Byju’s is rationalizing costs and frantically driving sales as it switches its attention from growth to profitability in an effort to meet revenue projections.
“Every day when you enter the office, I don’t see a person walking; I see a number. A few weeks before Diwali, then one of India’s most important holidays, Gaurav Tanna’s manager gave him a number to remember: “That number is the main difference between your target and what you have been able to achieve.”
Tanna (name changed), 26, works as a sales executive or business development associate (BDA) at Byju’s, the most valuable edtech startup in the world, in Bengaluru.
He was informed on a work-related WhatsApp group by the manager to “get ready for saying ‘bye-bye’ to the current company soon. A screenshot of the chat is available on Moneycontrol.
According to a notification made by Byju’s on August 31, the first revenue assessment for BDAs like the Tanna was to end on October 12.
The policy states that BDAs would be evaluated by their current managers and the HR team, and then “appropriate action” would be taken, including separation without a performance improvement program, if they failed to meet more than 70% of their weekly sales target for eight weeks (PIP). A screenshot of the notification sent to sales executives has been seen by Moneycontrol.
“My manager frequently uses such language in front of everyone. All the senior staff members here are like that; it’s not just my manager. It occurs frequently. I therefore didn’t worry too much about losing my job because these are standard pressure techniques”, said Tanna.
“Even after receiving the policy notification, we all believed that this was simply an effort to put more pressure on us to increase sales. None of us anticipated leaving without PIP. But the same day, we learned that Byju’s is firing 2,500 workers, and our WhatsApp groups immediately went crazy. Despite the fact that many claimed to have seen it coming, the reality of it felt entirely different.
Tanna was referring to the Byju’s announcement on October 12 that it would rationalize costs by terminating 2,500 employees, or 5% of its workforce, across all departments.
Thousands of BDAs, including Tanna, are currently waiting and hoping anxiously that they will not be given pink slips. According to at least nine of the internal sources and four external sources, including employees, out of Byju’s total workforce of over 50,000, more than 5,000 employees across departments have already received performance notices. A screenshot of the discussion about the number on an unofficial Byju’s BDAs group was viewed by Moneycontrol.
BDAs are full-time representatives of Byju who work in sales. The edtech company has started giving its employees pink slips as a result of the assessment.
“We vehemently reject your claim that 5,000 employees “across departments” have received what you refer to as a “notice.” No changes have been made to our fixed or variable payment structures for our BDAs, according to a Byju’s spokesperson in response to questions from Moneycontrol.
“Of course, sales employees are given monthly and quarterly goals, but these goals are flexible. Targets are the accepted industry standard for measuring sales performance objectively so that the top performers can receive more rewards, promotions, and incentives. Nothing can be improved that cannot be measured, “added the spokesperson.
Financials of Byju’s
The aggressive cost reduction comes as the most valuable edtech startup in the world reported the largest loss ever for an Indian startup in FY21, alarming investors. For FY21, the loss increased to Rs 4,589 crore. Byju’s previously steep valuation curve may have flattened after the company recently raised $250 million at a $22 billion valuation. As it turns out, Byju’s has changed its focus for the upcoming fiscal year from growth to profitability, according to a recent statement by Mrinal Mohit, the head of the company’s India operations.
According to Moneycontrol, it recently stopped operating in Thiruvananthapuram, Kerala, and asked more than 170 employees to resign. However, the company claimed that 140 employees were impacted and that they were receiving “generous and progressive” exit packages that included extended health insurance benefits, outplacement services, and paid time off for gardening.
Byju’s would borrow Rs 300 crore from its fully owned subsidiary Aakash Educational Services at an current interest rate of 7.50 percent annually for “principal business activities,” according to a Moneycontrol report from earlier this week. The loan, according to the business, will be used to fund Aakash’s marketing initiatives.
Byju’s is taking measures to save money even as it continues to spend a lot on marketing and advertising, according to company employees.
To increase sales, Byju’s is investing in marketing and advertising. People involved in the company’s fundraising processes claim that the company has raised billions of dollars, particularly over the last two years while projecting high revenue. According to data from Tracxn, Byju’s has raised more than $5.2 billion in equity and debt to date, of which more than $3 billion was raised over the last two years.
Employees displeased
‘Tera kitna tha’ The most frequently asked question on a great unofficial group of Byju’s BDAs last week was (How much was yours? ), as worried employees tried to reassure one another about their sales goals.
“That evening brought to mind the night before the government declared Covid a national emergency. “There was panic and chaos among employees, just as there was panic and chaos everywhere,” a BDA who has currently worked with Byju’s since 2019 said under the condition of anonymity. “Everyone was only interested in learning who would be let go. We were all tracking our sales and encouraging one another.
To make matters worse, the new policy stipulated that, regardless of whether the executive met or exceeded 70% of the sales targets, the BDA’s employment would be terminated without a PIP if the BDA’s RCN (returns, cancellation, and not confirmed) rate was higher than a predetermined level.
According to the executives, the RCN rate is determined by comparing the number of returns, then cancellations, and “not confirmed” leads the BDAs receive to their overall lead volume.
The policy also mentioned BDA sales goals, which differ based on how long an employee has been with Byju’s. The weekly sales goal for a fresher, who typically graduates from college today, is between Rs 30,000 and Rs 62,500. The first four weeks of the new BDA’s stint will serve as the evaluation period.
For someone with two to most probably six months of experience, the weekly sales target ranges from Rs 50,000 to Rs 75,000. A BDA who has worked for more than six months should expect to make sales of between Rs. 60,000 and Rs. 90,000 each week, while a BDA who has worked for more than a year should expect to make between Rs. 70,000 and Rs. 1 lakh each week.
From August 15 to October 12, these targets were evaluated. For those who met the 70% sales targets with a passing RCN score, there will be two additional eight-week assessment periods.
The screenshots of the emails that Byju’s sent to its BDAs and which mention the sales and RCN score targets have been seen by Moneycontrol. The policy states that BDAs placed on PIP three times will have their contracts terminated immediately. These time frames are from September 15 to November 9 and from October 13 to December 6.
“The fair targets set for our BDAs have not changed significantly, and we want to emphasize that. The frequency of our appraisals has changed in order to give our BDAs quick guidance and opportunities for course correction “Byju stated.
“We still provide our BDAs with the best benefits and compensation packages in the business on a fixed plus variable basis. Our BDAs receive fixed CTCs that range from INR 4.5 to 10 lakh per year, as well as a variable component that is determined by their fixed pay, experience, and past performance. They are eligible for bonuses that can equal 30% to 100% of the fixed component, depending on how well they perform.
They are now eligible to receive merit-based higher bonuses more frequently thanks to the new revenue assessment policy. Additionally, by making real-time data available to all stakeholders, it increases transparency throughout the entire process and eliminates bias “added the spokesperson.
The manager of a team of BDAs said, on condition of anonymity, “This policy was notified in August, but then suddenly everyone was still going through the details only last week.” “To me, it seems like a cost-cutting measure. We are actively hiring, but freshmen are our main priority. We receive them as part of a package worth between Rs 5-8 lakh and Rs 9.5–15 lakh annually, compared to the current BDAs. In order to reduce the CAC (customer acquisition cost), it appears to be churning.
Updating sales equipment
Additionally, it appears that Byju’s is restructuring its sales team to save money. According to at least nine sales executives, then BDAs with less than a year of experience are typically given packages worth Rs 5-8 lakh annually. According to BDAs and then screenshots of targets viewed by Moneycontrol, compensation for BDAs with currenlty more than 12 months of experience ranges from Rs 13.5 lakh to Rs 15 lakh, and with monthly sales targets of moreover Rs 4 lakh.
“Their packages are the main benefit for Byju’s to keep luring freshmen out of college. We are still all aware of how difficult it is for college graduates to find employment. Other businesses, including some of Byju’s direct competitors like Vedantu, had visited our college for placements, but their package was the best, according to a BDA who has then worked with Byju’s for a little over a year and asked to remain anonymous.
And from our seniors, we learned that when it comes to sales, all businesses, particularly startups, are the same. Therefore, Byju’s was the obvious choice for the majority of us.
Freshmen are unofficially given higher targets and had told that if they do not still meet them, they will not receive positive feedback during assessments, also which can affect their growth within the company and even outside when they look for different jobs, according to a BDA manager who is currently on leave from Byju’s.
“These sales managers know that if you put pressure on a fresher, they will give in to it. Additionally, they have the advantage of being recent college graduates who are oblivious to how other workplaces operate. For them, the packages Byju’s offers are far superior to anything else, and as a result, they believe they must comply with all company demands, according to the sales manager previously mentioned.
“Also, if managers are getting more sales from freshers at smaller packages, you can claim an increase for bringing in more business at lower costs.”
The churn rate of Byju’s BDAs has not changed in a “significant” way over the past two months, according to a company representative.
“Every BDA who has performed below expectations is provided with sufficient opportunities to reach or even surpass the set target through mentoring. Each line manager has the authority to investigate the causes of poor performance and present their reportees with opportunities for improvement “said a representative for Byju.
“However, since poor RCN performance is associated with student escalations and mis-selling, we pay close attention to it. We use a RCN as a red line in the performance reviews of our BDAs because we are a customer-centric business with zero tolerance for misselling “added the spokesperson.
Aggressive pitch for sales
More aggressive sales are now a reflection of the race to increase revenue at the lowest possible cost. According to at least seven BDAs who were contacted by Moneycontrol, Byju’s has urged BDAs in various cities to increase the volume of calls they make each day to parents of students to offer them courses.
BDAs claimed that because of the rise in calls, their pitches to parents have gotten shorter, which has a negative impact on the conversion rate. In an effort to convert leads, BDAs occasionally end up overselling particular courses.
A BDA who wished to remain anonymous said, “We willend up pitching something to parents that’s not part of the package.”
The use of edtech sales tactics becomes difficult when targets are raised. According to at least 10 employees, BDAs are given a daily call time target of two hours, and if they fall short of it, they are marked absent and do not receive pay for the day.
Parents typically exercise caution and ask numerous questions. And according to various BDAs, sales representatives must contact hundreds of parents.
The BDA previously mentioned stated, “So we also end up in saying something just so that they buy the new course.”
“To put our BDAs under excessive pressure to perform would be foolish and unproductive; in fact, the company views them as its most important and highly regarded growth asset. A calling time of just approx 120 minutes per day is the standard goal “The spokesperson for Byju said.
“Two hours per working day is a reasonable goal, and even in this case, managers are urged to focus on the caliber of work rather than its quantity. The managers have the authority to flex the time constraints as needed. If there are any exceptions to this rule, we quickly spot them and make the necessary corrections “added the spokesperson.
According to BDAs, Byju’s sales began acting more aggressively about a year ago. This strategy has led to accusations of misselling and overstating the value of courses against Byju and the companies in its group.
The government is reportedly looking into the situation, according to some media reports. The Indian Edtech Consortium (IEC) was created in January by the Internet and Mobile Association of India (IAMAI) as a self-regulatory body for edtech businesses.
According to IEC officials, Byju’s and its group companies, like Great Learning, are the subject of the majority of complaints the consortium receives. Of course, Unacademy and Vedantu, two of Byju’s rivals, have also received complaints.
These complaints, according to IEC insiders, have been made by parents or students and concern, among other things, advertisements (misleading sales pitches), refunds (if loans have been taken for subscriptions that have subsequently been terminated), and the caliber of content.
According to Byju’s, it only receives three complaints on average per month, and all of them have been resolved.
By collaborating with numerous schools, Byju’s is also stepping up its outside marketing efforts.
In a recent tweet, Amod Malviya, co-founder of the business-to-business e-commerce startup Udaan, stated that he needed to download Byju’s mobile app in order to view the outcomes of a test his child took at the school.
You could easily display the results online, but you need to increase those installs. People in the industry won’t want to work with you if Byju’s keeps using these growth hacks, Malviya tweeted. Byju’s is also expanding in tier-2 and lower-tier cities and towns that offer K-12 education.
Prior to last year, executives would craft proper pitches, and then parents would decide whether to accept or reject them, according to a former Byju’s BDA executive who asked to remain anonymous.
This year, we were instructed not to accept a ‘no’ from parents, so I felt the need to make up excuses in order to seduce them. After a while, I just couldn’t handle it, so I quit in May of this year,” the former BDA continued.
According to Byju’s, the ratio of newer and more seasoned BDAs has not changed and won’t change in the future.
“Fair sales goals are set for employees by all businesses, and BYJU’S is no exception to this “high performance, high growth” culture. Our inside sales team, which communicates with inbound leads remotely and more effectively and efficiently, is also expanding. This implies that a large number of our field sales executives will have the chance to transition to inside sales “The spokesperson for Byju said.
Ad spending keeps going.
Byju’s continues to be aggressive in its advertising and promotional efforts even though the company is making adjustments to its on-ground sales strategies to “optimise costs” and increase sales.
According to its regulatory filings, the company spent more than Rs 2,500 crore on marketing and advertising in FY21. This was before the business agreed to become the FIFA World Cup’s official sponsor. According to news reports, Byju’s will spend about $40 million on the sponsorship.
Even before online education made a breakthrough in India, the startup built a strong brand by signing celebrity Shah Rukh Khan in 2017. According to media reports, it recently renewed its contract with the Board of Control for Cricket in India for $55 million, becoming the lead sponsor of the Indian cricket team in 2019. The ongoing Men’s T20 World Cup of the International Cricket Council is being sponsored in part by Byju’s.
According to at least 10 parents Moneycontrol spoke with, the company has introduced a number of special discounts and offers and has bundled them to make its packages even more affordable, especially in the K–12 market.
For instance, Byju’s has combined its offline and online classes and is selling the package to students for a significant discount compared to conventional offline coaching facilities.
According to sales representatives, Byju’s offline tuition classes at a monthly cost of between Rs 3,000 and Rs 3,500 include digital study materials. The majority of the material offered by traditional offline tuition centers is physical, and they charge about Rs 50,000 per year.
The advantage of going hybrid allows the edtech giant to offer more affordable packages by requiring students to attend classes in person only when necessary and online the rest of the time, according to insiders. In an effort to boost sales, Byju’s is also collaborating with organizations like Flipkart, Zepto, and Cadbury’s Bournvita to provide free introductory lectures.
Valuation questions
Byju’s is under increasing pressure as the edtech decacorn (company valued at $10 billion or more) struggles to increase post-pandemic sales as evidenced by the aggressive sales pitches, marketing expenditures, and cost-optimization initiatives.
According to sources, the company is attempting to achieve its multibillion-dollar revenue projections, which assisted it in raising billions of dollars from investors at extremely high valuations. For instance, Raveendran stated in an interview with Moneycontrol that Byju’s anticipated revenue of over Rs 4,500 crore for FY21. The startup did, however, manage to generate revenue of Rs 2,428 crore, a 3 percent decrease from its FY20 revenue.
Given that FY21 was the first year of the pandemic, which helped edtech companies in India and around the world in an unprecedented way as classes shifted online, the decline in revenue was unexpected. Closest rivals of Byju, Vedantu (backed by Tiger Global) and Unacademy (backed by SoftBank), saw a fourfold increase in revenue in FY21.
Due to the company’s underwhelming performance, particularly in FY21, investors began to express growing concerns about Byju’s and other edtech companies’ capacity to meet revenue projections, which put a spotlight on their valuations. Due to this, Byju’s had to raise $250 million earlier this month at its current valuation, even though it was in a difficult macroeconomic setting and some of its competitors were having trouble raising capital. Byju’s was reportedly offered a valuation of $11–$12 billion, according to Moneycontrol.
In March of this year, cofounder Byju Raveendran announced a $800 million fundraising effort, with a $400 million check serving as the round’s anchor. Due to the withdrawal of two investors, Byju’s failed to receive about $250 million from its first two rounds. According to Byju’s, the two investors left due to the macroeconomic environment’s uncertainty.
At a $22 billion valuation, the proposed $800 million was to be raised. An investor with direct knowledge of the situation claims that Byju’s expects its FY23 revenue to exceed $1.9 billion (Rs 15,660 crore), which means that the company was able to raise the money at a TTM (trailing twelve months) multiple of just over 11.
Byju’s now has an LTM (last twelve month) revenue multiple of just over 40, making it the most expensive edtech in the world for investors, according to a Moneycontrol report from last month.
Byju’s reported that it had to defer 40% of its revenue to succeeding years in FY21 after Deloitte, its auditor, suggested that it alter how it recognizes revenue.
Edited by Prakriti Arora
