WhiteHat Jr: India’s Most Controversial Ed-tech Startup

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About three years ago, Karan Bajaj (1) was at the rudder of Discovery Inc, an American broadcaster’s South Asia operations; he came up with what was at that time an offbeat idea for the Indian market – teaching kids to code online. He cobbled together some data and sent a cold email to Anup Gupta, a partner at venture capital firm Nexus Venture Partners (2).

In November 2018, when Karan Bajaj served out his notice period at Discovery, Nexus committed to lead a 1.3 million USD seed investment round in Whitehat Education Technology. At that time, the Mumbai-based startup, incepted in October 2018, was valued at 6 million USD.

Soon after the seed investment, Bajaj and his team of seven started to create WhiteHat Jr, a platform to teach children aged between 6 to 14 the fundamentals of coding.

According to Anup Gupta, the idea of teaching kids to code online seemed off the field at that time, even if it is obvious now. There were several questions about the market’s depth and creating a platform that is not dependent on star teachers. There were also questions about keeping kids engaged for multiple sessions across months and several others. And after numerous discussions, they agree to partner, and Nexus led the seed funding round in WhiteHat Jr at the concept stage.

Even though ed-tech startups were beginning to make their presence felt at that moment, it wasn’t at the gold rush it has now turned over the past few years. The most ed-tech startup popular among investors back in 2018 majorly focused on different areas such as online tuition, tutor-parent engagement, and test preparation.

According to Gupta, the WhiteHat Jr was an outliner as it was a contrarian investment and in a sector which was not considered hot at that time.

However, the contrarian bet paid off handsomely for Nexus when the Bengaluru-headquartered online learning platform, BYJU’s, acquired WhiteHat Jr in a 300 million USD all-cash deal (3).

Read Also: E-learning platform Byju’s acquires K-12 leader WhiteHat Jr for $300 million

Nexus and Omidyar, who came as a part of the 1.3 million USD seed round, stand to score 14 times more return on their original investments. These two investors also participated in WhiteHat Jr’s 10 million USD Series A funding round in September 2019, led by San Francisco Bay Area-based venture capital company Owl Ventures. Notably, it also made about 10x return on its investment upon the deal completion.

Read Also: Ed-tech Startup WhiteHat Jr Acquires $10 Million Funding in Series A Round

WhiteHat Jr and BYJU’s and Their Shared Global Vision

In early June, Karan Bajaj got a message from Byju Raveendran, the co-founder, and CEO of BYJU’s (4), with a self-introduction. And after a chat followed by several conversations over the phone for the next couple of days, both entrepreneurs outlined the basic deal contours. DC Advisory, an investment banking advisory firm, joined in, and within a few days, Bajaj presented the proposal to his investors.

In all, in about six weeks from Raveendran’s WhatsApp message to stitch up the deal after due diligence, legal reviews, and other related paperwork. In a nod to prevailing times, both companies executed the whole deal online from start to finish.

While commenting on the development, Bajaj said that the deal’s place would give a lot of credit to Byju. He stated that WhiteHat Jr was a 150 million USD annual revenue business with many different cost elements, several countries involved with more than 65,000 paying customers. Raveendran could navigate through all of that and get the due diligence done promptly because of his paramount focus.

Bajaj further added that the boundaryless global vision of both of us also contributed to the deal’s quick and successful execution.

He stated that they expanded to the US quickly, which is somewhat unusual for an Indian firm as Bajaj has a complete global view. Notably, Byju also shared the view and supported it.

WhiteHat Jr had launched itself in the US market in February 2020, about a year after the platform was formally launched in India. The launch in the US also helped the company to accelerate its growth. In July 2020, the company had an ARR, Annual Recurring Revenue of 95 crore INR, which is a little more than 150 million USD, claimed Bajaj.

According to the company’s regulatory filings with the Ministry of Corporate Affairs dated for the year ended March 31st, 2019, it reported losses at 2.5 crore INR against revenues of 21 lakh INR. It is also worth highlighting that at the time, the platform was still in beta.

According to White Hat Jr’s claims, at that time, its user retention rate is over 85% in the US market, and in India, more than 60% of its business is generated from outside the top 15 cities. Bajaj further stated that the user retention rate in India is 70%. Out of its total 65,000 paying customers or users, more than 65% is located in the country.

On the other hand, the US market accounts for 55% of its revenues, and about one-third of the revenues come from renewals. Bajaj didn’t make any comments on its pricing structure for each of its markets (5).

It is also worth highlighting that WhiteHat Jr teaches coding fundamentals such as sequence structure, sequence, logic, algorithmic thinking, and commands. The platform offers four levels of courses with its original coding curriculum: beginner, intermediate, advanced, and professional, to help children create commercial-ready games, apps, and animations online.

Bajaj claims that the company had been cash-flow positive from January 2020. About 16 million USD, including 11 million USD in venture capital, was in the bank at the acquisition time (6).

Read Also: How Ed-Tech Startup WhiteHat Jr earned a magnificent triumph and got acquired?

 

The Roadmap

The 300 million USD all-cash acquisition deal of WhiteHat Jr with BYJU’s made Bajaj, a 41-year-old Indian entrepreneur, the latest poster boy of India’s bubbling startup ecosystem overnight. However, he is far from done with WhiteHat Jr.

After the acquisition, Bajaj stated that he is not exiting the company, and he is very much part of Byju’s focus. Instead of venture capital funding, WhiteHat Jr has BYJU’s acquiring and wishes to continue the growth. 

Bajaj further added that it is a huge global market, and there is no category as coding for kids. WhiteHat Jr has created the category so rapidly in India and the US; Bajaj believes that India can become the leader in the category by using the supply here and making it available across the globe.

After the acquisition, BYJU’s committed to investing 30 million USD over three years to help WhiteHat Jr with new product development. According to Bajaj, WhiteHat Jr operates as an independent identity, and BYJU’s have committed a hundred percent support with zero interference.

Moreover, the acquisition also enabled WhiteHat Jr to leverage BYJU’s global presence. At the same time, BYJU’s would piggyback on its US presence for further growth in one of its largest focus markets.

It would take a while for Bajaj to scale WhiteHat Jr on BYJU’s platform. He has claimed that he would stay with the company for at least the next three years as his focus is on the company’s global expansion and creating more teaching jobs in India (7).

What makes the deal more notable is its 18 monthly sprint from a valuation of 6 million USD to 300 million USD. WhiteHat Jr’s success story also offers several twists of the country’s startup ecosystem, which can sometimes lack ethical practices in the business world. And WhiteHat Jr has been accused with quite a few of them.

 

WhiteHat Jr: What Went Wrong?

The two-year-old coding for kids startup became all the rage in India last year when it launched the multi-million dollar advertising blitzkrieg. It flooded television screens and digital media. It was hard for people to miss the commercials, some of which claimed that the company’s students, some as young as 6-year-old, are being chased by global investors and getting jobs at Google because of the skills that they had acquired through WhiteHat Jr classes.

The campaign was a big success for WhiteHat Jr. At that time; WhiteHat Jr had stated that its revenue run rate, extrapolating an annual revenue figure based on one-month actual revenue, ballooned from 75 million USD in June to 220 million USD in August. During the same month, the company also crystallized its status as a startup success story when India’s biggest ed-tech unicorn BYJU’s acquired it for 300 million USD in cash.

But, the same content that brought WhiteHat Jr to dizzying heights ultimately turns to haunt it.

In October 2020, the Advertising Standards Council of India deemed certain of WhiteHat Jr’s commercials misleading and asked the company to take them down (8). At that time, the company that also prided itself on creative jobs for hoards for educated women who were not part of the country’s workforce also revealed toxic holes in its workplace culture (9).

Even though WhiteHat Jr kept its eyes on the final price and is preparing to introduce several subjects with an international expansion on its mind (10), we can’t ignore what happened with the company in 2020.

The Coin’s Two Sides

BYJU’s, India’s most famous online learning platform, has its coding platform known as WhiteHat Jr. The coding platform prepares kids age 6 to 14 by teaching them coding via online classes taught individually.

As we discussed, WhiteHat Jr was merely an 18-month-old company when it was acquired by BYJU’s in an all-cash deal worth 300 million USD.

WhiteHat Jr claims to have a revenue run rate of 115 million USD. It has also secured 11 million USD for investors such as Nexus Venture Partners, Omidyar Networks India, and Owl Ventures, who have also invested in BYJU’s.

WhiteHat Jr, based in India, has also branched out its venture in the United States early in 2020 and claimed to be growing at more than a hundred percent MoM in the United States. It had recently announced its plans to grow globally in countries such as Australia, Canada, UK, and New Zealand after its triumph in the United States one-on-one coding classes. 

The acquisition of BYJU’s also helped its investment in technology platforms, product innovation, and expanding the teacher base to match the demands.

It is worth highlighting that the ed-tech business is growing exponentially, and the success of WhiteHat Jr could be all in the team’s decision to make the right choices, which root the revenue run rate from 12 million USD to what it is now.

The company may be just upfront on how a startup organization in India can make it big via its recognition and investments. It also has a dark side that it brings to the table, along with several inexperienced teachers as seen on the video by Speak Truth To Power (11) and savvy marketing tactics that amplified to extremes what it has to offer. They also have a share in misleading ads, alleged mistreatment of former employees, and many more, which are the ones that have come to light.

 

WhiteHat Jr Struggles with Criticism

Several Indian startups use harsh methods to keep their reputation in the business world and to deceive the public through running misleading advertisements. WhiteHat Jr is one such firm that weaponized the internet portals to bring down anyone who has an adverse opinion on the company and their product right away. It is a clear violation of the freedom of speech a person has the right to, including Pradeep Pooniya (12). 

On its slack channel, a member of the ORM team asked his colleagues to report a Facebook post that criticized WhiteHat Jr allegedly. The post by Miah Drew, reading ’13 texts, seven emails, a phone call, and two WhatsApps in less than 12 hours’ by WhiteHat Jr. Reportedly, the tutor was a young girl 18, sitting in a bedroom somewhere in India with children running in the background. The tutor was rude and abrupt and not very good with the children. Drew then immediately withdrew from the class, blocked the company on all social media platforms, and called them an outright scam. 

Similar to many reported comments and posts, WhiteHat Jr deleted this one too. The company has accusations of several cases of deleting negative comments on unprofessional behavior, stalking, pestering potential customers with spam calls and messages, and inexperienced teachers.

 

Going Too Far with Advertising

Another scam and the most famous one by WhiteHat Jr is their marketing scam, which took over the internet as an unethical way of advertising and marketing and the ethical models of human beings and deceiving others.

One of the most popular advertisements features Sundar Pichai, the CEO of Alphabet Inc., which questions if he promotes the products or is part of Google. Spoiler alert they are not.

A WhiteHat Jr advertisement with claim to become Microsoft CEO at the age of 12
A WhiteHat Jr advertisement with a claim to become Microsoft CEO at the age of 12

WhiteHat Jr’s marketing team went too far, from utilizing images and videos of many other famous personalities like Microsoft’s Bill Gates, with the tagline coder at 7, CEO at 21, Steve Jobs, and even Elon Musk in some of their promotions.

It also reached the Advertising Standards Council of India, ASCI (13), the self-regulatory body, to remove five advertisements, which violated the advertising code of making questionable and unattested. 

The ad featuring a 7-year-old TEDx speaker, Hiryana Rajani
The ad featuring a 7-year-old TEDx speaker, Hiryana Rajani

The ASCI receives 15 complaints against seven advertisements of WhiteHat Jr, in which five of them potentially violated the ASCI code. It is also worth highlighting that the company immediately agreed to withdraw these advertisements when ASCI meddled (14). 

During the IPL season, the company went on an advertising spree that flooded the internet and received a lot of criticism and crawling from people.

Read Also: WhiteHat Jr codes Censorship more than Learning?

 

The Impersonation Scam

People have also accused WhiteHat Jr of impersonating a school kid to attend their competitor’s class, which is an unethical way to grasp and imitate their teaching model. Tekie, a cording platform for kids, had allegedly accused WhiteHat Jr of impersonating a 6-grade student to attend their trial class (15).

The company’s co-founder shared that the class took place on October 19th, 2020, with the student allegedly saying that his camera was not working and continued the session without the video. Tekie also shares the demo video on LinkedIn, which shows the alleged act of impersonation. 

The company became suspicious when the student turned off his camera, and his voice sounded like a 30-year-old adult. It was said that the average student was screen recording the session and an email window with WhiteHat Jr work email signed in responding to two different names.

Tekie also claimed to have asked the student from a general number asking if they were speaking to Saurav from WhiteHat Jr, to which the person replied positively. According to Tekie, it was the same voice from the trial class (16).

 

The Lawsuit Against Pradeep Puniya

Recently, Bajaj of the WhiteHat Jr had filed a defamation case worth 20 crore INR against Pradeep Poonia.

In an interview, Pradeep Pooniya, a whistleblower of the numerous camps that WhiteHat Jr, explains how companies such as WhiteHat Jr have on Indian society and the ethics or that India lacks in its startups (17). 

Read Also: WhiteHat Jr Vs. Pradeep Poonia: The Rage Against Silencing

 

Misusing the Tough Situations of Indians

According to Poonia, WhiteHat Jr created a FOMO against parents and made them feel like if their kids don’t enroll right now, they won’t get a job in the future. The company misuses the tough situation of us Indians as job opportunities are getting less each year, and that’s what WhiteHat Jr and BYJU’s are cashing in on.

Reportedly, they are also trying aggressively to enroll as many students as possible before the schools open (18).

Reports suggest that their marketing scam was doomed to fail; their product itself didn’t add value to children’s education. We can also say that what they are selling is out there for free already; they sell canned air. Moreover, even the teachers are underqualified and still haven’t made the curriculum for the entire classes.

It means that not even a single student has done their entire course by now. Hence there is no proof of concept. 

How do people know if these one-on-one coding lessons would benefit children even if they have completed the course? 

Several reports suggest that people cannot be cram logic and argumentative attitudes. It is something kids learn on their own through trials and experiments by playing outside. Moreover, all the WhiteHat Jr courses assume that all children would learn at the same speed, and the same examples would make the concept clear for every kid across the globe (19). 

Read Also: WhiteHatJr’s Digital Franchising: Could it end the claims?

And we know that everyone’s learning speed is different, and we all need different examples to understand different concepts. Certain examples that would make sense for you may not work for someone else because of different geographical locations, financial conditions, and cultural differences. 

According to Poonia, WhiteHat Jr has some script for each lecture, and teachers get step-by-step instruction on how and what to say to children. And according to us, it is not teaching.

While some of these operations, other institutes had been doing and carrying out to some extent for a long time, WhiteHat Jr seems to have crossed all the limits. It has set a very dangerous disease to other ed-tech startups as well.

It is time that India shuts down such scams sooner or later, or others may also start following the suite, and the whole edtech circus would turn normal. It may reach a point of no return. It is time for India to realize the importance of such scams and stop them from ruining an entire next generation just because a few venture capitalists could make some quick billions.

It is worth highlighting that the money that BYJU’s is pouring into the WhiteHat Jr scam helps the company push its ads and get the venture capitalists’ big returns as quickly as possible. We also know that WhiteHat Jr has been playing with such false advertisements from its initial months. For instance, Wolf Gupta claims are not new since it is what the company has been doing in 2019 as well (20).

About a decade ago, there was a trend in India for engineering. Everyone was running after PMC; physics, maths, and chemistry. What did the country get out of that frenzy? Lakhs of below average and unemployed engineers, turning into a burden for the entire nation. The same could happen if these kids were learning block coding from scams such as WHiteHat Jr. 

It could also result in the entire generation facing depression as teenagers as WhiteHat Junior is selling pipe dreams of jobs with a salary as high as 150 crore INR and that too at the age of 13. We cannot ignore the innocence of 6-year-old kids that if you tell them there is a ghost under their bed, they would believe it for real. How can they understand the gimmicks of startups like WhiteHat Jr.? We should just let kids be kids and let them enjoy their childhood.

We all have gone through rabbit holes of pipe dreams at some point in our lives. It is time for us to imagine how these pipe dreams of a 150 crore INR salary would burst onto 13-year-old kids. It can take them into depression; teenage age is already difficult for some kids, and over top of it, if such pipe dreams shattered over a kid, we can’t imagine how they would handle it. We all have seen several kids each year ending their life because of certain tags like NEET and IIT exams.

WhiteHat Jr is crossing all limits in the ethical lines in all directions to make money. They also don’t intend to spread any education since those who care about education offer their production lectures for free (https://code.org/). Instead of going for scams like WhiteHat Jr, start teaching children about how to Google search, find free and good educational material sources, and differentiate between real and fake news. Once these fake videos become more normal, fake news would grow exponentially, even from the point we are now.

It makes us wonder why BYJU’s bought the company for 300 million USD, knowing the kind of product they had and all the false marketing WhiteHat Jr used to push its products.

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Rucha Joshi, currently managing a team of over 20 content writers at TimesNext is fueled by her passion for creative writing. She is eager to turn information into action. With her hunger for knowledge, she considers herself a forever student and a passionate leader.

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