Pandemic the Catalyst as Yuanfudao Edges Closer to a New Funding Round

Author: Qasim Khan Editor: Luke Sheehan Mar 21, 2020 04:05 PM (GMT+8)

Yuanfudao is one of the companies which has benefited the most from the situation in terms of acquiring new customers.

Online education. Image credit: Yuanfudao official website

People familiar with the matter have recently told Reuters that Yuanfudao is edging closer to its latest round of financing, worth around USD 1 billion. The new addition of capital will lift the company to a staggering valuation of USD 7.5 billion. The round is believed to be led by previous investors Tencent and Hillhouse capital. 

Talking about online education, 2019 wasn’t a good year, as financings cooled down and investors started to focus more on the profitability of the firms. The epidemic situation has given these very firms new hope. 

Koolearn and Xueersi, online education firms owned respectively by education giants New Oriental and TAL, have rapidly harvested a large wave of traffic. Up-and-coming industry leaders such as the above mentioned Yuanfudao (猿辅导), GSX Techedu and Zuoyebang, also saw their users soar. GSX Techedu recently claimed to have attracted 15 million students to sign up for its free courses, with Yuanfudao attracting more than 20 million and Zuoyebang a staggering 28 million students within 2 months. 

According to market research firm App Annie, from January to mid-March this year, Yuanfudao ranked first in ‘educational’ in-app purchases in China's app stores. In February, Alibaba developed DingTalk, which became the most downloaded free application.

A spokesperson of the company who chose not to be named told Reuters that the company sought to close the round sooner and opted not to spend time seeking more investors, including new ones who would need extra time to conduct offline due diligence due to the outbreak. 

Tencent is an early investor in the firm while Hillhouse was in constant talks with the startup before this fundraising.

Other than online education firms attracting millions of users with basically no customer acquisition cost, tech giants such as Alibaba (BABA: NYSE) and ByteDance are looking to pounce at the opportunity. 

Alibaba recently launched a product called 帮帮答, which directly translates 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.

Prior to the release of this app, Alibaba’s enterprise communication and collaboration platform, DingTalk, rolled out a bunch of new features for classroom settings, including live-streaming lessons that can accommodate as many as 300 participants, and an online testing and grading system. According to Alibaba, at least 50 million students from elementary to high school across China have signed up for DingTalk’s online teaching programs, which have been conducted in tandem with local education authorities as of February 10.

Zhang Yiming, the founder of the world’s most valued unicorn, ByteDance, recently expressed his intention to plan new strategic directions towards education in a letter released on the eighth anniversary of the company.

Businesses in many physical industries have been affected amid the COVID-19 pandemic, but it has provided new opportunities for development for many online industries, as well – one of which is the online education industry.

We believe more such huge funding events will take place in the near future. Huge tech firms will either invest in leading companies or will take this opportunity to lay out their own online education-related products.