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Analysis EO
Jul 5, 2020
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Analysis EO
Jul 5, 2020

H1 2020 at a Glance: China's Online Education Industry Boom

Businesses in many physical industries have been affected by the COVID-19 pandemic, but the catastrophe has also provided new opportunities for the development of many online industries, as well – one of which is the online education industry. China's online education market has maintained steady growth over the past five years. The COVID-19 epidemic in 2020 has brought new vitality as it boosted demand. It is expected that China's online education users will reach 309 million by the end of 2020. Due to traditional face to face education coming to a halt at the start of the year, online education has witnessed an explosive growth. Students from all over the country started online classes at home. Some of the leading K12 online education firms took the opportunity to announce the provision of free courses during the outbreak, allowing them to gain a maximum number of users.  Talking about K12 online education firms, Yuanfudao set a new record with a staggering USD 1 billion financings in March. Following that, Zuoyuebang, another online education firm, nabbed USD 750 million for its series E round, becoming the second-highest valued edtech unicorn in China.  From celebrity endorsements, naming various popular online variety shows to placing small video ads on Douyin, Zuoyebang, Yuanfudao, Youdao and other head K12 online institutions have been working hard to prepare ample ‘ammunition’ to meet the upcoming summer enrollment season. Other than K12, vocational and quality education tracks saw their popularity increase with Tencent and 58 other firms investing in related companies. Let's use the data to see what was happening in the domestic education venture capital market throughout the first half of the year. According to statistics collected by EqualOcean from ITJuzi, in the first half of 2020, there are 10,640 companies in the field of Education. Of these, 60% had no investment, 28% were invested in and the investment question is not clear about the remaining 12%. In the industry, the angel round stage accounted for the largest proportion of 37%, followed by the A round stage, accounting for 31%. As can be seen, a large number of companies are still in a very early stage, because it is a result-oriented industry. The product's effectiveness needs to be verified and observed over a long period of time.  As 2019 broke, we were all warned of China’s forthcoming ‘capital winter’, only to wake up in Q1 to mega-rounds from Zhangmen (USD 350 million), DaDa (USD 255 million), Andela (USD 100 million) and opening Q2 was Coursera’s USD 103 million Series E. 2H 2019 saw the surge continue with mega-rounds from Knowbox (USD 150 million), ByJu’s (USD 150 million), VIPKid (USD 150 million), Zhihu (USD 434 million), Ruangguru (USD 150 million) and Guild (USD 157 million). Little did we know what 2020 would bring. COVID-19 and way too many video calls later, 1H 2020 has marked a resurgence in mega-rounds, averaging a USD 100 million round per month. In the space of six months, EdTech has it’s very own giant (that didn’t come from China or the US), Yuanfudao has set a new high water-mark with a USD 1 billion round and ‘mainstream’ investors are venturing to learn more about the future of education, the role of technology and the opportunities to participate in that growth. In the first half of 2020, 112 investment events occurred in the Chinese education industry;, the number of transactions fell by 32% month-on-month and 45% year-on-year. The total amount involved was CNY 19.6 billion, an increase of 15% year-on-year. ; The decline in the number of financings in the field is obvious, but the total amount of financing has risen, and the average amount of single financing has also increased by 77% year-on-year to CNY 175 million. Over the past three years, the activity of CNY funds in the field of education investment and financing has been significantly higher than that of USD funds. The number of CNY transactions accounted for more than 90%, and the transaction finance accounted for about 55%~62%; but in the first half of 2020, the total amount of CNY transactions substantially declined and the total amount of USD transactions exceeded CNY transactions for the first time, accounting for 77%. Talking about the amount of funding in the first half of 2020, out of the 112 investment events, the largest number of transactions were in tens of millions of yuan. 19 firms raised more than CNY 100 million, with a total financing amount of CNY 15.7 billion, accounting for 80% of the total financing. Now we should dig deeper into the firms which actually boosted their financings in the first half of 2020. We have short-listed the top 10 education firms with the highest amount of funding raised. These firms are backed by the likes of huge investors such as Tencent, IDG, Sequoia, Temasek etc.  As far as the sub-sectors are concerned, quality education dominated the number of financings with 26, which only totaled CNY 1.3 billion. K12 education showed its dominance, with 18 investment events adding up to CNY 12.4 billion.  As the largest subdivision track in the field, K12 Education has always attracted capital. In the first half of 2020, K12 Education’s financing amount accounted for 60% of the entire industry. Yuanfudao’s new round, worth USD 1 billion, was the main reason behind it. It was followed by the highest single amount of financing in the field; in June, the Zuoyebang completed its E round of financing, worth USD 750 million.  Other than that, listed Chinese edtech companies have shown their strengths as well. NetEase Youdao released its Q1 unaudited financial report which showed the firm has achieved a steady growth for a fifth consecutive quarter. Another US-listed firm, GSX Techedu, has been a hot topic. Its financial results have been found too good to be true for some US research firms. The Chinese online tutoring company has been shorted as many as 10 times in the first half of the year but the stock is showing no signs of weakness – instead, recently it hit the highest ever amount since it was listed.  With Edtech companies such as Yuanfudao (猿辅导), Zuoyebang (作业帮) and Xueba (学霸君) suddenly catching the limelight and seeing this as an opportunity, major Internet companies have stepped up their efforts in the online education track as well.  Alibaba (BABA: NYSE) launched a product called 帮帮答, directly translated to ‘help me answer.’ It is a paid question and answer platform for primary and secondary school students for academic problems. This is the first independent product launched by Alibaba in the field of education. Zhang Yiming, the founder of the world’s most valued unicorn, ByteDance, expressed his intention to consider and plan for a new strategic direction towards education in a letter released on the eighth anniversary of the company. “The online tutoring market has been very hot recently, and many people ask about my company's business progress. In fact, I am not anxious and have patience. I think it is still very early. The education business must have more fundamental innovations, of course, provided we have a deeper understanding. Especially for a company that already has a successful business, starting a new business is not easy. Bold attempts in new fields are an important part of starting a business.” Zhang said. It is evident that the epidemic has created a window of opportunity for huge tech giants to enter the education industry – but at the same time firms which are already are in the business have stepped up to prove the strength and advantages of online education. By providing free online classes, companies such as Yuanfudao, GSX Techedu and Zuoyebang gained millions of users.

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Online Education Firms to Rescue Students in Crisis

As an unexpected epidemic casts a long shadow over the festive mood of the New Year, and the updated data strikes fear among citizens, many Chinese internet companies have tried to play their part in helping out the populace as it confronts a trying situation.  We will specifically talk about educational firms and their efforts to help. Recently EqualOcean reported about the notification issued by the Ministry of Education, requiring localities and educational institutions to actively participate in joint prevention and control, including detecting the symptoms as early as possible and reporting them so that treatment can be done in time. With time more and more education firms have stepped up. Yuanfudao (猿辅导), an online education company, announced that it has donated CNY 10 million to Wuhan to fight the new pneumonia epidemic. Yuanfudao is a domestic K12 platform that owns science and technology education products such as Yuanfudao Online Class (猿辅导网课), AI Courses (斑马AI课), Yuantiku (猿题库) and more.  The company said in an official statement: “Yuanfudao will fully support the materials and funds required by the frontline staff. It is the responsibility of each worker to carry out their responsibility in such a situation, provide students with online courses and high-quality intelligent learning products.” Zouyebang (作业帮), another online education firm, has launched a free-of-cost synchronous live broadcast class for elementary and junior high school students (currently Hubei Province) whose schools have been shut due to the epidemic. According to the official public account of the company, the plan includes the following: • Classes will cover all grades from elementary and middle school; • Classes will start from February 11th until the school starts normally; • The live broadcast classes will take place during the daytime hours from Monday to Friday; • The course content is specially designed for the academic situation in a specific area (Hubei province), which is basically synchronized with the school's normal progress; • The number of attendees is unlimited and it is completely free of cost.  Xueersi, a Beijing-based educational training site focused on primary and middle school students, suspended all offline classes and has shifted to online classes.  Chinese education giants such as TAL and New Oriental have also played their part by either donating funds to the local government or by providing free online classes.  The notice stated that, due to the recent situation, in order to reduce the risk of contagion due to large gatherings and to protect the health of all teachers and students, Beijing Xueersi has suspended offline courses for winter vacation classes.  It further stated that, in order to ensure the continuity of children's learning, and also take into account the learning needs of the majority of students and valuable learning time, all offline courses (face-to-face classes, dual-teacher classes) in the winter vacation class will be converted to online courses.

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Oct 30, 2019
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News EO
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Former VP of Megvii Joins Zuoyebang to Bolster Its Tech Clout

It is reported that Luo Liang (罗亮), former vice president of Megvii, one of China’s leading AI unicorns,  has joined Zuoyebang (作业帮) as the Chinese edtech giant sets sights on faster growth driven by top-notch talent. In his new role at the Beijing-based company, Luo will be responsible for setting up operations to support the overall technical system, expand the edtech company’s photo search business and help develop AI capabilities for its online live-streaming classes. He will report directly to Huo Jianbin, the CEO of the company. Luo will partner with Chen Gongming and Li Boyang at Zuoyebang, who are responsible for the products, technologies and operations of different business lines. According to the company, Luo's arrival on the executive team will further increase the technical advantages of the company in the field of photo search. And at the same time, he will focus on building a more powerful intelligent system to help with customer service and improve teaching and efficiency. Zuoyebang, founded in 2014 by search giant Baidu, is a platform for primary and secondary students. It started as a section of Quora-like Q&A website Baidu Zhidao, but a year later was spun out to form an independent mobile app. The company later introduced live-streaming courses and one-on-one mentoring.  The startup has raised a total of more than USD 580 million. It is backed by big-name investors such as Coatue Management, Goldman Sachs, Sequoia Capital China and GGV capital. There were reports last year that SoftBank Vision Fund was seeking to invest about USD 500 million in the company. However, the funding was not finalized due to reasons unknown.  With experience working for Baidu, Kingsoft and Megvii, and an entrepreneurial career in digital education, Luo is expected to accelerate the pace of technological development at Zuoyebang. Prior to his new adventure at the Baidu-affiliated startup, Luo worked at Megvii as a technology executive and led the team in developing its flagship product “Hetu,” which is a robotics operating system enabled with AIoT. With the rapid development of the online education industry, the role of technologies such as artificial intelligence, 5G and big data has expanded, making room for a wider array of educational products married with technology. The continued recruitment of technical experts by Zuoyebang into its C-suite signals a desire to further boost its technical strengths and hasten the application of its technical breakthroughs. More and more education companies are investing in technology, either by hiring executives or by spending more on R&D. Just over a week ago, the world’s most-valued startup ByteDance said it’s set to introduce a 24/7 artificial intelligence teacher for K12 students in China by early 2020. Another programming education startup, Hetao (核桃), raised USD 50 million last month and said it will use CNY 150 million (USD 21.4 million) to develop AI teaching products and roll out technology upgrades over the coming year.

Analysis
Sep 10, 2019 · EO company
Analysis EO
Dec 4, 2018
Analysis EO
Dec 4, 2018

Zuoyebang, the Uprising Force of K12 Online Education

Zuoyebang (Homework Team, 作业帮), is an online education startup company platform for primary and secondary students. The company seeks to raise USD 500 million from SoftBank. With previous funding series were raised from Sequoia China, Goldman Sachs, Tiger Fund etc. In China’s online education market, Zuoyebang is an absolute late comer comparing to its peers like Xiaoyuansouti(小猿搜题) and Xueba100.com(Xuebajun, 学霸君), but it was incubated by Baidu. However, late but not last, Zuoyebang is the uprising star for investors. Comparing to major online K12 education companies, Zuoyebang’s ability to abtract investors is unquestionable with a team formed by Baidu’s former senior engineer and product managers. Year 2012 is the starting point of online education when Chinese government published supportive policies regarding to accelerate private education and online education. Successively, the biggest competitor of Zuoyebang, Yuanfudao (猿辅导, the mother company of Xiaoyuansouti App), was founded in 2012 and initiated its series A funding in the same year. In the following years, online education market has welcome waves of startups and especially, K12 education is the main battle field for online education startups. In 2017, the K12 online education market size reached over CNY 29.87 billion with an averaged annual increase rate 30% from 2012 to 2017. Capital-chasing online education prevails in China and the prevalence is not surprising.  Before 2010s, China’s online education and private education lagged because of constraints from multiple sides, including government policies, internet accessibility and others. Until 2012, the lowered entrance bar opened the online education era. Considering that China used to adopt One-Child policy, the only child gets parents’ all attention in every aspect, and particularly, education is the top concern for parents. Traditional cram schools that used to be the only option for parents are seemed less competitive than online K12 educators, which are not bounded by space and time. Dual-career family is common in China and this situation leads to a consequence that both parents’ time spent on child’s education is limited. Taking child to cram school or tutoring homework is difficult for dual-career family. Hence, online education becomes an ideal alternative for those families. Zuoyebang’s Chinese name means “Homework Helper” and is perceived as so. Its app guides students through homework problems’ solving and is equipped with test banks for students to practice. In comparison with other apps, Zuoyebang has a unique panel for users to send question to teachers for solution guide. Attributing to increased accessibility to smart phones and internet, the after-school education is no longer restricted by siting. Apps like Zuoyebang are more cost-efficient for parents to choose when most apps have free essential tutoring services, though the premium versions cost. In less developed area of China, cram schools are not likely to enter since the customer base does not meet the floor for them to take into consideration. Online tutoring apps partially fill the unbalanced education gap in China. Besides the unbalanced distribution of education resources, the intense competition among students urges the need of after-school education. Based on data provided from NBSC (National Bureau of Statistics of China), the elementary-college entrance rate from 2012 to 2016 is approximately 20.59%. In above chart, data retrieved for college registration ranges from 2012 to 2016 and data retrieved for elementary school ranges from 2000 to 2004 in order to compare within the same generation. Chinese parents have motives to increase educational expenditures in K12 level to prepare their children for college entrance. In a recent data, the monthly activity of apps reveals Zuoyebang’s giant customer base – the monthly activity reaches over 70 million times. Apparently, Zuoyebang is well ahead of other market players. State by Zuoyebang, client repurchase rate has risen from 50% in 2015 to 80% in 2018. Strengthened customer stickiness is a positive sign for investors and in October 2018, SoftBank’s funded Zuoyebang USD 500 million. According to Hurun’s 2018 Q3 Unicorn Index, Zuoyebang is approximately valued at CNY 20 billion (USD 2.93 billion).

News
Jul 18, 2018 · DoNews