BYJU’s – The Learning App – have acquired the Mumbai based start-up WhiteHat Jr in a $300M all-cash deal. This is Think and Learn’s (BYJU’s parent company) biggest acquisition so far. The deal would give BYJU’S an excellent opportunity to grow even further in the K-12 segment of the EdTech sector. K-12 segment is the Kindergarten to 12th standard segment. The acquisition talks went on for six weeks before the announcement was made. DC Advisors acted as the financial advisor for this deal. So how and why did BYJU’s acquire WhiteHat Jr. for $300M? Let’s have a look.
Official statement from BYJU’S: https://byjus.com/life-at-byjus/whitehat-jr-joins-byjus-family/
WhiteHat Jr: One of India’s best performing Start-ups
WhiteHat Jr was founded in 2018 by Karan Bajaj- former CEO of Discovery Networks India. The start-up focuses on online coding classes for kids. It had raised $11M in Seed Round and Series-A funding from Omidyar Networks, Owl Ventures & Nexus Venture Partners.
WhiteHat Jr was clocking a revenue-rate of $150M at the time of sale. In the month of February, the company ventured into the US market, and subsequently saw a 150% month-on month growth and 55% of their total revenue comes from this market. Its charges on an average about $10/hour, and their USP is one-to-one training. The company had bagged over 20,000 paid subscribers as of June 2020. Its subscription packages are priced between ₹6000 to ₹1 lakh, and currently offers three packages of 8, 48 and 144 classes.
Table: Earlier Stockholding of WhiteHat Jr
BYJU’S – The Learning App: Indian EdTech Unicorn
BYJU’S – The Learning App is the brand owned and managed by Think and Learn Pvt. Ltd. It was founded by Byju Raveendran in 2011. It is the world’s most valued EdTech company and India’s second most valued start-up with current valuation of $10.5 billion. The start-up posted a revenue of approx. $374M or ₹2800 crore.
The company has previously acquired other learning platforms like Osmo, Math Adventures, TutorVista & Vidyarth, and are at an advanced stage of negotiation to acquire Doubtnut at around $100-$150M. BYJU’S is also on a fundraising spree in this calendar year, with a Bloomberg report suggesting DST Global, the venture capital firm led by the famous Israeli-Russian billionaire entrepreneur cum physicist, Yuri Borisovich Milner, in talks with BYJU’S to invest $400M into the company.
Why did BYJU’s acquire WhiteHat Jr?
BYJU’S has been trying to expand to other countries for quite some time. As WhiteHat Jr has operations in US, this would give BYJU’S an excellent opportunity to get into the US market. Also, WhiteHat Jr caters to premium segment, and BYJU’S can cross-sell its own programs to this segment. The company also operates on the one-on-one model of teaching, whereas BYJU’S doesn’t, and therefore it can leverage this model and expand it to other subjects as well (not restricting to coding only). Experts like Vaibhav Sisinty, Head of Marketing, Klook India & ME, are of the view that with the Indian Govt. announcing the new National Education Policy (NEP), which makes coding a mandatory subject in school, there would be a huge demand for skilled tutors/teachers in the future, who can teach coding at school level. BYJU’S wants to capitalize on this opportunity by operating both at B2C level as well as B2B level (providing human resource to the schools). Also, with the growing reach of 4G connectivity into the rural areas, there lies a big untapped market, which BYJU’S would definitely want to capture.
Link to Vaibhav Sisinty’s post on LinkedIn: https://www.linkedin.com/posts/vaibhavsisinty_everything-about-byjus-acquiring-whitehat-activity-6697458417126248448-whL-
Did WhiteHat Jr. exit too soon?
There has been quite a chatter in the news media and social media about WhiteHat Jr’s early exit. The start-up was just 18 months old. Questions are being raised and rightfully so – ‘Did BYJU’S get a cheap deal?’ After all, WhiteHat Jr was racking in $150M revenue as per recent disclosures made by the former owner. Well, Kara Bajaj, the former owner and CEO of WhiteHat Jr, has himself answered all these questions. In a recent interview to Business Insider India, Bajaj said, “we were doing very well revenue wise and with that you would ask for a high value, but that was offset by the fact that the company is very young – it has not lived through many cycles of ups and downs. Neutralizing all of that I thought it was a very attractive deal for all of us – BYJU’S got the company at a lower multiple that what a company with this revenue would make. The investors made excellent return on investment and employees who held stocks too got a good deal.”
“We were doing very well revenue wise and with that you would ask for a high value, but that was offset by the fact that the company is very young – it has not lived through many cycles of ups and downs. Neutralising all of that I thought it was a very attractive deal for all of us – BYJU’S got the company at a lower multiple that what a company with this revenue would make. The investors made excellent return on investment and employees who held stocks too got a good deal” – Karan Bajaj
|Investor||Investment Made||Return on Exit|
|Nexus Venture Partners||$5M||$66M|
Table: WhiteHat Jr. investors; their investment, and their return on exit.
“I realized that I have figured out a product which seems to work really well in India and the US. The next thought was how do I expand very aggressively globally and create teaching jobs. I figured out there’s nothing I will be able to do faster and better than I could do with BYJU’S,” said the yogi-turned entrepreneur, who lived in an ashram for a year and who once led Discovery Network India.
Link to Business Insider’s article/interview: https://www.businessinsider.in/business/startups/news/how-karan-bajaj-sold-his-less-than-18-month-old-startup-white-hat-jr-to-byjus/articleshow/77415329.cms
BYJU’S and WhiteHat Jr’s common view of expansion would soon be implemented. They are set to launch in six new countries – UK, Australia, New Zealand, Singapore, Canada and Germany. THis launch is set to happen this month only. While the ownership has been transferred, Karan Bajaj would still be heading WhiteHat Jr. The man has proved beyond doubt his leadership skills. After all, we know how well performing WhiteHat Jr was. Experts are also saying that BYJU’S will replicate WhitHat Jr.’s models of one-on-one coaching with other STEM subjects in the very near future. With the EdTech segment still slated to grow in the coming years and the immense opportunity is carries, there is no doubt that companies in this sector, especially BYJU’S will do well. It not too far-fetched of an idea to thick that in the coming future there is a fare chance that BYJU’S might dethrone Paytm from the number one spot for the most valued start-up in India. Guess we just have to wait and watch this glorious journey unfold.
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