2020 has been a turbulent year for the education industry. A total of 247 financing events took place, showing a downward trend since 2016 and hitting the lowest point in history. With a very dull first half for the second half of the year, it has gradually recovered, with financing reaching CNY 17.56 billion in October and 27 events in December.
The Chinese education industry reached its peak in 2016, with the number of investments and financing incidents reaching 886 throughout the year. After nearly three decent years, the number of investments and financing incidents in the education industry dropped sharply in 2019, with only 332 incidents taking place. In 2020, COVID-19 impacted the already cold education industry with a mere 247 investments in total, a decrease of about 26% compared with 2019, and a decrease of about 72% compared with 2016’s performance.
The industry saw only 114 investments and financing events during the first half of 2020. The overall investment scale slowed down, with a decline in monthly numbers compared with the same period last year. It was not until the second half of the year that the financing situation slightly recovered.
Financing continued to be concentrated in early rounds such as angel rounds, A rounds, and Pre-A rounds, accounting for about 42%. The overall number dropped significantly with the proportion of strategic financing becoming prominent compared with 2019. The potential reason could be that strategic financing is more inclined to industrial synergy rather than financial gains as the main purpose.
Although 2020 saw 42% of early rounds compared with the previous two years, the number of ‘Mega financings’ (billion-dollar-plus) increased sharply in 2020. The overall number of USD 100 million-plus financing reached 69, accounting for 28% of the annual number of investments. At the same time, the number of 10 million-plus financings was reduced; this also indicates that, in the later stage of 2020, later financing rounds such as C, D, E and G increased and capital seemed to favor the developments of relatively mature educational enterprises.
As per our research, there were 10 companies that had more than two financings in 2020: Zuoyebang, Yuanfudao, Zhixueyun, Code Planet, Baijiayun, Cool College, Spark Education, HachiBot, Meishubao and Yueshen AI. Yuanfudao and Zuoyebang belong to K-12 online education, while Code Planet, Spark Education, HachiBot and Meishubao represent the STEAM education field.
In terms of geographical distribution, first-tier cities such as Beijing, Shanghai and Guangzhou are still areas with high investment rates, where Beijing accounts for 41% of the total investment, with Guangdong and Shanghai claiming the second and third spots respectively. When comparing with the data for 2019, it can be concluded that there were no major changes in the geographical distribution of the investment and financing in the education industry in 2020.
In 2020, 18 institutions made more than two investments in the education industry. Among them, EdBeta Fund, Tencent and BE Capital ranked in the top three, with nine, eight and six investments respectively.
Education industry hotspots in 2020
Quality education
The capital market continued its interest in the quality education track in 2020. Among them, STEAM education performed really well. A total of 12 investment events from January to February mainly concentrated in the field of quality education, accounting for more than 34% of all events, with STEAM education accounting for 11 out of the 12. STEAM education continued to lead in March 2020, and the number of investment events in April, May, June, July and December occupied the top position. It is worth noting that the popularity of programming education, which once led the quality education track, has decreased slightly, and capital has begun to focus on fine arts, robotics and gamification.
Vocational education
Since the release of a series of favorable policies such as the 'National Vocational Education Reform Implementation Plan', the vocational education track has slowly attracted investment interests. In 2020, vocational education institutions received financing almost every month. From March to May, the amount of financing in the field of vocational education saw a month-on-month increase. In April, it increased by 29%, and a month later was up by 73%. In addition, the Ministry of Education has issued relevant enrollment expansion policies many times, and vocational education seems to be gaining momentum. Since then the number of investments received by the vocational education track has exceeded four per month in August, September, October and December.
K-12 education
The K-12 track has been popular for a couple of years now because of its own rigid demand and the business model is now mature. The tens of billions of financings in one month in 2020 are led by the 'influx' of K-12 education giants, such as Yuanfudao and Zuoyebang.
Looking back at 2020, the number of investment and financing events in the education industry has plummeted, and capital injections have become more prudent. In terms of financing rounds, the proportion of strategic financing has become prominent in the overall decline. The K-12 and early childhood education track are still hot, and the quality education, corporate service and vocational education track performed well.
Global EdTech financing trend
Global EdTech started the last decade with USD 500 million of venture capital invested in 2010 and finished 32 times higher in 2020, at USD 16.1 billion, nearly double the previous record in 2018.
According to market research firm Holon IQ, there are over 1,500 EdTech VC deals in 2020, which workforce represented almost half of them and K-12 took almost one-third.
Mega and billion-dollar-plus funding rounds dominated the VC EdTech landscape in 2020.
China accounted for almost two-thirds of VC funding in 2020, while investments in the US and India were each valued at around USD 2.5 billion. EdTech Unicorns raised USD 8 billion, marking more than half of the EdTech VC in 2020. More specifically, fundraising from Unicorns in China accounted for half of the total 2020 global EdTech VC investment. The same dynamic was reflected in India on a smaller scale, whereas the US maintains a broader and perhaps more diverse foundation of smaller fundraising rounds.