A Record Month for EdTech Investments: March 2020 Roundup
As education systems and companies scramble to adapt to the coronavirus (COVID-19) and a stark choice to either cancel classes or hastily migrate them online, education technology companies will play a key role in maintaining education continuity for students, serving after school needs, and sustaining corporate training programs. Incumbent EdTech companies have seen a surge in stock prices, and EdTech start ups are well-positioned to find capital and tell a strong growth story. EdTech companies around the world are reporting spikes in traffic, new users, and new deals in the pipeline. March 2020 saw the biggest EdTech investment ever in China, the largest pre-seed round in MENA, and a number of other developments. Here’s our roundup of notable EdTech investments last month.
The Biggest Ever EdTech Investment in China
China saw its biggest ever EdTech investment on March 31, with Chinese K-12 online education platform Yuanfudao (猿辅导) securing $1billion in a Series G round led by Tencent Holdings and Hillhouse Capital on a $7.8billion valuation. Founded in 2012, Yuanfudao owns six apps, and its core products are subject online tutoring for K12 students in China and Baima AI Ke, an artificial intelligence-enabled app focusing on English and logical thinking. The company claims 400 million app users, including 1 million full-service paid members on Yuanfudao and 500,000 on Banma AI Ke. Recently, concerns over COVID-19 caused China to close schools earlier than most countries, causing an earlier spike in interest in online education products last month. At one point in February, Yuanfudao claimed that it suffered a two-hour system crash after 5million people took up its offer of free live courses.
Our thought bubble: this raise is unique both in its size (the largest in EdTech history in China) and that it’s a Series G which is fairly rare. Yuanfudao might have a bigger pile of cash now than its competitors VIPKid, 51talk, zybang, and 17zuoye, but eventually Yuanfudao and its peers will need to demonstrate profitability rather than just user and revenue growth. Customer acquisition costs in the Chinese K12 online tutoring space have continued to rise and undermine profitability. Acquiring customers has become expensive there so many well-capitalized companies offering a litany of discounts, free trial classes, and referral incentives, hoping to capture enough market share to snuff out competitors and eek out a profit on the second or third round of course fee renewals with new customers. It’s telling that Yuanfudao is China’s most valued EdTech start up, but about 0.3% of its users are full-service customers. The intended use of this investment isn’t public, but we’re curious: does this signal a transformation in Yuanfudao’s business, or will this just perpetuate the contest to see who can hold out and burn cash the longest and still survive? Is this a game changer, or just a historically large pile of cash for Yuanfudao on top of as it burns?
Other Notable Investments in China
Besides the Yuanfudao investment, investors in EdTech were busy in March.
STEAM education company Xiaomawang 小码王 announced a ¥150 million RMB ($21 million) Pre-C round of funding with undisclosed investors on March 23. The company focuses on teaching children programming languages and will use the funds for curriculum development, tech R&D, and upgrading its online platform.
Qinhan Hutong 秦汉胡同 announceda ¥150 million RMB ($21 million) Series B round on March 20. Qinhan Hutong is a traditional Chinese culture education company mostly focusing on children. The company plans to use the funding to expand its adult education business Haoyanshe(好研社) and to grow its e-commerce platform.
Kuaipeilian(快陪练), a platform connecting students with piano teachers and tutorial live streams announced a new round of funding on March 25, with the investors and amount undisclosed. The company turned heads in 2018 when it took a record ¥50 million RMB in its angel round, the biggest of any in arts education or the online competence-based education sector.
ViaX(盐趣科研教育) announced its Series A round of financing of “tens of millions of US dollars” led by Tianjinvc on March 20. The company focuses on academic research projects and research mentorship for high school and university students.
In March, there were some EdTech angel rounds in China worth noting as well. Jingchuang Education(竞创教育) raised nearly 10 million RMB to build a SaaS platform for private education SMEs. 101 Teacher-Factory (101名师工厂) and Duohao Education both announced angel rounds with the amounts undisclosed. Coding Education company JoysKid announced a new round invested by BE Capital, also with the amount undisclosed.
Meanwhile, Meten International Education Group (美联英语) and EdtechX Holdings announced on March 30 that their planned merger was complete. In a related move, Meten and EdtechX completed a placement of $36 million from outside investors.
Bytedance, owner of TikTok, Douyin, and Toutiao, founded an edtech firm called Boxue on March 17, adding to its growing list of education products such as English learning platform Gogokid, vocabulary study app Tangyuan, and K12 study portal Qingbei Wangxiao.
Our thought bubble: Little has been announced about Boxue’s product and connection with the broader Bytedance ecosystem, but we have a sneaking suspicion that Bytedance is trying to quickly roll out an EdTech product to convert some of the millions of bored teenagers and adolescents the use its wildly popular Douyin app into fee-paying students.
Investments in North America
Topping off the list of EdTech investments in North America, Honorlock, an on-demand online testing and proctoring tool, secured $11.5 million in a Series A funding round led by Neil Sequeira from Woodside, California-based Defy Partners on March 19.
Preply announced a $10 million Series A on March 30 led by Hoxton Ventures. Preply is a tutoring marketplace that reported bookings triple in areas in the US and EU affected acutely by COVID-19. It said the funding will be used to scale the business and beef up its focus on the US market, where it plans to open an office by the end of the year.
Coursedog, a scheduling tool for education institutions, announced it raised $4.2 million from investors, including First Round’s Josh Kopelman, on March 9. The funding will be used to build out Coursedog’s product line on projecting course demand, the correct number of seats a school should offer per course and student success.
GradeSlam, which provides educational support system to enable remote learning in schools, announced $7.5 million in funding led by Reach Capital on March 11. As part of the deal, GradeSlam is rebranding to “Paper”.
Also on March 11, Nepris announced a $5 million Series led by K12, Inc. Nepris is an online platform that connects K12 and university classrooms with industry professionals, with an emphasis on preparation for STEAM careers. Nepris plans to spend the money on building scale, expanding to new regions, and signing more industry partnerships. This is consistent with K12’s announced “pivot” to career education which included their $165 million acquisition of Galvanize in January.
SportsEdTV closed a $3 million Series A on April 2, allowing the online sports education platform and community to hire new staff, add more content, and double down on marketing.
In Mexico, Dev.f raised a $1.4 million Pre-A series led by Invent Capital Fund on March 26. The technology skills focused training company aims to expand from 5 locations in Mexico to 30 locations in 10 countries around Mexico and Latin America.
Also worth noting is the merger between Edwin, the Y Combinator-Backed Startup that offers AI-powered English teaching, and Voice Assistant Company MyBuddy.ai. The resulting company will keep the name “MyBuddy.ai” and will focus on building a virtual English conversation partner. Observers note that similar products in China like Liulishuo and Squirrel AI Learning have grown rapidly and that companies like Roybi in the US seem to be following suit.
Big Investments in European EdTech
Leading the pack of EdTech investments outside of China was Le Wagon, a French coding bootcamp, that raised its first funding round of $19 million on March 3, led by Cathay Capital. Having bootstrapped since 2013, the company hopes to use the investment to add new courses and expand to new regions.
On the fringes of EdTech, Nextory, a Sweden-based online collection of e-books in pdf and audio formats, raised SEK60 million ($6 million USD) on March 25 in a venture round led by existing investors. Also on the fringes of EdTech, UK-based Azoomee announced £3m in investment from Wealth Club at the start of the month. Azoomee focuses on hosting child-safe videos, games, and messaging.
Belgian startup MobieTrain raised a €1.8m ($1.94 million USD) Series A led by Limburg Investment Company and the Concentra Media Group on March 12. The mobile and microlearning software company focuses on training company employees.
On the same day, Dutch company Edumundo raised a venture round of €1.2m ($1.29 million USD). The company delivers game simulations and hosts an online book-replacing platform. Capital Mills and InnovationQuarter were the most recent investors.
On March 30, Kernel Capital announced that it led a €1.2m ($1.29 million USD) investment in Irish coding education company Code Institute.
The Olive Group, another Ireland-founded EdTech company, announced the early launch of an online professional training platform called My Virtual Tutor. The company said that it invested €5m ($5.39 million USD) in the product and that the early launch was motivated by disruptions to traditional corporate training caused by COVID-19.
Meanwhile, Finland’s first EdTech Fund, Sparkmind announced the first close of its venture fund toalling €40 million (approx. $44.6 million USD). Its biggest financial backers are Tesi, a Finnish government-owned investment company, and KRR III, another fund with backing from. The fund plans to focus on Series A deals between €1 million to €20 million. Its first investment was also in March in a Series A round for Fuzu, a career development startup based in Kenya.
March EdTech Investments Elsewhere
In India, Bengaluru-based fintech company Leap Finance, which was founded to provide funding options to Indian students seeking overseas education, raised a $5.5 million USD seed round led by Sequoia Capital India on March 3. Later in the month, Mumbai-based online tutoring company Lido secured a $3 million Series B, and Hyderabad-based Univariety raised $1.1 million USD from Info Edge. Univariety is an online university and career guidance platform for schools in India. On March 31, Unacademy acquired Kreatryx in a cash and stock deal, with the amount undisclosed. Stay tuned for our roundup of April’s investments in India, which include Camp K12’s $4m seed round and Lido’s $3.3m Series B!
Meanwhile, Jordan-based Abwaab raised a pre-seed round of $2.4 million, the largest pre-seed round ever raised by a startup in the Middle East and North Africa. The platform that was launched recently and produced 1,000 Arabic-language videos on STEM subjects. Also in March, Saudi-based online course provider Aanaab raised a $1.5 million seed round led by Wamda and Noour Nour Knowledge Company.
In Australia, Zookal raised a $15 million AUD (approx. $9 million USD) Series B round led by existing investors Koh Boon Hwee and Bernard Sabrier. Zookal started out renting out textbooks to university students but has since moved into providing educational materials and videos to its established base of users through its digital platform.
