Why is Codemao Favored by The Capital?
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Programming, the language of the future. Image credit: stem.T4L/Unsplash

Codemao was founded less than six years ago, since which time the company has received 10 rounds of financing, reaching around CNY 1 billion. The pattern of funding events for this subsector of the education market is continuing. According to the disclosed information, Codemao (编程猫), Subject Code (和码编程) and PipaCoding (核桃编程) each won a deal worth over 100 million RMB respectively last year. 

In a broader context, as startups in coding education have been paid particular attention by investors, and as competition is getting increasingly competitive, enterprises winning multiple large investment deals are standing out as having the greatest potential to grow into industry leaders. 

In November Codemao (编程猫) announced that it had raised its Series C round of financing, worth CNY 400 million. The founder has revealed that the number of Codemao's students has reached 31.47 million. In June 2019, the monthly income totaled CNY 61.22 million; income in the third quarter of 2019 went beyond CNY 200 million. Behind such high-profile performance, what are the forces driving the rapid development of this likely unicorn-to-be?

Regarding this round, Li Tianchi (李天驰), the Founder and CEO of Codemao, said: “After this round, we hope to increase investment in products and continue to upgrade the teaching system. The Octopus system is a crucial step to improve efficiency.”

Backed by strong investors such as Hillhouse Capital (高瓴资本), Saif Partners (赛富基金) and Everbright (光大控股), Codemao is already ahead of many programming education institutions. The question is, why does the company get such favor from the capital market? 

The company believes that technology is its core competitiveness. It has a research and development team full of graduates from top universities such as of Tsinghua and Peking University, and the other members from famous overseas schools/universities with relevant educational experience. A strong R&D team is the foundation for Codemao to quickly gain a foothold.

The core product of Codemao is positioned at the front end, supporting a 9-level teaching system, using a graphical programming language to guide students to learn and create and stimulate user interest.

If compared with competitors, Codemao is at the upstream of the industrial chain, with product specialty, a wider customer base for pricing and a position backed up by strong capital. 

Another children’s coding company is Miaocode (妙小程), which was founded in 2017. With a total of nearly CNY 100 million in financing, it suspended its services around two months ago. The company recently announced that it had been acquired by 37 Interactive Entertainment (三七互娱).

With the tightening of capital in 2019, children's programming followed the trend of children's English and children's thinking training, and ‘fell out of favor’ in the primary market. According to statistics from FirstInsight, in 2019 16 children's programming companies received investment, compared to 34 the year before. Out of the 34 programming institutions that received financing in 2018, 27 companies did not raise any round in 2019, with Miaocode being one of them.

Judging from the number of investments and financing transaction events, the field of quality education claimed the top spot. There were 122 financing events throughout the year. On average, a quality education company received financing every 3 days.

The children's programming firms WeCode, Codemao, CodePlanet (代码星球), Jikestar (极客晨星), Xigua Chuangke (西瓜创客), XiaoMaWang (小码王), and Walnut education (核桃编程) have been receiving continuous financing in 2018 through 2019. Among them, Codemao is the first one to have raised a C round.

We cannot deny that funds are the foundation of such startups, but at the same time channels and businesses are very important components as well. Even if a project is one step behind in financing and relying on channels and businesses to explore sustainable business models, there is still a chance for the firm to survive. 

In many cases, favor for a company comes through recognition of its business model and operating channels. After reviewing quite a few children's programming firms that were financed in 2018 and 2019, we found that Codemao first tried to adopt a model of online teaching and offline school collaboration. In addition, with the maturity of its curriculum system and the promulgation of favorable policies related to programming, opening up the channels of public schools has gradually become an important plan. It is reported that Codemao has reached cooperation with more than 11500 schools and educational institutions across the country. Li Tianqi, the founder and CEO of the firm, told EqualOcean in an exclusive interview that he has his eyes on the Indian market and sees it as a huge potential arena for growth.

Codemao’s product marketing model mainly uses online one-to-one marketing plus offline public-school cooperation, institutional affiliation, channel dealership and other relationship marketing, which greatly reduces marketing costs, all while using word of mouth marketing and other publicity methods to enlarge publicity effect.

It is Codemao that has occupied its place as the leader of the sector and has caught the attention of all parties in the education industry. Their slogan says "educate the creators of the future" an showing their interest in shaping the next generation of digital creatives minds. We will have to wait and see if these words really mean something and the firm becomes a new industry giant. 

From the perspective of capital, unlike online children's English, which is one of the most popular tracks, children's programming has not attracted investors such as the BAT companies, although Matrix Partners China and Sequoia Capital China have been quite active. In addition, K12 education giants New Oriental and TAL are also stepping up their positions in the sector. TAL wholly acquired CodeMonkey and has invested in AllDream. New Oriental has invested in Jikestar and Xigua Chuangke. 

On the one hand, education investment has become more and more important in family expenditure, and on the other, the younger parent structure has brought about changes in education awareness, from academic achievements to the ability to communicate and critical thinking. As a rising track in the domestic education industry, children's programming has certainly been showing a lively profile in China since 2015.

Editor: Luke Sheehan

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