Tencent Adds Another Edutech Startup To Their Portfolio With $40M Investment

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China’s cutthroat education system is a breeding ground for Chinese K-12 education startups. The country’s exam-heavy system particularly gives rise to startups that focus on helping students improve their test scores.

Online education startup Yuanfudao (猿辅导), which targets China’s middle school and high school test takers, announced a $40 million USD boost from Chinese tech giant Tencent on Tuesday.

Last March, the Beijing-based startup raised a $60 million USD round of Series D funding from IDG, Matrix Partners, New Horizon Capital and CMC Capital Partners.

“Over the the past four years, with continuously improved adaptive learning algorithms, Yuanfudao has gained a massive amount of data in terms of our students’ practice behavior, which we have used to build online tutoring courses,” said Li Yong, Yuanfudao’s CEO, the company’s press release.

Currently, Yuanfudao has three products, but their online tutoring platform, also named Yuanfudao or “Ape Tutor” (our translation), will be the main beneficiary of the $40 million USD injection. As far as products go, Yuanfudao’s tutoring app is pretty straightforward – it connects students with tutors, who livestream through the app. Students can choose one-on-one tutoring services or join a group class. Some tutors teach a series of classes, typically on exam-specific material, while others teach one-off courses that are priced as low as 1 RMB ($0.15 USD) for a one hour lecture.

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From left to right: 1) different course offerings on Yuanfudao 2) a list of classes, each 199 RMB 3) a description for a group class (maximum of 2000 students) that covers the Chinese language and literature section of China’s national college entrance exam

Yuanfudao’s product is aimed at easing China’s buke (补课) bottleneck, which affects middle school and high school students all over China. In China, buke refers to remedial classes that are taught outside of normal class hours. However, unlike remedial classes in other countries, buke is not just for students who have missed class or need to make up coursework. In China, buke classes are largely attended by students who want to improve their test scores.

Due to the competitive and do-or-die nature of China’s exam system – students can only attend schools that they test into – buke classes are a lucrative business. According to Yuanfudao, Chinese families spend an average of 3,820 CNY (about $580 USD) per year on their child’s buke classes, with some families spending as much as 80,000 RMB (about $12,149 USD) a year. By moving buke sessions online, Yuanfudao claims it can cut at least 70% of the cost and distribute buke tutors and services more fairly across different regions of China.

In addition to Yuanfudao’s tutoring platform, the company has two other products: Yuantiku (猿题库), an app that helps middle school and high school students cram for national exams by serving practice problems from an adaptive database, and Xiaoyuansouti (小猿搜题), an app that lets students  search for homework answers and one-on-one help by uploading pictures of homework problems.

Though the three apps operate independently at the moment, it’s not hard to imagine possible synergies between them. Already, Yuanfudao has a unified account system that recognizes users based on their phone number across its different apps. In China’s crowded education market, Yuanfudao’s product suite could give it the competitive edge it needs over similar products, like Xuebajun (学霸君), which is almost identical to Yuanfudao’s Xiaoyuansouti.

Yuanfudao joins a number of other education startups in Tencent’s investment portfolio, including Enjoy Learning, a private tutor marketplace, and ABC360, an English language learning startup based in Hangzhou. In addition to funding, Yuanfudao’s press release hinted that it would “cooperate with [Tencent] on a more strategic level.”

The company’s PR spokesperson did not respond to requests for more details.

Update (6/2/2016 9:45): This post was updated to include IDG as one of Yuanfudao’s previous investors.