equity and makes sense when you have regular cash flow, so they explored the option just in case the equity round may not work out,” the first person cited above said. The company has earlier raised debt, although smaller rounds, from InnoVen Capital and RBL Bank.
Byju’s said its FY20 revenue doubled year-on-year to Rs 2,800 crore, and that it has 3.5 million paid customers. While it did not give profit figures for FY20, it made a profit of Rs 20 crore in FY19, according to regulatory filings.
The coronavirus lockdown has been a boon for online education firms. Growth and funding have amplified hand in hand as students have been forced to learn from home. Ed-tech startups have raised about $750 million this year alone, and on track to raise more.
Moneycontrol reported on July 14 that Japan’s SoftBank is in talks to lead a $150-200 million in Unacademy, another online learning startup.