🕹No, Byju's is NOT a tech company. Here's why.

What is a tech company anyways?

Pretty shocking title, isn't it? After all, Byju's is India's most valuable startup. And the biggest ed-tech startup in the world. Of course, it's a tech company! How can Byju's not be a tech company?

That's what I thought. Until I saw the facts that convinced me otherwise. In today's article, I will prove to you why Byju's isn't a tech company.

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Before we prove why Byju's isn't a tech company, first we need to understand what a tech company is.

Today, there is widespread confusion over the exact definition of a tech company. Companies like Google, Microsoft, Apple, and IBM are obviously tech companies. But what about the new companies after 2010? Is Airbnb a tech company or a hotel company? Is Uber a tech company or a taxi company? Is Netflix a tech company or a movie production house?

If a company employs programmers, is it a tech company? If the founder was using a laptop when he came up with his startup idea, is it a tech company?

You get the point, right? It isn't easy to tell which company is a tech company and which isn't.

Sometimes, this confusion turns into a disaster. Just take the example of the dot-com bubble during the 1990s. At that time, companies adding dot com to the end of their name experienced a temporary surge in their stock price. Lots of random companies did just that. The result? Dotcom crash.

Another example is WeWork- the company fooled everyone and said that it was a tech company, but in reality, it was just a real estate company. The result? Its IPO fell apart, and its valuation crashed.

Now you realize how important it is to understand the meaning of a tech company? The confusion over tech companies can lead to disasters at their worse. But what exactly is a tech company!?

Let me explain it to you using the example of Zomato and Domino's.

Both these companies have an app where you can order food and get it home-delivered. So both of them are tech companies, right?


Remember the Zomato article? In that article, I said Zomato's main product is its marketplace. This marketplace has 3 segments- people, restaurants, and drivers. The goal of this marketplace is food delivery. The Zomato app ensures this goal is achieved. We order food using the app, the restaurant receives this order instantly, the driver is dispatched to the restaurant to pick up and deliver the order, and we can track him in real-time on the app.

Now think- would this marketplace be possible without the app? Nope.

Compare this to Dominos- their main product is pizza. The Domino's app makes the pizza ordering process easy for us. In this case, technology is a side-product, not the main product. Can Domino's exist without the app? Of course!

This is the first defining trait of a tech company- they can't exist without technology.

Let's see if Byju's passes this test. What is Byju's main product? Is it the app or the website? It's neither. The product is the learning modules that students can access using the app or the website. The app and website are the distribution channel for the content. Now that we know that the product is the content, we need to establish whether it can be accessed without technology. It absolutely can. Hence, Byju's hasn't passed this test since its products are available outside its apps and websites. In essence, it is not a tech company but a content marketing company.

Coming back to our Zomato-Domino's example, the 3 segments of Zomato- people, restaurants, and drivers form a positive cycle. More people using Zomato attract more restaurants to Zomato. This attracts more drivers to deliver the orders. More drivers mean faster delivery which attracts more people to Zomato. And the positive cycle continues.

But Dominos doesn't have any such positive cycle. More people ordering on Dominos only increases the burden on the chefs and drivers- it doesn't attract more chefs or drivers. And existing Domino's customers don't attract new ones.

This is the second defining trait of a tech company- they have network effects.

Another good example of network effects is social media companies. Facebook, Twitter, Instagram, WhatsApp, Snapchat, TikTok- all these have very strong network effects. If my friends use WhatsApp, obviously I will also use WhatsApp. And if none of my friends use Signal, obviously I also won't use Signal.

Now, let's check whether Byju's satisfies this condition. Even if all my friends learn from Byju's, I have no incentive to do the same. I can learn the same concept elsewhere too. Existing customers of Byju's don't attract new customers. Thus, Byju's doesn't have network effects.

Before I describe another characteristic of a tech company, let me paint a scenario for you.

I live in Surat. Let's assume for a moment that Dominos and Zomato both aren't available in Surat. If Zomato wants to expand to Surat, what will it do? Just launch the app and do some marketing, right?

In the initial stage, maybe they will sign a deal with a couple of restaurants so that people have something to order on the app. All these are relatively minor costs. Once people start downloading the app, restaurants will be automatically attracted to join Zomato. And drivers will be attracted to deliver the orders and get some quick income. So for Zomato, expanding to a new location is very easy, and not very costly.

But what if Dominos wants to open in Surat? They have to sell their franchise to someone, do negotiations, supervise them, maintain quality, etc You get the point, right? If Dominos wants to expand to a new location, it is very costly.

This is the third defining trait of a tech company- expanding takes very little effort and costs.

What about Byju's you ask? Byju's has a large sales team that carries out door-to-door sales of Byju's products, especially in Tier 2 to Tier 3 cities, sometimes engaging in questionable practices to make the sales. Other strategies include advertisements, holding camps in societies to sign up students, etc. You get the point right? Expanding is very costly for Byju's.

To summarize:

  1. Byju's products can exist without technology.

  2. Byju's doesn't have network effects.

  3. Byju's spends a lot of money to expand.

Well, I hope now you're convinced that Byju's isn't a tech company but a content marketing company. Now you might be thinking- so what if Byjus isn't a tech company? Who cares?

The thing is, it matters a lot. Remember the WeWork saga?

The year was 2019- WeWork was at the top of the world. People worshipped it as the "next Alibaba". The company was getting ready for its massive $50 billion IPO. It was supposed to be one of the biggest IPO's for a tech company.

But the IPO never happened.

As the company was marketing its shares on Wall Street before the IPO, it faced a problem- no one on Wall Street wanted to buy its shares.

All the investors had the same issue with WeWork- it wasn't a tech company.

WeWork's business was buying and renting office space. Investors were hoping for a magical software-based solution to this. But they were disappointed to see that there was no software or technology at WeWork- it was a plain, boring real-estate business that simply used technology to improve its offerings. They were shocked to see a $50 billion valuation for a real-estate business.

The ending of this story was sad and painful. In June, the company postponed its IPO. Then it kicked out its CEO Adam Neumann. Softbank took control of the company. And WeWork's valuation fell from $50 billion to less than $10 billion.

The moral of the story- in today's mad rush of startups and unicorns, it is very easy to forget what is a tech company. WeWork's entire valuation was based on the fact that it was a tech company. But when people realized it wasn't, the valuation collapsed.

I'm afraid a similar fate awaits Byju's- when investors realize that Byju's isn't a tech company, its valuation will undergo a similar freefall.

🕹 This week, I wrote about-

  1. The concept behind vertical e-commerce. (Definitely read this- it is my most liked article ever🔥🔥)

  2. A better way to hire coders.

  3. Spotify launches Greenroom, its Clubhouse competitor.

  4. Stripe’s long-term thinking.

I’ve started writing on Twitter as well. Follow me there so that you don’t miss all these insights:

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I hope you found today’s article insightful. Thanks to Adwait Pisharody for his valuable contributions to the article.

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