Education technology leader Byju’s has acquired US-based kids learning platform Epic in a $500-million cash-and-stock deal.
This is its second-biggest buyout after brick-and-mortar coaching network Aakash Institute, which it snapped up earlier this year for nearly $1 billion.
The Epic acquisition is part of Byju’s foray into the overseas market, from where it expects annual revenue of $300 million this financial year, cofounder Byju Raveendran told ET. In 2019, it had acquired US-based maker of educational games Osmo for $120 million. The Bengaluru-based startup said it aims to invest around $1 billion in North America over the next couple of years.
Epic, founded by Suren Markosian and Kevin Donahue, has 50 million users—children in the United States who access digital books for free as well as through subscriptions. Epic had around 20 million users in 2019. Markosian and Donahue will continue to run the business.
Evolution Media and Battery Ventures are among its investors. Neither of these companies disclosed details of the transaction.
“It is the largest B2C (business-to-consumer) edtech company in the K-12 segment and has a strong product capability that fits well into our overall plan of building an edtech ecosystem,” Raveendran said.
Byju’s has been on a fundraising spree since last year, using the capital to finance large acquisitions. After having raised $1 billion in 2020 from global and domestic investors, the decacorn mopped up almost $1.5 billion from investors such as UBS Group, Blackstone, Abu Dhabi’s sovereign fund ADQ and others in the last few months.
Some of its early backers include Lightspeed Venture Partners, Qatar Investment Authority, Owl Ventures, General Atlantic, Tiger Global, Tencent, Verlinvest and Sofina.
“In some of the new markets, we will be in a growth phase, and we will invest to build similar brand and sector awareness (like it did India). With strong organic growth and acquisitions, we will start adding significant numbers in our total revenue and you will see us accelerating over the next many years even on a large base,” Raveendran said.
Byju’s is well-capitalised, and its India business is profitable, besides generating cash, he said. “India’s growth is getting accelerated with Byju’s growth and Aakash. With Byju’s Future School nicely scaling (abroad), we will have three businesses overseas that will have $100 million revenue.”
In April, Byju’s launched its Future School, which will offer one-to-one teacher and student sessions in markets like the US, Brazil, the United Kingdom, Indonesia and others.
Its coding-for-kids subsidiary WhiteHat Jr played an important role in building the new platform, and Karan Bajaj, who founded WhiteHat Jr, is heading this business.
On the back of increased adoption of online education in India and aggressive expansion overseas, Byju’s expects its revenue to more than double in the current financial year. The company is estimated to have closed FY21 with revenue of Rs 5,600 crore.
Byju’s is also reportedly in talks to scoop up Gradeup and Great Learning. Sources said the company is likely to announce the closure of the Toppr deal in the coming weeks.
At a time when many top-tier startups and tech companies like Zomato, Paytm and Mobikwik have either gone public or in the process of doing so later this year, Raveendran said Byju’s is looking at an IPO timeline of 15-18 months. However, that timeline is not set in stone as it still sees strong interest from investors in the private markets to raise capital, he added.
“At our scale and maturity, the business model allows us to go public at any point of time— that’s always an option for us. But there is strong demand from private markets too, including global investors,” Raveendran said. “Going public is the next big milestone but broadly we will think of (an IPO) in the next 15-18 months, but that’s not a strict deadline as we don’t have to do this to give an exit to investors.”
The Indian edtech sector has been one of the biggest beneficiaries of the ongoing pandemic accelerating the shift towards e-learning. Edtech startups cumulatively raised $2.2 billion in 2020 compared to $553 million in 2019, according to Venture Intelligence data.
The edtech sector is projected to become a $30 billion industry in 10 years, according to a recent report by transaction advisory firm RBSA Advisors.
Unacademy, backed by SoftBank and Tiger Global, is also finalising a $400-$500 million funding round from marquee investors this year.
Source: Economic Times