WhiteHat Jr’s dream run until it became controversy’s favourite child

Promises on promises.
Promises on promises.
Image: WhiteHat Jr website
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A two-year-old Indian ed-tech startup that has lately become controversy’s favourite child, has a backstory that could put many a venture to shame.

In an ecosystem where even the most prominent startups struggle to give their investors a lucrative exit, WhiteHat Jr was acquired by India’s largest ed-tech unicorn Byju’s in August for $300 million (Rs2,215 crore).

Byju’s is not the only one that believed in WhiteHat Jr.

Founded in November 2018 by Karan Bajaj, ex-CEO of Discovery Networks India, WhiteHat Jr stoked interest among notable investors even before it was launched. Bajaj reportedly pitched WhiteHat Jr to its first set of investors without a working product.

“All I had was a PowerPoint presentation, a vision and backing from some early friends and family who tested my idea,” Bajaj told YourStory in September 2020. “With that, I presented a plan and got $1.3 million from Nexus and Omidyar without actually even registering the company.”

This is not unusual because investors in early-stage startups often take the risk of placing faith in a founder’s vision. In this case, the two investors are veterans, backing over 70 Indian startups each, data from Tracxn show.

And the duo invested in WhiteHat Jr not once but twice.

WhiteHat Jr’s dream run

By the September funding round, WhiteHat Jr said it had over 150,000 student trials, over 500 teachers, and 100% month-on-month growth in the number of students and revenue. It said it was conducting a thousand online classes each day and had expanded outside of India with operations in the US.

“We have been very impressed with their execution and rapid growth,” Anup Gupta, managing director of Nexus Venture Partners, had said at the time.

Besides the veterans, Owl Ventures, a Silicon Valley-based ed-tech venture capitalist, made its first foray into India when it participated in the September round. “WhiteHat Jr has created something that is unique, scalable, and very relevant, not only in India but across other markets,” Owl Venture’s managing director Amit A Patel said while announcing the investment.

Even Byju’s had said that it struck the deal because it believed the company could help with its international expansion plans. Byju’s was gearing up to debut in the UK, Germany, Australia, New Zealand, and Singapore around the time of the acquisition.

What’s more is that WhiteHat Jr always positioned itself as a young and vivacious firm. More than four in five of White Hat Jr’s teachers are reportedly under the age of 35, earning between Rs 50,000 and Rs 1.5 lakh a month.

It was even celebrated for its gender parity by Namita Dalmia, principal of investments at Omidyar Network India, who had praised the company for hiring “highly educated women tech professionals returning to the workforce.”

However, the coding platform for kids aged 6-14, is now embroiled in controversies ranging from running fake ads to promoting toxic work culture, according to recent tweets by Bengaluru-based software engineer Pradeep Poonia. The critic also alleged that the companies internal Slack chats reveal a distasteful sexist slant within the company.

Riding the ed-tech wave

Since the coronavirus outbreak began in March, school-from-home became the norm, and demand for online learning skyrocketed. Subsequently, industry players started raising funding and making acquisitions to grow. Just yesterday (Nov. 25), Unacademy, which made three acquisitions earlier this year, reportedly raised between $75 million and $100 million from US-based behemoth Tiger Global.

But as demand and supply scale up, so has the scrutiny around business models.

In the case of WhiteHat Jr, keeping up appeared seamless.”When BYJU’S approached us in June our revenue run rate was at $75 million, when the acquisition was completed in July we were at $150 million and in the first month of acquisition, in August the revenue run rate was $220 million,” Bajaj said.

But this massive growth for a company that promises 1:1 live classes begets several questions. “Were people coming back after taking their initial coding class? Were they able to sell more? Were they able to handle the sudden influx?” a Reddit user asked.

While it’s possible the company has answers—WhiteHat Jr did not respond to Quartz’s emails—it’s developing a notorious reputation for flouting criticism and gagging dissenters.

And this backlash could hurt its business not just in India, but also abroad.