A total of 23 investment/Merger and acquisition events took place in the education industry this September, with a total financing amount of CNY 732 million.
After an elevated beginning to the year, the total amount of investment for education in China in September dropped sharply, amounting to only 1/3 of the tally for August. It went from CNY 2.1 billion in August to CNY 732 million in September.
With VipThink raising hundreds of millions of dollars for its B round of financing from New Oriental Education & Technology, the ‘quality education’ segment contributed nearly CNY 400 million, or 54% of the total amount.
It is worth noting that the largest amount of financing in august was also raised by a quality education company. Huohua Siwei (火花思维), which offers a one-to-many online interactive small classes of small size, has a strong interactive game element that let students develop students' core abilities in concentration and other core skills. Huohua Siwei managed to raise USD 85 million on August 26 from GGV Capital, Kohlberg Kravis Roberts.
Data compiled by Edu Insight shows that in September a total of seven angel round investment events took place, accounting for 30%, followed by five A round and four strategic financing events.
Compared with the 45% financing in early August, the proportion of financing in early September was as high as 70%, continuing the situation that the financing round was dominated by early financing in the past few months.
In terms of geographical distribution, financings have been dominated by tier-1 cities as expected. After Shanghai fell out of the financing city list in August, it returned to the top three this month.
For many observers, this market has unlimited future opportunities. Yet the distribution of educational companies is still dominated by northern and eastern regions. Beijing is still ranked first with eight accounting for 30% of the total; Guangdong and Shanghai ranked second with four events each accounting for 17% of the total, while Zhejiang ranked third with three events.
Among the financing events in September, 14 companies managed to raise tens of millions of Yuan, accounting for 60%. Compared with last month, the number of financing events was just reduced by one, but the total financing amount is where we saw a huge difference. A total of CNY 732 million was raised in September, which is only equivalent to 1/3 of the total amount of CNY 2.1 billion raised in August.
Only two startups were able to raise in hundreds of millions of Yuan, namely the strategic financing of CNY 100 million for Learnroom (乐融儿童之家) and VIPThink (豌豆思维) raising hundreds of millions of Yuan from New Oriental.
As far as the sub-sectors are concerned, STEAM ranked first, with eight firms raising funding. It was followed by K-12, early childhood education and vocational education.
Compared with July and August, financing activities in the K12 sector have increased significantly, but from the perspective of the financing volume of each sub-sector, the amount of financing in September is still less than that of STEAM.
In September, STEAM took the top spot in the amount of financing just like the previous month. It contributed nearly CNY 400 million to the total amount of CNY 732 million, accounting for 54% of the total amount, showing the sector is favored by capital.
Since the second half of 2018, the mathematical thinking track has been receiving attention from both the ministry of education and as well as the capital. In July, the MOE and four other departments issued a plan on strengthening mathematical science research, which emphasized the support for the development of mathematical science research. This shows STEAM education has a huge potential.
According to HolonIQ, edtech venture capital in 2019 Q3, is downgrading their outlook for 2019 by almost USD 1 billion and estimating the year closes out at USD 6.5 billion. While there are a number of mega-deals in the market still searching for the right investors and terms, we have seen a significant slowdown of mega-deals out of China and weaker than normal underlying activity through Q3 globally.