The Art of a Good Unicorn | Learning from BYJU’s cautionary tale
The perils of overconfidence and wanting to get too big too fast affect most start-up founders. Learning antifragility in a world without certainty is a way out
There was a time when BYJU’s was considered one of the coolest and most sought-after Indian startups of its era. Now, it seems like it’s all going downhill. In June, BYJU’s reportedly skipped payment on interest of about $40 million on its $1.2 billion loan. In recent times, it has faced a slew of issues from layoffs, board members and its exiting auditor, Deloitte Haskins & Sells, delays in remitting provident funds to its tech investor Prosus NV slashing its valuation to about $5.1 billion in June.
BYJU’s is considered the world’s most valuable EdTech enterprise and one of India’s most highly valued startups. Since the world of startups is fast-paced and exhilarating, startup founders may find themselves swept up in a whirlwind of success, often growing bigger than they thought they would. This could even lead to a belief that a founder’s innovative vision is invincible.
But, a house of cards can collapse without strong fundamentals. As a startup founder, what would you do if you face the perils of overconfidence and wanting to get too big too fast?
It may be that a startup founder could be intoxicated by their vision, leading them to have a blind spot regarding their operational strategies and business models. This could mean they don’t pay enough attention to their competition, some regulatory challenges or market shifts, because they think an innovative idea could sustain the test of time.
Here’s what you do
As a startup founder, you have to create a strong foundation with a compelling value proposition that offers a unique user experience to an identifiable market segment and a branded concept. Your strong fundamentals ensure a solid framework for sustained growth, so prioritise market research, a good product-market fit and financial discipline.
So, you may have to pay attention to your cash flow management, burn rate and not rely too much on external funding. Without such a solid financial foundation, you may be ill-prepared for unexpected market downturns or operational setbacks.
As BYJU’s debacle shows, IPO valuations may need to be more realistic with a clearer path to profitability. As a startup founder, you may even discount valuable advice from industry experts or experienced investors, because you may think your unique perspective and your entrepreneurial instincts are enough to march on, but that may not always be the case.
Make sure your startup has strong corporate governance. It could seem burdensome when you’re chasing flexibility and agility, but this creates accountability and credibility.
It brings transparency in financial reporting, compliance with regulatory frameworks and ethical practices. It would also help avoid conflicts of interest with proper mechanisms in place. If there are internal controls and documented policies, your startup is ready for scrutiny and a successful IPO or acquisition.
But, just because the idea of an IPO or acquisition sounds appealing, the temptation to cash out quickly must be avoided. This is because you may find yourselves relinquishing control over the startup and risk diluting your vision and decision-making autonomy.
Focus on how customers could be at the centre of your strategies and operations. This would help with deep insights into your target audience’s pain points and preferences.
In a hypercompetitive market like today’s, a strong customer experience could be a key differentiator, allowing you to create personalized and unique experiences, deliver great value and cultivate a competitive advantage. It would also help you be agile and respond swiftly to changes in the market, emerging trends, shifts in customer demands and competitive pressure. In terms of your business model, it has to be strong enough without solely relying on funding, otherwise, there’s a risk of cash flow challenges.
What went wrong with BYJU’s dream?
It may be that while BYJU's did its best to become an EdTech goliath, not establishing a strong governance system may have been a shortcoming. No matter how big you are, if your credibility keeps getting hit, at some point, you will collapse. And having plans in place as contingencies may have been another shortcoming, which is why it’s important for startup founders to explore alternative strategies.
Byju Raveendran has expressed his dedication towards BYJU’s, stating that it’s not just work for him, it’s his life. But, if the EdTech giant does fall due to repeated blows, all that’s left is 20-20 hindsight. You can’t cut corners while trying to become the biggest, growth must be calibrated with checks and balances and solid fundamentals.
In today's rapidly evolving business landscape, startup founders have to recognize what it means to truly be antifragile and resilient and how these are critical attributes for long-term and sustained success. This is what could have made a name like BYJU's a beacon of stability and trust, demonstrating a steadfast commitment to stakeholders and shareholders. As a startup founder, do you have what it takes to build your startup's long-term resilience?
Learning resilience
Antifragility is all about building something that can harness the power of uncertainty, recognising that change is inevitable and that there's an opportunity for growth in the face of hardship. Instead of just withstanding shocks, if your startup is antifragile, it can thrive in the face of adversity to leverage disruption to your advantage. And that means having a clear understanding of your core strengths, your competitive advantages and the market dynamics.
This also means that your startup's decision-making process is transparent, accountable and has the best interests of stakeholders in mind. Being antifragile means having a robust governance framework for the necessary checks and balances and fostering a culture of integrity, ethical behaviour and responsible decision-making. So, the journey towards antifragility requires you to prioritise solid fundamentals, establish good corporate governance, promote transparency and embrace uncertainty.
As a startup founder, do you have what it takes to embrace antifragile principles in a world that refuses to be certain?
Shrija Agrawal is a business journalist who has covered startups and private capital markets before it was considered cool in India
The views expressed are personal.
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