Troubled edtech giant Byju's unable to pay salaries, Founder Raveendran says 'Funds are locked'

Troubled edtech giant Byju's has hit a financial roadblock, unable to process employee salaries for February.

Founder Byju Raveendran attributes this predicament to a dispute with a handful of the company's investors, which has led to the funds from a recent rights issue being locked away. Despite efforts to navigate these troubled waters, Raveendran admits the company is at a standstill, with the rights issue funds inaccessible, leaving the team in a dire financial situation.

Investor dispute deepens

The crux of the issue lies in a disagreement with investors over a $200 million rights issue, aimed at injecting much-needed capital into the company.

However, this move has been met with resistance from key investors, including Prosus NV, Peak XV Partners, General Atlantic, and Sofina SA, who have challenged the valuation and legality of the rights issue. This dispute has not only frozen the funds but also led to a broader conflict over the company's governance and management practices.

Legal and governance challenges

Amidst this financial turmoil, Byju's faces legal and governance challenges, with the National Company Law Tribunal (NCLT) stepping in.

The NCLT has ordered that the funds from the rights issue be kept in an escrow account until the dispute is resolved, further complicating the company's ability to meet its financial obligations. This legal intervention highlights the severity of the governance issues plaguing Byju's, once a beacon of success in the startup world.

Shareholders vs Founder

The dispute has escalated to a battle for control of the company, with shareholders voting to remove Raveendran and his family from the board over allegations of mismanagement. This vote, contested by the company as invalid, underscores the deep rift between the founder and some of the company's most prominent investors.

The disagreement over the rights issue and the future direction of Byju's has brought to light the challenges of balancing founder control and investor interests in high-growth startups.

The road ahead

As Byju's grapples with these financial and governance challenges, the future remains uncertain. Raveendran's commitment to resolving the salary delay by March 10 offers a glimmer of hope to the employees caught in the crossfire.

However, the resolution of the broader dispute with investors and the legal challenges will be crucial in determining the company's path forward. Byju's journey from a celebrated startup to a company in crisis reflects the volatile nature of the tech startup ecosystem, where rapid growth often comes with complex challenges.