Today Kai Shu Story announced that it has secured a Series C+ fund of USD 66 million from TBP Capital (leading investor), Temasek and Loyal Valley Innovation Capital (participant investors), at a post-deal market value of USD 600 million. Within one year, China’s education primary market has bankrolled the children’s story app for over USD 120 million.
Since launching in 2013, Kai Shu Story has drawn much attention from the capital market, under the fame of the founder Mr. Wang Kai (王凯), a former China Central Television (CCTV) host. In July 2019, it made a strategic leap in its Series C funding by integrating the online app into the Baidu product system (Baidu, BIDU: NASDAQ) .
“It has been proved again that Kai Shu Story has the capability to continually provide high-quality content products”, says Mrs. Ye Chunyan (叶春燕), the partner at New Retail of Loyal Valley Innovation Capital, “meanwhile the company is advancing the content products to make education products, indicating its potential and push for sustainable development”.
The company’s core competency relies on original stories based on Chinese traditional literature. At the very beginning, Mr. Wang created the first paid story product, ‘Kai Shu: Journey to the West ’ and developed a story-writing methodology to apply at scale. The quality of stories was controlled by a selection mechanism similar to the investment decision meetings widely practiced in financial institutions.
As Kai Shu’s stories spread to the children’s communities, the virtual characters, or Intellectual Properties (IPs), have gained more realizable values by transforming words into tangible products. More than audio stories, Kai Shu Story further explores various forms according to the IP product matrix, including dramas, books, videos, AI tutorials, smart readers (similar to the Walkman) and concerts.
China’s online education market now is going through a mature stage, with more good companies fast growing and appreciated by the public market. Babytree (01761: HK) is a pioneer in building an all-in-one platform for young mothers, with an IPO price of HKD 1.7 billion in 2018. In the English-learning market, Liulishuo (LAIX: NYSE), an English-learning app equipped with AI technology, raised USD 72 million in 2018, following 51 Talk’s (COE: NYSE) IPO in 2016 at a similar price (USD 72.4 million).
Currently, the systemic impact of Covid-19 is facilitating the digitalization of the education industry, and testing the viability and adaptivity of the business model. Amid a general suspension of kindergartens and primary schools, Kai Shu Story is providing free access to its core education content. As of February 21, the story app had recorded more than 120 million plays on its public-welfare page.
Even though smart apps with fun stories can never replace real parenting, they can provide a media resource connecting children and parents for quality family time. This company is capturing this market, with the help of Chinese literary culture.