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News Mar 11, 2020 03:00 pm EqualOcean

VIPKID cooperated with Huawei launching online education intelligent solution, realizing 0 katton in the classroom

Analysis EO
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Analysis EO
Jul 5, 2020 11:26 pm ·

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.

Briefing
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Briefing
Jun 29, 2020 11:03 pm · Jingmeiti

Yuanfudao Aims at Early Education with New App

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Analysis EO
Analysis · 2
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Analysis EO
Jan 22, 2020 02:29 pm ·

Online Education Investment Landscape in China & US

The US economy is experiencing an upswing. In 2019 the Dow Jones Industrial Average passed 28,000 points, the S&P 500 Index topped 3,000 points and the Nasdaq broke 9,000 in what some have termed one of the longest bull markets in history.  Since the beginning of 2020, Chinese education firms such as TAL, New Oriental, Genshuixue, 51Talk and Netease Youdao have all seen their stocks rise. Among them, New Oriental rose 11.96%, TAL rose 12.07% and 51Talk rose 47.76%. This article observes global online education development trends from a macro perspective to give a much more comprehensive understanding.  Vocational training track grabs attention in the US According to data published by EdSurge, a research firm centered on educational technology in the United States, in 2019 investment in educational technology companies reached above USD 1.6 billion (about CNY 14.4 billion). The run involving 105 transactions, which is the highest in five years. The amount of financing increased by 16% as compared to the previous year, even with five fewer investment events. A total of 332 financing events took place in China’s education industry with the total amount of financing reaching around CNY 20 billion. Out of the total 148 events that took place in the online education track, with a total financing amount of CNY 11.56 billion. It is not difficult to see that online education in China and the United States is very similar in terms of financing scale and quantity. Funds have been pouring into the US education technology industry during the past year, which is largely mirrored across the wider venture capital landscape. A CB Insights report puts US venture capital investments at USD 108 billion across 5,906 deals in 2019, the third-biggest year ever by value. Employers in the United States are seeking third-party agencies to help them recruit top talent or train talent among existing employees. Stimulation of uncontrollable economic factors has created a talent recruitment market where employers are looking for help.  The unemployment rate is at a low level of 3.6%, which is a rare number in the period since 1969; this low level may be caused by people giving up job applications, resulting in a lower labor force participation rate, making it difficult for employers to recruit suitable talent, reported EdSurge.  The eight most important edtech deals in 2019 involved companies that provide training services to employers and employees, often focusing on training them to ensure their qualified retention or an internal promotion. The eight companies are Guild Education, BetterUp, Coursera, Andela, Degreed, MindTickle, EdCast, and A Cloud Guru, which account for 39% of total education technology investment in 2019. Jenny Abramson, founder and CEO of Rethink Impact venture capital firm, said the employee training programs “are becoming table stakes for anyone who wants to run a company with great talent.”  Data from iResearch shows that the revenue of Chinas’ online education industry exceeded CNY 300 billion. It may be estimated that by 2022 the scale of the market will surpass CNY 540 billion, with industry insiders predicting that the track will produce a unicorn soon.  Morgan Stanley’s survey report analyzes that China’s K12 online education market will grow 23 times in the next 10 years which makes investors around the world confident about investing in the sector. The table below shows that Chinese companies that provide teaching services in K12 related fields and their combined investments exceed CNY 1 billion. However, K12 online education companies in the US do not have a broad financing record. Except for ClassClassjo, an app used by schools for communication, which received USD 35 million from GSV ventures, and Newsela, an instructional content platform that supercharges reading engagement and learning, which raised a Series C round worth USD 50 million in March 2019. We can see that, as compared to China, the K12 education market in the US is declining. Quite a few of the companies are being acquired. We should also note that K12 education has lost its position to STEAM education in terms of number of companies attracting capital.

News EO
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News EO
Jan 10, 2020 03:30 am ·

Tencent and Sequoia Pour USD 80 Million into VIPKid's Subsidiary

Cindy Mi, Founder and CEO of the unicorn company announced this week that Dami Online School has raised USD 80 million in a Series A funding. Investors include Tencent, Sequoia Capital China and Hommer Capital, marking the first major domestic financing event of 2020. Having started as an incubated project nearly two years ago, the brand is designed to provide a more cost-effective education by enabling bigger class sizes, with students signing up for online sessions in addition to private instruction. Founded in 2013, VIPKid is a global education technology company that connects children with teachers for online English classes. It has become China’s leading online education startup, attracting investment from investors like Tencent, Coatue Management, Sequoia Capital, Sinovation Ventures, Yunfeng Capital, Matrix Partners, Learn Capital, Northern Light VC and Bryant Stibel. The VIPKid platform currently connects over 700,000 paying students with over 90,000 teachers in the US and Canada. China has taken a lead in online education, with firms using some of the latest technologies – such as artificial intelligence and virtual reality – to improve education quality and efficiency. According to iResearch, the country’s online education market is expected to reach CNY 380.7 billion this year, from CNY 251.7 billion in 2018.  With the evident expected increase in the market size, VIPKid has a lot of competition, with the world’s most valued startup ByteDance’s subsidiary Gogokid bringing English-speaking teachers into virtual classrooms in China. Speaking of the marketing war for the summer class in 2019, Cindy Mi said at the press conference that Dami Online School will never join the marketing war. She said education must return to the original intention which is educating pupils and spending money on teachers, teaching research and product experience.  Lynn Yang, Managing Director of Sequoia Capital China, said: “VIPKid has two major advantages when entering the large class track: firstly, VIPKid has been deeply involved in the industry for six years, has a deep understanding in the field of online education and understands users' online behavior. With these advantages, it can quickly gain user trust and Support. Secondly, it has a strong and professional management team. I believe that, under the leadership of the management team, Dami online school can take the user as the center of the experience, solve their pain points and create a closed-loop of learning that combines quality with test-oriented education, and lead the development of the K12 online education.” Yu Haiyang, managing director of Tencent Investment, expects Dami to be in a strong position to meet increased demand from Chinese parents for online education, according to the statement. Last October VIPKid raised an undisclosed amount for its Series E round of financing, led by Tencent, with China Renaissance (华兴资本) playing the role of financial advisor. VIPKid said that the two sides will continue to deepen cooperation in the fields of Internet education, artificial intelligence, cloud services and public welfare.

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