China’s EdTech boom was highlighted in CB Insights EdTech White Paper in 2016. Funding to China-based EdTech companies topped USD $1B in 2015; the rise of Chinese EdTech mega-rounds helped boost the overall number. Funding to Chinese companies made up 37% of 2015’s global EdTech funding total, compared to 17% in 2014.
$100M rounds in the global EdTech sector rose from two in 2013 to three in 2014 to seven in 2015, and China-based companies took four of the seven $100M rounds last year. 2015’s $100M+ financing rounds in China EdTech players include TutorGroup, Hujiang, Changingedu, 17zuoye.
In the past 5 years, China’s EdTech investment has gone through immense hype. China-based EdTech funding rose 230% on a year-over-year basis in 2015. Now there are more than 10,000 EdTech companies in China. In 2016 one year the VC funding in the education sector has reached 3B USD, many innovations have been emerging and new business models are testing the market. If we count government spending, the total budget/revenue is about 50B USD. Overall market activities are very active.
China EdTech companies listed in US stock market include New Oriental, Tomorrow Advancing Life (TAL), Tarena (TEDU), 51Talk, and China Distance Education Holdings (CDEL). There was a rapid growth of education companies in China’s New OTC Market. By September 2016, 120 education companies were listed in the New OTC Market. In addition, valuation of Ed-tech companies in China is generally higher.
They used to call this industry “online education” because of the paradigm shift enabled by the Internet. Here we summarize the market on the top level.
The advancing momentum is significant because of the support of VC and corporate investments, and also the huge base of China’s population and talents. There are around 260M K16 students in China. The competition in China is fierce, which makes the industry in China evolve faster than other countries. From the top view, a large number of deal shares (81%, 86 in total) are seed/angle and series A funding, which was more than that of 2015.
Sometimes China EdTech players start by copying products and business models from the international EdTech market, then localizing or renovating them. The speed of change is impressive, and the products of innovation is worth our attention. With that being said, there are many challenges ahead. The education industry is slow and complicated, which is being proven true in China as well as in other countries.
In the EdTech market, K12 has the biggest scale, and includes digitalization in public education and after-school products/services. The former scale is bigger than 200 billion RMB, and the latter scale is over 100 billion RMB. The market value of vocational education and online language learning has reached tens of billions RMB. K12, vocational education, and online language learning are at the top of investment scale. Others booming include corporate training and online skill training. B2C players grab the biggest portion of the investment (as shown below). You can contact us for a detailed breakdown, statistics, and analysis of EdTech products in China.
There have been quite a few M&A events recently, and it’s predicted that M&A will be a major trend as this market evolves in the future. In 2016 the acquisition deals increased by 49.5% compared to 2015, reaching 16.3 billion dollars. Big players that emerge from inside or outside the education industry will obtain technology capacity through M&A. In 2016, there are 11 new funds created aiming at EdTech targets.
For now, there are very few big companies; only 6% has more than 1000 employees.
If we categorize China EdTech companies according to their ages, almost 40% of them were founded in the past 5-6 years. We expect the landscape will be changing in next several years.
The integration of online and offline learning products and the integration of players in the industry supply chain are advancing. Now China’s investors are highly interested in smart technologies such as learning data analytics, Machine Learning, Natural Language Processing(NLP), and Artificial Intelligence in education nitch market. China investors are hunting for emerging and promising targets worldwide, but without local resources, they might not be able to support companies in early stages.
China is listed currently as the second largest education market, but the biggest learner population with 42.65 million pre-school students and around 180 million K12 students. Parents are willing to pay more for good educational products, especially parents born after the 80s. Superstar teachers in China online education are making big profits because of very high demand. Native English speaker teachers are also much needed for online learning.
If you are interested in China’s EdTech industry or market opportunity, you can contact us for the free industry report or consultancy.
We are hosting EdTech Business Connections webinars to bridge business investment, partnership and collaboration opportunities between US companies and China community (leadership of EdTech companies, after-school programs, schools, investors etc.). If you like to join, please contact us.