White Hat Graduation
Last month we discussed how WhiteHat Jr. is disrupting the Edtech space by teaching coding to kids aged 6-14 years. This month its founder Karan Bajaj sold off the 18 months old startup to Edtech Behemoth Byju’s for $300 Mn ALL CASH DEAL. Bajaj owned 40%+ of the company per Money Control which means that he earned $120 Mn in CASH from an 18 months old startup.
Is this a big deal? Here’s some perspective – SriharshaMajety (Co-founder and CEO of Swiggy) owns only 6% of Swiggy (6 years old) and his net worth is around $220 Mn (and it is illiquid).
The earning boils down to a daily cash earn run rate of INR 1.67 Cr. If you have been wondering what’s the right amount of earnings that justifies over-working, INR 1.67 Cr per day is a pretty good benchmark (weekends included).
Too good to be true right? Well there’s more: Bajaj is going to stick around with Byju’s for 2-3 years more to build the next generation of products.
But is it all justified?
WhiteHat Jr. Claims to have clocked a $150 Mn Annual Revenue Rate (ARR) as of July’20. It was just $12Mn in Jan’20. (Unacademy had an AAR of $30 Mn in Feb’20).
The wow factor: The Startup boasts a customer return rate of 80% (WOW!)
The Big Picture:
The exit story of WhiteHat Jr. throws light on a promising method of startup exit, i.e. selling a smaller startup to a larger Startup.
How does it work?
Step 1: You get inspired by a startup that has been making noise and decide to replicate the model.
Step 2: You assemble a team and sprinkle a bit of innovation by tweaking the product to cater to a niche segment within the industry.
Step 3: Give it some time. Shed some sweat. Over work. Build a brand. Build a personal brand image.
Step 4: 2-5 years down the line if you’re able to maintain superior customer feedback with a high rate of repeat paying customers, you can start posting your company’s resume to the bigger fish and sell the company for cash. (Disclaimer: It comes with a huge list of ifs and buts).
Foodtech: Spare Labs (2 years old) that was into last mile food delivery was bought by Zomato back in 2016.
Edtech: Osmo (5 years old) that is into creation of AR games for Kids was bought by Byju’s back in 2019.
This article is a part of the August'20 edition of our Startup Newsletter. Here's the complete publication: