Byju’s: VC Valuation vs 409a Valuation
The outbreak raises awareness of online education; this might be a watershed moment for the industry, ushering in higher use of this format and shifting attitudes toward how children learn and teachers educate. The education industry has seen tremendous growth in the past few years, where learning has now become more creative and innovative. Earlier, students used to go to school, and now the entire education industry has been shifted to learning online. You can sit at one place and learn from anywhere around the world. Byjus has been the game-changer for almost every educational industry, and it is now one of the leading educational technology companies. Byjus has been successful in acquiring and getting funding from various multinational companies.
Byju’s
Byjus is an Indian multinational education company that has become the world’s largest hub that creates tailored learning programs for kids in grades K through 12. It has successfully acquired a lot of funding and collaborated with a lot of organizations creating various employment opportunities for students, educators, mentors, and youth. Byju has acquired various other ed-tech ventures as well.
About Byju’s
With around 300,000 annual paid subscribers, BYJU’S The Learning App (BYJU’s) is India’s largest K-12 education app. Since its introduction in 2015, BYJU’S has had a significant impact on the online learning sector. Byju Raveendran, a teacher by trade and entrepreneur by chance—created the India-based mobile learning app, which is today utilized by over 15 million students and has 900,000 paying users.
BYJU’S The Learning App is redefining how kids study in the age of mobile devices by teaching them to imbibe the culture of learning on their own rather than being spoon-fed. BYJU’S methodology blends world-class teachers, proven pedagogical approaches, innovative technology, and data science to provide tailored learning, feedback, and assessment for students.
Byju’s Funding Rounds
According to the most recent regulatory filings acquired by business intelligence platform Tofler, edtech firm Byju’s has secured $50 million in a Series F round from IIFL’s private equity fund and Maitri Edtech. With a $35 million investment, IIFL led the round, followed by Maitri Edtech with a $15 million investment.
UBS Group, Zoom founder Eric Yuan, Blackstone, Abu Dhabi sovereign fund ADQ, and Phoenix Rising-Beac were among the investors who contributed $340 million to Byju’s.
Byju’s funding round summary
Byju’s current round of funding follows its $950 million cash-and-stock acquisition of tutoring company Aakash Educational Services. This was the largest acquisition in the online education business in India. India’s Competition Commission approved the merger on Monday. Byju’s has bought several smaller and specialty businesses in the last year, causing the industry to consolidate.
Following the acquisitions of WhiteHat Jr, Scholar, Osmo, and Toppr. The Indian ed-tech sector is expected to grow to $30 billion in 10 years. UBS Group, Zoom founder Eric Yuan, Blackstone, Abu Dhabi sovereign fund ADQ, and Phoenix Rising-Beacon Holdings were among the investors who contributed $340 million to Byju’s.
This round valued the company at roughly $16.5 billion, putting it ahead of Paytm, India’s most valuable startup, which is valued at $16 billion. After the newest round of fundraising, Byju’s Valuation remained at $16.5 billion. Tiger Global, Sequoia Capital, the Canadian Pension Plan Investment Board (CPPIB), and Lightspeed Venture Partners are among the company’s investors.
Byju’s Cap Table
Before understanding Byjus’s cap table, let’s first understand what we mean by cap table.
A capitalization table, sometimes called a cap table, is a spreadsheet or table that displays a company’s equity capitalization. A capitalization table is most typically used by startups and early-stage firms, but any company can use it. All of a company’s equity ownership capital, such as common equity shares, preferred equity shares, warrants, and convertible equity, is commonly included in cap tables.
Byju’s, an online learning platform provider, has received $300 million at an $18 billion valuation.
According to TechCrunch, the firm is poised to receive even more money as part of the round, valuing the India-based edtech company at around $21 billion. If Byju decides to go public, investment bankers estimate that the company will be valued at between $40 and $50 billion. Byju’s, the world’s most valuable VC-backed edtech startup, is poised to gain from many big trends at the same time. Prior to the epidemic, the corporation had ambitious plans. However, once schools worldwide closed and went online, demand for edtech goods skyrocketed, causing Byju’s to raise $1.8 billion and more than treble its Valuation.
Byju’s Overview
- Founded Year – 2011
- Location – Bangalore
- Company Stage – Series H
- Total Funding – $4.38 B
- Last Funding Round – $150M, Series H
- Valuation – $16.8B as on Sept 17 2021
- Annual Revenue – $336M as on Dec 31, 2019
- Employee Count – 33,957
Byju’s Funding Rounds
Here are the funding round summary of Byju’s.
- Series A – Following the seed stage of a company’s development, Series A funding begins when the company gains traction. There should be tangible indications that the company is ready to advance. This proof can be based on pre-existing interest, early revenue, or KPIs that show there’s a compelling rationale to continue development. On September 1, 2013, Byju’s raised $9 million in Series A from Aarin Capital.
- Series B – Once your firm has successfully identified a market for your products and you are ready to expand, Series B fundraising can take place. Scalability is the focus of Series B. You must demonstrate that you can grow your client or customer base from 200 to 2,000, or perhaps 200,000. This is also the time to consider increasing the number of personnel to help with scaling proportions. Byju’s Series B funding was $25 million from Aarin Capital.
- Series C – If your firm makes it to the Series C stage of funding, it’s safe to assume that it’s doing well and that you’re ready to expand into new areas or begin developing new goods and services. It’s not uncommon for Series C companies to begin growing globally in order to reach a larger audience. It’s also possible that they’re looking for an opportunity to increase the worth of their firm before going public (IPO). On March 22, 2016, Byju received another funding of $75 Million from Sequola Capital India, Sofina.
- Series D – Many companies have established themselves to the point where they are comfortable producing their own revenue streams for future expansion. However, there are a few compelling reasons why a Series D investment would be necessary. To begin with, the move could be due to you needing to locate a new source of revenue before pursuing an IPO. Byju’s Series D funding was raised to $50 Million on September 9, 2016, by Chan Zuckerberg Initiative, Sequoia Capital.
- Series E – Series E is a type of fundraising round that functions similarly to Series D. Perhaps you’ve fallen short on your past goals, or you’d like to stay anonymous in the future. In either case, companies seldom make it to the Series E stage of investment, and founders usually do so owing to an unforeseen scenario that wasn’t anticipated in earlier business plans. This isn’t to argue that moving into Series E is a bad thing; in fact, it might be extremely profitable in the long run. Byju’s Series E funding was closed at $50M on December 20, 2016.
- Series F – Series F is a form of loaded fund that you can purchase without having to pay a sales commission. Fee-based advisers, not commission-based advisers, are the only way to get Series F. This funding has reduced yearly costs since they do not pay commissions to advisers. On March 29, 2017, $30 Million was raised for Series F funding by Verlinvest for Byju.
- Series G – Series G funding is the startup’s eighth fundraising round (the first being the seed fundraising round), yet it is feasible. Because money is so fundamental to how they do business, some well-known financial services have received Series F or Series G funding.
- Series H – Every round of investment opens up new possibilities for the company, but it also has the potential to dilute the company’s stock and valuation. In order to do business, it is important to have enough financial resources. There are instances that firms or financial services receive Series H funding.
| Date | Funding Amount | Funding Round |
|---|---|---|
| 08 September 2021 | $150 M | Series H |
| 08 June 2021 | $460 M | Series H |
| 29 April 2021 | $350 M | Series H |
| 29 March 2021 | $1.11 B | Series H |
Byju’s Cap table timeline
This infographic showcases the acquisition of the capitalization table and it also defines the fundamental differences in the funding received and the amount of money invested.
Byju’s VC Valuation
As the world’s most valuable edtech company focuses on extending its operations in worldwide markets and exploring other acquisitions, Byju’s is raising roughly Rs 2,200 crore ($300 million) as part of a larger round of new financing.
According to industry sources, the latest capital might put Bengaluru-based Byju’s at an $18 billion valuation, up from $16.5 billion in June. Byju’s was named India’s most valuable unicorn in June, with a valuation of $16.5 billion, exceeding the $16 billion valuations of fintech company Paytm. According to regulatory filings accessed by business intelligence platform Tofler, the company intends to issue 77,174 Series F compulsorily convertible cumulative preference shares with a face value of Rs 10 each and a securities premium of Rs 285,062 to investors. The spending resolution was passed on September 27, 2021.
Byju’s 409a Valuation
According to regulatory filings with the Ministry of Corporate Affairs sourced from business intelligence platform Tofler, Byju’s has raised over $1 billion from investors, including Baron Funds, Facebook co-founder Eduardo Saverin’s B Capital Group, and US-based investment hedge fund XN Exponent Holding.
According to the documents, the company raised a total of Rs 11,364 crore ($1.51 billion at the current exchange rate) in three Series F tranches, starting with Rs 912 crore from Black Rock and T. Rowe Price in December 2020. This round, which is a continuation of its capital-raising to fund the company’s recent acquisition of Aakash Educational Services Ltd., brings the company’s total funding to $1.5 billion. Existing investors include Silver Lake Management, Owl Ventures, T Rowe Price, Disruptive Technology Solutions, Footpath Ventures, Prudential Assurance Company, Olay and Investments, and GSV took part in the latest round, according to the documents.
For the 409a valuation of the company, we can utilize a Market Approach (Guideline Public Company method) to help find the value. With a forecast of Rs 10000 Crore for 2022, equivalent to ₹100,000,000,000, we can convert this into USD with the rate of 1 USD to 75.9469 INR, equivalent to $1,316,708,084, or $1.3 billion.
After finding 6 public companies with similar business natures to Byju’s in Edtech, being Adtalem Global Education (ATGE) , Chegg (CHGG), Coursera (COUR), Docebo(DCBO), Franklin Covey (FC) & PowerSchool Holding (PWSC).
We can find a ballpark figure of their EV/Rev multiples by looking at Yahoo Finance.
We can then combine them together to get a range and average.
| Companies | EV/REV |
|---|---|
| ATGE | 2.21 |
| CHGG | 6.63 |
| COUR | 6.24 |
| DCBO | 13.55 |
| FC | 2.48 |
| PWSC | 6.65 |
| Average | 6.29 |
We then take their forecasted sales by the average to arrive at:
| Indication of Value | |
|---|---|
| EV/Rev Multiple | 6.29 |
| 2022 Forecast Sales | $1,316,708,084 |
| Market Value | $8,286,482,875 |
Byju’s VC Valuation vs Byju’s 409a Valuation
The main point of difference between the 409a Valuation and venture capital valuation. A 409A valuation is a third-party, independent appraisal of the fair market value of a private company’s common shares. One of the “safe harbor” techniques of assessing fair market value outlined in the tax code is to obtain a 409A assessment from an independent assessor, whereas venture capital valuation.
The venture capital technique illustrates the investment process in which investors are seeking a 3 to 7-year exit. First, the investment’s predicted exit price is calculated. After that, one determines the current post-money Valuation, taking into account the time and risk taken by the investors.
The Difference between Byjus VC Valuation and 409a Valuation:
| Point of difference | Byjus’s VC Valuation | Byjus’s 409a valuation |
|---|---|---|
| Meaning | The market value negotiated between entrepreneurs and venture investors is known as VC valuations (VCs). | Compliance professionals produce 409A values, which are point estimates at the bottom end of a defensible valuation range. |
| Amount | Byju's, an online learning platform provider, has received $300 million at a $18 billion valuation. | Similar Market Approach at $8.27 billion. |
| Consideration | A 409A valuation is rarely used by venture capitalists in their appraisals. | The venture capital valuation is nearly always taken into account by 409a valuation providers. |
We can see from a 409a valuation vs VC valuation perspective, the pre-money valuation of Byju’s was $18 billion, and 409a valuation sitting around $8.27 billion. This difference is often the difference between how VCs value a company for investment (preferred shares), and what 409a valuation analysts look at in terms of common shares and strike prices.
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