We will more than double revenue this year, churn net profit: Byju Raveendran
Byju Raveendran’s South Bangalore office at Koramangala is buzzing with activity. There is tight security on every floor of the multi-storeyed building. Inside, content producers are brainstorming, filming and editing educational material for students. The study material and tablets are packaged carefully by scores of employees and dispatched across the country.
His ed-tech startup Byju’s is the most-funded venture in the segment in India. But this is not enough for the 38-year-old Raveendran. He wants to go global. And with investors from the US, Europe and Asia, he can certainly do so.
Wearing his quintessential black t-shirt and blue jeans, he spoke to TechCircle about his marketing ethos, why he doesn’t see his business as a monopoly, how being a self-learner taught him the skills he needed to win and much more. Excerpts:
This is your fourth office in two years. What's happening?
We outgrow our capacity so fast that it becomes tough (to stay in a smaller office). Our first office had just 15 employees, though I cannot recall when it was. In 2015, we moved to a 250-capacity office and now we have more than 2,000 employees. That is eight-fold growth in manpower in under three years.
We have been hiring so much but we have strived to get the right people, not the best. Every organisation has a culture and we looked at cultural fit like those who can pass on the right vision to the next level. We have been fortunate to get people like that.
How has that happened?
It is aided by the fact that we have always hired a lot of top talent from our student pool. That is the differentiator in our case. The company started like that.
Our online and digital journey started in 2011 with eight of my students from the offline era. Most of them went to IIMs and came back to join me. That has been a good pipeline to hire talent. They know what we do. They know the benefits of what we do. It is easy to convince them.
Otherwise, when you bring so many new people it takes time to get settled and some of them would not be able to. And these students are at all levels of management. More than 50% of our workforce is our students and 75% of our top management.
How did you manage to gain such scale in a short period of time?
We have seen companies of our scale only in the offline segment. But being a tech company helped us attract the top tech talent for an education company. We see ourselves as a company at the intersection of education, tech and media. We are equally split in strength into these functions.
All learning games and videos are created in-house. We have a good team of artists, designers, scriptwriters and production controllers with multiple studios in our office.
You have talked about international expansion. How is the India business helping it?
The India business is doing so well that we will soon start making net profits now and not just break even. We are doing Rs 60 crore per month in revenue for the past couple of months. There is month-on-month growth as well. We have kept our expenditure under control even as we doubled our income.
Our loss was Rs 59 crore in 2016-17 and Rs 49 crore in 2015-16. In 2017-18, our loss should approach zero and we should make huge profits in 2018-19.
We will do Rs 1,200 crore in revenue at least (in 2018-19). In 2017-18, we might close with revenue of Rs 510-540 crore. We had revenue of Rs 45 crore in 2014-15, Rs 110 crore in 2015-16 and Rs 240 crore in 2016-17. We are doubling revenue every year since our app was launched in 2015.
For us, to double revenue, we don't need twice the number of users every year. A lot of companies struggle to grow 100% once they reach a certain scale. We have found it to be easier so far.
What makes you confident about sustaining this kind of a growth in coming years?
Last year, we had an 85% renewal rate. The year prior to that, we had an 89% renewal rate. Our only cost is payment gateway costs and we are not sharing the money with anyone as the content is all ours. We are aggressively building content for international markets inside.
Our current cost includes all our future product development cost, which is a substantial component today. For instance, we have spent Rs 165 crore on product development in the last fiscal year, most of which is for international markets.
Would you not require to renew the content delivery to avoid boredom?
That you need to do only once in five years or so.
Have you completely moved away from the offline business?
Almost everything is online now. Almost 97%. In Bengaluru, you might still see some legacy ads, etc. This year, around Rs 16-17 crore might come from the classroom component. We have some commitments in offline but those are being slowly phased out.
CAT (Common Admissions Test for top management schools) is now 100% online and that is what even they want. In lower grades, you need to convince parents too.
How do you get feedback from students and parents?
It is much better than in classrooms. In offline, it is a gut feeling because most students don't ask questions in our classrooms. Our classrooms are often one-way traffic. This is not a replacement for schools anyway. We get feedback without asking them and it is lot more objective and is often much more personalised.
In offline, only our mark lists will tell how good we are but that itself is a faulty premise. Here, nobody is forcing them, so they need to like our content. We know how much time they spend and the engagement levels.
Do you feel that your pricing is a bit too steep?
On the app, they pay somewhere between Rs 10,000 and Rs 15,000. The benchmark is Rs 1,000 per month, which most students spend on transportation and is still cheaper than offline classes. Some of them spend upwards of Rs 50,000 in high schools and for higher secondary classes annually. It might be lower in smaller towns but we are still cheaper.
You don't seem to have any competition in the segment now...
I won't say there is no competition. It is only a relative success. It is a new segment. We have 260 million students and we don't even have 10% of the market, you can’t call it a monopoly.
One major difference is that we are not copying a US or China model. We are probably the world's largest school learning app with more than 15 million registered users on the app, out of which close to a million are paid subscribers.
Once we reach 10% of the market, it won't stop at 10%, I am sure. We are the fifth most-funded ed-tech startup in the world, but that does not mean much in such a large market.
We will call it a success when a much larger percentage of students become self-learners. That is our aim and that is what we are creating here. We need to help these people to unlearn and relearn.
How do you build such a fast-growing company?
You keep your aspirations high and when you are about to reach there, raise it again. You need to think so much ahead because we can't even predict the nature of job 10 years from now when the present day students enter the job market. We need lifelong learners. That is not true in a lot of developed countries. Maybe Nordic countries might have a perfect system.
The India market is still under-penetrated, so why do you want to enter foreign markets?
Because we see a scope there. It is not about creating a large business in India. We started in India but we see a potential in lot more markets. Tomorrow every education company will use technology and can disrupt the market.
In emerging markets, education is the most important thing and you will see such companies from emerging economies as the willingness to pay for education is very high. It is about what society needs everywhere. We will localise in every market with proven local teachers.
What is your marketing mantra?
How we spend our marketing dollars, we have been very successful. How we build our product is our core strength. But how we do our sales and marketing, that has been our second USP (unique selling proposition).
We are not just going to decide we are going to spend $50 million. We will figure out who are the right partners to go with, so when we go we will make sure that… if we are not getting the ROI (return on investment) we will know that before we spend the first $2 million. Investors like us only because of that.
Will you need another round of funding this year?
Fundraising is easy today because fundamentally our business is very strong. Today, we don’t need money because whatever we have raised, almost everything is there in the bank, even with big investments happening in the new product development.
We are not burning cash in India. Within two years of the app launch, we have become profitable in India. We don’t need money for growing business in India.
You are a popular motivational speaker, too. How do you get so much of positivity?
I am a self-learner. The advantage of being a self-learner is that you will be a fast learner. I was forced to be a self-learner because I was interested in everything else other than classroom learning. I used to bunk most of my sessions even in school. That is when you learn how to be in a team, how to trust your partners, how to lead a team, how to have that killer instinct are what you learn from multiple games.