China’s Ed-Tech start-ups go from strength to strength

Chinese online education App Zuoyebang has raised $1.60 billion in what was described as a Series E+ funding round from both domestic and international inventors.

The fundraising comes just 6 months after Zuoyebang tapped the markets with an initial Series E round that raised $750 million. In total, the company has so far raised an impressive $2.93 billion in external funding.

Online education and learning have enjoyed strong growth over the course of 2020 thanks in part to the pandemic and the stay at and work from home culture that it has created. However, this is just part of a trend that has been gaining pace over recent years.

Research and Markets data predicts that the global online education market will be worth almost $320 billion per annum by 2025 up from $187.87 billion in 2019.

That represents a CAGR or a compound annual growth rate of 9.23% which is being driven by falling costs as well as rising levels of connectivity and availability of access among consumers.

New technologies such as AI, highspeed 5G networks and the internet of things are only likely to accelerate this process.

Perhaps the most competitive market place for online educational products and businesses is in China which despite its reputation for having a rapidly ageing population still has 35% of its headcount in cohorts aged between 20 and 44 years old.

Zuoyebang did not disclose its valuation following the completion of its latest funding round but back in September Reuters reported that the company was intending to raise fresh cash of $600 million based on a valuation of $10.0 billion.

The success of the latest funding round which raised more than two and half times the original amount sought will have bumped that valuation up significantly.

Investors participating in the latest funding round include Tiger Global, the Softbank Vision Fund, Sequoia Capital China and Fountain Vest. All of whom had previously invested in the business. Zuoyebang also attracted new investment from Alibaba who join their e-commerce rivals Baidu as investors in the business.

Alibaba has invested in many other Chinese tech companies and startups including high profile fintech Ant Group which is now intense scrutiny from Chinese regulators. Whether China’s tech giants will be allowed to continue to invest freely in other tech names remains to be seen.

The treatment of existing external investors in Ant Group in the weeks and months ahead may also have some bearing on how keen overseas investors are to pump into China’s Start-up scene going forward.

For now, at least the online education sector seems to be free of those concerns Zuoyebang’s largest rival Yuanfudao raised $2.20 billion in a fundraising of its own back in October that was led by another Alibaba rival, Tencent, which valued Yuanfudao at $15.50 billion, making it the world’s most valuable educational technology company.

Zuoyebang which offers online courses and live lessons, alongside homework help for students. from Kindergarten to year 12, claims to have 170 million monthly active users.

Some 50 million of whom are active on the system each day, out of total K-12 student population in China of around 200 million.

During September and October Zuoyebang’s live stream lessons, which students pay for, were accessed by more than 10 million users.

This is another reminder of the scale of on-line markets in China and the lucrative investment opportunities they represent unless or until the goal post are moved by Beijing.