Tencent has led E-round funding in Vipkid, one of China’s largest online English-language tutoring platforms, according to a statement on WeChat.
Why it matters: The Beijing-based platform has struggled to fundraise against a challenging backdrop of stricter regulations in the industry, as well as growing concerns over the high costs of acquiring and retaining users.
- Since July, Beijing has required all foreign teachers to hold valid teaching credentials and companies must make public all related information such as certificates and work experience details. The regulation came out shortly after local police reported a drug bust involving foreign English teachers in Xuzhou, Jiangsu province.
- Once an investor darling, Vipkid has faced challenges during this funding round as investors turned cold on China’s online education sector.
- Vipkid competes against a host of local rivals like 51Talk, Hitalkkids, and Dada ABC to attract English speakers to power their live tutoring programs.
Details: The company did not specify the size of this round, but local media reported in September that Tencent would invest $150 million in the company at a valuation of $4.5 billion.
- Tencent declined to comment on previous reports about the funding size and valuation.
- Vipkid had initially aimed to raise $500 million but later lowered this goal to around $150 million, Reuters cited a source as saying.
- The company will use the new proceeds to generate quality content, recruit talent, develop technology, as well as boost its operating efficiency and organizational capabilities, according to a statement.
- Vipkid claims to provide services for more than 700,000 students and at least 90,000 teachers from North America as of August this year.
Context: Revenue in China’s online education market grew by over one-quarter to hit RMB 251.8 billion ($35.3 billion) in 2018. A growth rate of 16% to 24% is expected over the next three to five years, according to data from market research and consulting firm iResearch.
- The K12 education segment (kindergarten to 12 years of age) is expected to expand to account for 28% of the market by 2022, up from only 9% in 2012, thanks to improved education concepts among younger generations and higher internet penetration, according to iResearch.