Byju Raveendran thinks that Indian education startups have a shot at defining the edtech space globally. But acquisitions will play a key role in enabling that vision. “Finding the right blend between organic and inorganic growth will be the difference between a good company and a great company,” said Raveendran, CEO of the eponymous online education company, India’s most valuable startup at $16.5 billion.
At TiE’s India Internet Day, Raveendran, along with the founders of two companies he acquired — Great Learning’s Mohan Lakhamraju and Osmo’s Pramod Sharma — spoke about the promises and pitfalls of acquisitions, factors to look out for, and the online education sector’s role and promise. The session was moderated by Dev Khare, Partner at Lightspeed India, an early investor in Byju’s.
Great Learning and Osmo are unique buyouts for Byju’s because the three founders are based in three countries — Lakhamraju in Singapore, Sharma in Palo Alto (US) and Raveendran in Bengaluru (India).
“People worry about cultural integration, but I think that’s a smaller challenge, because they can have their own culture. We don’t force changes. With founders in different locations, we have these super pods from where we operate,” Raveendran said.
Osmo, which develops learning games, was acquired by Byju’s in 2019 for $120 million. Sharma started Osmo because he saw a huge gap between what parents and children wanted from education. “Kids want something fun, while parents want something that’s good for kids. We wanted to bridge this gap,” Sharma said.
Acquisitions take time
Sharma, however, warned that if a company is getting acquired, the founder must be ready for a long process, especially if it is a cross-border deal. “Most founders underestimate how long the process takes. Just filling out legal details takes months. Most founders don’t go through this multiple times. It takes a lot of effort to go through this and you should be ready for that,” he said.
Founders should also evaluate what they really want, and have their priorities clear before getting acquired, Lakhamraju said. “Have clarity on what you’re looking for. Will you get distribution? Will your cost of capital reduce? Will you get access to the ecosystem or to other assets?” he added.
Raveendran said he decides what to acquire depending on whether it complements Byju’s business. “Each large acquisition has been very complementary. For example, we bought Osmo for their exceptional technology, and they have grown 4.5 times in the two years since we acquired them,” Raveendran said.
All three founders also stressed that despite abundant capital flowing into online education recently, acquisitions boil down to whether people get along. For instance, Lakhamraju first met Raveendran at the 2019 Cricket World Cup in England, where they did not discuss work at all.
Over a year later, when they met again, Raveendran first apologised for Great Learning not getting access to BCCI’s cricket videos for its promotional material. The Indian cricket board had promised to give the videos to the company before ultimately handing them over to Byju’s, which sponsors the national team’s jersey. The last-minute change led to Lakhamraju scrambling for videos from other countries.
“The apology disarmed me. And later we spoke so much, we skipped a meal. When you skip a meal it is always a good sign that you are having fun,” Lakhamraju said.
Keeping company cultures intact
Over time the founders were convinced that their company cultures would remain intact. They continue to run their individual companies within Byju’s, and still see themselves as company owners, as they did before.
All the speakers said that not having an ego was key to making an acquisition work. “This is still a new industry, and there is such an influx of new ideas. There is no history (the sector hardly existed ten years ago) and lots of churn, so you cannot have an ego,” Sharma said.
Raveendran believes that India and the world gives him enough of an advantage to win in the online education market. “After-school tutoring expenses have gone up significantly in markets we don’t expect. Europe, for instance. Edtech is an underinvested sector. Billions have gone into online entertainment and streaming services. Investment is starting in education only now,” he said.
“The India advantage is that for most of us, education is still the only way to make it big,” he added.