Prosus Slams Byju's After Quitting Board, Says India's Top Startup Regularly Disregards Advice

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A Scathing Statement from a Key Investor

On Tuesday, Prosus, one of the largest investors in Byju’s, expressed its disappointment in the edtech giant’s reporting and governance practices. This comes a month after all key investors quit the startup’s board.

A Disappointing Development for Byju’s

Prosus said in a statement that Byju’s reporting and governance structures ‘did not evolve sufficiently for a company of that scale,’ and the Indian firm ‘disregarded advice and recommendations’ from Prosus’ director despite repeated attempts. This statement highlights the growing concerns about Byju’s management practices.

A Departure from the Board

Prosus, the largest external investor in the Bengaluru-headquartered startup, said its director, Russell Dreisenstock, stepped down from Byju’s board after it became clear that ‘he was unable to fulfil his fiduciary duty’ to serve the long-term interests of the company and its stakeholders. This move is a significant development, as it shows that even key investors are not satisfied with Byju’s management.

A Changing Landscape for Byju’s

The move follows three key Byju’s investors — Sequoia India, Prosus, and Chan Zuckerberg Initiative — quitting the startup’s board last month. Byju’s, which at $22 billion valuation is India’s most valuable startup, downplayed the significance at the time, saying the directors ‘had to vacate’ the board because their shareholding fell below the minimum threshold set in the shareholding agreement.

Trouble Mounting for Byju’s

Global auditor Deloitte also quit the startup last month, saying it had not received ‘any communication’ from Byju’s on the status of ‘audit readiness of the financial statements and the underlying books and records for the year ended March 31 2022.’ This development highlights the growing concerns about Byju’s management practices.

A History of Concerns

Byju’s, which has raised more than $6 billion altogether, has spent over $2.5 billion in recent years to aggressively expand globally in a move that rattled some of its investors, according to people familiar with the matter. As the market conditions shifted, the startup had to postpone its listing plans, lay off thousands of employees and scramble for other ways to cut costs.

A Scathing Statement from Prosus

Prosus is one of the earliest backers of Byju’s and has never sold any of its shares in the company. The Netherlands-headquartered investment group said today that it has invested billions in India and remains a ‘long-standing and committed supporter’ of Indian entrepreneurship.

"While the companies and sectors we work with in India and across the globe are high-growth and rapidly evolving, our stakeholders rightly expect that we hold ourselves and our investee companies to the highest standards," said a Prosus spokesperson. "We have been concerned about Byju’s management practices for some time now, and this decision is a reflection of those concerns."

A Call to Action

The statement from Prosus highlights the need for Byju’s to address its governance issues and ensure that it is operating in a transparent and accountable manner.

"Investors like us have a responsibility to our stakeholders to ensure that our investee companies are managed in a way that aligns with our values and principles," said the Prosus spokesperson. "We will continue to work with Byju’s to address these concerns, but ultimately, it is up to Byju’s management to take concrete steps to improve its governance practices."

A Bright Future for Edtech?

Despite the challenges faced by Byju’s, the edtech industry as a whole remains a bright spot in India’s startup ecosystem. With increasing demand for online education and growing investment in the sector, it is likely that we will see more innovation and growth in this space.

However, for Byju’s to succeed, it must address its governance issues and ensure that it is operating in a transparent and accountable manner. The statement from Prosus highlights the importance of good governance in the startup ecosystem and serves as a reminder to all companies to prioritize transparency and accountability.

What’s Next for Byju’s?

The statement from Prosus raises several questions about Byju’s future prospects. Will the company be able to address its governance issues and ensure that it is operating in a transparent and accountable manner? Only time will tell, but one thing is certain – the edtech industry as a whole remains a bright spot in India’s startup ecosystem.