Unless you have been sleeping under a rock, there’s no way you would have missed edtech major Byju’s recent global shopping spree. The decacorn with a valuation of $16.5 billion has been basketing its rivals and peers over the last two years, gaining substantial muscle and reach in an industry which it believes is still under-invested.
Moneycontrol takes a closer look at Byju’s acquisition strategy, the elements it looks for in a potential target and the learnings secured, to gain insights into the string of buyouts. We chose five of the key acquisitions that the edtech giant had carried out in the last few years, to understand the strategy and execution.
These include Osmo, which was Byju’s first-ever big-league acquisition; WhiteHat Jr, which had created a big buzz in the market; Aakash, its biggest acquisition by value and Epic and Great Learning, which are the latest buyouts.
Essentially there are three aspects that Byju’s look for in every acquisition target.
- a) Complementarity of product/technology
- b) Alignment of vision
- c) Quality of the team
Byju’s decision to acquire Osmo wasn’t just because of the need to break into the US market; it was primarily because Byju’s was convinced that the American firm’s technology platform offered a tremendous value add.
Osmo, the Silicon Valley-based educational gaming start-up, had already built up a strong brand in the US. “Though their platform was targeting the age bracket of 4-10, we realised that it had the potential to be developed further. We gathered that it could be targeted at older children too,” says Anita Kishore, Chief Strategy Officer at Byju’s.
It all started with a Zoom call in December 2018 with Byju’s founder Byju Raveendran. He expressed an interest in acquiring the company and Osmo co-founder Pramod Sharma decided to fly down from Palo Alto to Bengaluru the very next day. Sharma was excited about the larger canvas that Byju’s provided and was confident that Byju’s large development team could take the product to the next level.
Sharma had started the company in 2013 after graduating in Computer Science at Stanford. He co-founded Osmo with Jerome Scholler, who too had migrated to the US. They both had similar ideas about employing augmented reality to help kids in their studies. Sharma was born in Nagla Bartai, a nondescript village in Rajasthan. Byju Raveendran, who too was from a small town in Kannur, Kerala, could connect with his aspirations.
Creating engaging, immersive content for students had always been the focus at Byju’s, through personalised learning experiences. On the other hand, Osmo had devised a novel way to use augmented reality (AR) to create content for children. It had created a variety of educational games, suited for US schools and sold more than a million AR games in the process. Raveendran and his team could see immense potential.
“Over the next two months, we had to go through the multiple aspects of a cross-border acquisition,” says Anita Kishore. Osmo was eventually acquired by Byju’s for $120 million. That call seems to be paying off. Osmo which had revenues of $25 million at the time of acquisition in 2019, has revenues of $110 million now.
Byju’s Raveendran’s take
First Impression: “Just like me, Pramod was also self-taught. So, that made an immediate connect. But the most important aspect was the strong alignment in mission. Just like us at Byju’s, Osmo too was in the business of making learning a lot more fun for the kids.”
Approach: “We promised the founders that we will make Osmo bigger, better and faster. At home, we had used Osmo’s products. The discovery and evaluation came through my son. We picked Osmo for its technology platform -- they brought offline learning online, with their computer vision technology and augmented reality. The founders were in the middle of an attempt to raise a fresh round of funding. So, Pramod came down quickly to Bengaluru, spent a full day at our office and by evening we had a handshake on the deal.”
We promised the founders that we will make Osmo bigger, better and faster. At home, we had used Osmo’s products.
Learning: “We learnt the importance of retaining the key people from the acquired entity. We don’t go about acquiring companies with a set methodology. In Osmo’s case we had identified a special product. Hence, we didn’t want to change its culture and operation in any way. For a fast and successful integration, we relied on Osmo’s key talent.”WhiteHat Jr:
Karan Bajaj sold his start-up WhiteHat Jr to Byju’s, 18 months after setting it up. Now, that constitutes a lesser time-frame than many of the tech courses offered online. The Mumbai-headquartered WhiteHat Jr., which offers online coding classes to school-going students in India and the US, thus executed one of the fastest exit stories ever in the Indian start-up ecosystem.
So, what clicked here? “We were focused on a high-quality coding outfit and then we found that WhiteHat Jr had a product with strong features,” says Anita Kishore, the chief strategy officer at Byju’s. “It had a highly interactive model that was great at one-on-one coaching.”
WhiteHat was able to scale quickly even as coding found resonance with parents. Kids starting enrolling for coding classes in thousands and Byju’s was able to see the wave quite clearly. “The entire acquisition process happened during the height of the pandemic, through a series of virtual meetings,” says Kishore.
Byju’s bought out WhiteHat Jr for approximately $300 million in August 2020. Bajaj stayed on for a year after the acquisition to ensure integration. The acquisition is already a big plus for Byju’s. “WhiteHat’s revenue in the last one year (after the acquisition) has grown 3x,” adds Kishore.
Byju Raveendran’s take
First Impression: “Karan Bajaj, the founder of WhiteHat Jr, is a person who believes there’s only one life and there are far too many things to be achieved. He’s a writer, yoga expert, ex-CEO of a television network and an entrepreneur. I found their 1:1 teacher-student model phenomenal; plus, they were able to scale it to a few thousand teachers in no time. They had operational expertise in conducting live classes. It was really impressive.”
Approach: “I sent him (Bajaj) a Whatsapp message to express our interest in talking to him. That’s how it all started. There is this notion that we are very quick to seal deals. But I would like to clarify that here. There’s a lot of homework that was done, before Karan was approached. First, we work on building conviction among ourselves before approaching anyone. Here too we had used the product and evaluated it thoroughly as a user.”
Learning: “It’s easier to deal at a founder-to-founder level. It was not that the target came to us through a bank-led process. It’s a lot less hard to set expectations during the acquisition process when the two founders meet early enough. It was not like they wanted to sell. They were doing very well as a company, and that’s when we approached them. It helped that I was dealing with him directly at the start.”
Aakash Educational Services
Byju’s quest for a hybrid educational model that would help them tackle the exam prep space, took it to Aakash.
“In Aakash we found a pan India player with a great legacy. They had demonstrated superior results in the exam prep space for years,” says Anita Kishore.
Aakash Educational Services Ltd (AESL) had built itself up from a small coaching centre in Delhi to a Rs 1,200-crore-plus company in annual turnover. It had started its exam coaching business in 1988 and grew into one of the most well-known education brands in India, maximising the early-mover advantage in this space. In 2019, the promoters led by JC Chaudhry and his son Aakash, partnered with Blackstone to create India’s largest digitally enabled, omni-channel test preparation company.
“Initially they were not looking to sell. During our discussions, the Aakash management saw the advantages that a combination of offline and online learning could bring on board. The future will require a hybrid model that can bring together the best of both worlds. They were eventually convinced that with Byju’s onboard, the business could be scaled further,” says Kishore.
The deal was a long-drawn process, lasting over five months of negotiations. Byju’s acquired it for nearly $950 million in April this year. As a rule, Byju’s looks to fully integrate and leverage every acquisition. It also prefers to let the acquired company run as an independent entity. “We don’t look to interfere,” says Anita Kishore. The objective is to help the acquired outfit retain its entrepreneurial spirit and cultural ethos.
Byju Raveendran’s take
First Impression: “Aakash was an obvious choice for us. We had a slightly longer process with Aakash as there were multiple meetings with various stakeholders and the fact that they had created a hugely successful organisation over decades. A few virtual meetings later, we met in person, after which both sides were convinced about the combined opportunity.”
Approach: “This acquisition was different from the others in the sense that we deliberately moved in for them. With the others, we happened to notice the product excellence and then moved in. In Aakash’s case, we wanted to plug the gap in the exam prep space. We were sure that we wanted a hybrid model in this segment and Aakash was the leader. Post the Blackstone deal, they had a strong management team too. So, in this case we were relentless in the pursuit and was determined to close it, as we realised that it would add an important slice of our portfolio. This year we have already crossed the pre-pandemic enrolment numbers at Aakash+Byju’s. We will be adding 100 more centres in the next 6 months.”
Learning: “We learnt the value of being patient and building trust. It’s also extremely important to understand clearly the business model of the target.”
Great Learning & Epic
Constant upskilling is not an option in today’s ultra-competitive workspace and learning does not stopping with college, as previously understood. The trend became even more conspicuous during the pandemic. It’s in this context that Byju’s started engaging with Singapore-headquartered Great Learning, the education platform that was founded in 2013.
Great Learning has delivered more than 60 million learning hours to 1.5 million learners from over 170 countries, according to reports. Its founder and CEO Mohan Lakhamraju and co-founders, Hari Nair and Arjun Nair had established Great Learning with a vision to make it a lifelong learning partner for India’s young professionals to get ahead in their careers.
For Byju’s, this presented another great opportunity. It was like the missing piece that it badly needed in its portfolio. “People have understood the importance of reskilling and upskilling. So, we went about looking at all possibilities and found Great Learning to be a good fit,” says Kishore.
Great Learning was acquired for $600 million in July this year, shortly after it bought over US-based digital reading platform Epic for $500 million. Byju’s has set aside a further $400 million of investment towards accelerating Great Learning’s growth. “The company was profitable and capital efficient. So, it was not a long process and we decided on the acquisition after just two or three conversations,” adds Kishore.
Epic was also an equally crucial acquisition as it was the largest digital reading platform for kids globally. Its acquisition has given an important foothold for Byju’s in the US market in this space.
Byju Raveendran’s take
First Impression: I first met Mohan Lakhamraju of Great Learning during the cricket world cup in England. We didn’t discuss any business. It was more like a casual chat. Of course, he had strong experience and credentials as an IIT/Stanford graduate who went on to head Tiger Global. What I liked about Great Learning was that it was bootstrapped just like Byju’s, for a long time. They had also retained their core team just like us.”
Approach: “This is an Online First segment. Millions of knowledge workers are looking at upskilling, with the pandemic laying emphasis on it. We knew this segment was ripe for positive disruption. The deal did not take too many meetings. Mohan was sure we would be able to build this segment, as we are a long-term player.”Learning: “We can’t always build things on our own. In certain segments it’s always good to acquire to scale faster.”
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
