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- 📚 Game over for Zenius after 20 years
📚 Game over for Zenius after 20 years
A wrong and irreversible bet that killed the whole company...
Admond Lee
May 12, 2024
Read Time: 5.5 minutes
Hey Founders,
Welcome to The Runway Ventures, a weekly newsletter where I deep dive into startup mistakes and lessons learned to help you become a better founder.
Let’s get to it! 🚀
Today at a Glance:
☠️ 1 Failed Startup → Zenius
⚠️ 2 Mistakes → Made a huge and wrong bet
🧠 3 Lessons Learned → Make calculated bets
🔗 The Runway Insights → How to decide to shut down or keep going
💰 Southeast Asia Funding Radar → Azara AI secured $1M to make AI accessible to businesses
☠️ 1 Failed Startup: Zenius
🚀 The Rise of Zenius
Zenius, founded by 2 founders (Sabda Putra Subekti & Medy Suharta) in 2004, was an Indonesian edtech company that provided educational access to students through online video formats via its website and mobile applications.
The Problem — K-12 students struggled to have high-quality education in Indonesia due to its expensive fees.
The Solution — Zenius provided affordable and high-quality educational access to students in Indonesia through online video formats via its website and mobile applications.
Since its establishment in 2004, Zenius has played a key role in helping millions of students pursue admissions to their desired state universities.
💰 At its peak, Zenius had over 1,000 employees. It raised a total funding of USD 40 million from top-tier investors, including MDI Ventures, Alpha JWC Ventures, Openspace Ventures, Northstar Group, and Beacon Venture Capital.
🔥 In December 2022, Zenius had more than 16 million users learning through its platform.
📉 The Fall of Zenius
Zenius was one of the most dominant edtech startups in Indonesia, and it was also well-loved by many students. But why did it still fail given the huge amount of funding it had raised and the traction it had?
📌 Here’s the full story of Zenius:
🧵 I tried my best to compile the full timeline of Zenius from various resources to give you the full picture. So just follow me along and you’ll see how Zenius started and how it made the “wrong bet” that eventually killed the whole company.
📚 A humble beginning of Zenius
2004 — Zenius was launched as an offline tutoring centre in Jakarta to prepare students for national exams and university entrance exams.
2006 — Lesson recordings began to be made and marketed on CD and DVD.
2007 — Zenius was incorporated as Zenius Education.
Apr 2008 — Zenius launched its website to sell CDs (a historic moment).
Jul 2019 — Zenius app was launched with more than 80,000 free videos of learning materials.
2020 — Pandemic happened. Online classes became the norm. Zenius’s revenue surged by 70% in the second half of 2020.
2021 — Growth at all costs with the momentum🚀
Expanded and opened an office in India.
Mass hiring and recorded the largest employee growth among Indonesian startups in 2021 Q3.
⚠️ Zenius made a huge (wrong) bet on offline tutoring (post-pandemic)
Feb 2022 — Zenius acquired Primagama (undisclosed amount)
Primagama is an offline tutoring giant that provides supplementary education services to students.
In total, there are 264 Primagama branches spread throughout Indonesia.
😧 Zenius’s post-pandemic gamble on offline learning didn’t pay off.
Zenius began to restructure the company due to the market downturn.
🌊 Then, 3 waves of massive layoffs happened:
May 2022 — 1st round of layoff (200 employees laid off)
Aug 2022 — 2nd round of layoff
Feb 2023 — 3rd round of layoff
💀 Zenius was in trouble
Apr 2023 — Management reshuffle & rising costs
Subekti took over from Rohan Monga as the CEO. Monga assumed the role of President. Sebastien Poutignat (CFO) left the company.
30% of Zenius’s revenue was used to cover debts to third parties and high operational costs (server & tech infrastructure).
Dec 2023 — Zenius approached several Indonesian edtech firms for M&A — but failed.
An undisclosed investor’s failure to meet the M&A agreement deadline led to the acquisition falling through.
Jan 2024 — Zenius officially shut down after 20 years of operation due to internal operational obstacles.
User support and trust are invaluable to us. Thank you for being a part of Zenius in the last 20 years of our existence.
Want to learn more about Zenius’s downfall?
⚠️ 2 Mistakes
Mistake 1: Made a huge & wrong bet
During the pandemic, Zenius grew like crazy because of the surge in demand for online classes. However, after the pandemic, students returned to offline classes — and Zenius struggled.
🎰 As a revival strategy, Zenius acquired Primagama because it bet on the offline tutoring market since many students returned to offline learning.
After the acquisition, several problems happened as reported by Tech in Asia:
Zenius realised it had not conducted thorough due diligence before acquiring Primagama.
After auditing all Primagama outlets, the number of outlets shrank from 250 to 118 outlets because some outlets folded up (didn’t meet standards) and some outlets (franchises) voluntarily closed down due to financial struggles.
Zenius’s financial condition worsened and slashed its marketing budget to help Primagama acquire new students.
Cultural friction happened between staff at Zenius’s offline units and academic divisions due to differences in work practices.
🩸 In short, the acquisition didn’t pay off as Zenius was still facing financial and operational struggles. Even worse, Zenius couldn’t fundraise or find potential buyers due to the market downturn after the pandemic.
Mistake 2: Spread resources too thin by doing too many things
For example, Zenius expanded and opened an office in India. Meantime, it grew its headcount significantly in 2021. Zenius also signed a costly deal with Disney, launched live online classes, and ran Primagama offline classes.
Because of doing many things at once, Zenius spread its resources to thin, leading to its downfall.
🧠 3 Lessons Learned
Lesson 1: Make calculated bets (not existential bets)
It’s understandable that every startup is an experiment to validate or invalidate a hypothesis, leading to an eventual product-market fit.
🟢 A calculated bet is when you make a small bet on something to potentially give you a huge return. If the bet doesn’t work out, it’s okay — you can make another small bet.
🔴 An existential bet is when you make a huge bet on something to potentially give you a huge return. If the bet doesn’t work out, your company could die — you can’t make another bet. Unfortunately, this is what happened to Zenius.
🌟 Key Takeaways:
Before you make any bet for your company next time, ask yourself this, “Is this a calculated bet or an existential bet?”
Rule of thumb → Never bet your whole company
Think of it like you have $100 worth of chips. Would you bet $10 for a potential $20 return? Or would you bet $100 for a potential $100 return? Manage the risk well, and you’ll be fine.
Lesson 2: Allocate your resources optimally
Every company has limited resources. How you use your resources determines how well your company can run and grow.
If you try to do too many things at once, you allocate fever resources to each channel, you lose focus, your ROI suffers, and your company might die.
🌟 Key Takeaways:
What are my company’s goals and objectives in the next 2-3 years?
Are my plans and executions aligned to help me achieve those goals and objectives?
What are the potential risks and returns from these executions?
What are the resources (and how much) should I allocate to these executions?
✅ Hopefully, by answering these questions, you can get better clarity to optimise the allocation of your resources.
Lesson 3: Always prepare for the worst
There’s a saying → Fix the roof before it rains.
While Zenius did very well during the pandemic, it failed to prepare for the market downturn and the challenges faced after the acquisition.
🌟 Key Takeaways:
During good times, ask yourself this, “What are the potential disasters ahead?”
If you can think 5-10 steps ahead, foresee potential problems, reverse engineer back to the present, and strengthen your fort to prepare for disasters — chances are you could survive during bad times.
🔗 The Runway Insights
💰 Southeast Asia Funding Radar
That's all for today
Thanks for reading. I hope you enjoyed today's issue. More than that, I hope it has helped you in some ways and brought you some peace of mind.
You can always write to me by simply replying to this newsletter and we can chat.
See you again next week.
- Admond
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Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.
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