Alibaba invests in education platform amid tighter rules

Education platform Knowbox has received a new round of funding to develop cost-saving AI technology, but with regulations tightening, time is running out for these platforms to generate positive cash flows.

Knowbox, a Beijing-based education platform, said on Thursday that it had closed a $150 million Series D fundraising deal, to develop artificial intelligence (AI).

Alibaba led the round of investment, joined by Jack Ma’s investment fund Yunfeng Capital, Bertelsmann Asia Investments, and C Ventures.

The fundraising proceeds will mainly be used to develop AI with the ability to create online classes on a massive scale, to save costs. By using  AI, it is possible to create customised services for students without charging them a higher price.

Having the ability to save on costs is crucial for any online education platform to survive, as the Chinese government wants to regulate arbitrary charge in the industry. On July 15, the Ministry of Education made an official announcement, banning advanced payment of more than three months for online education platforms. This official policy was issued in a guidance document in August last year, and was officially confirmed in legislation issued on Monday.

“The new regulation will eliminate those platforms who struggled to make a profit so far,” an investor who looks into the education sector told FinanceAsia. “It helps the survival of the fittest.”

The policy also asks platforms to keep filings for teachers and course content. It also requires teachers who tutor exam subjects to have qualifications, and these terms also apply to foreign teachers – an unexpected move by the regulator.

According to the new regulation, online education platforms need to store course content for at least a year, which may add server cost to these websites.

Under the new regulation guidelines, Alibaba’s investment definitely benefits Knowbox, allowing it to enjoy the AI advantage of Alibaba, as well as the cloud storage service of the Chinese internet giant.

Knowbox uses a slightly different approach to reach out to students. It attracts students by allowing them to correct homework online. It then developed online courses on the platform. Previously, it was also criticised for setting up too many paid services on its app.  

Prior to this round of funding, Knowbox received $100 million for its 2018 Series C investment, from New York-listed TAL Education and Yunfeng Capital. Bertelsmann, along with Baidu and Legend Star, also participated in its $43 million Series B fundraising that closed in 2017.

Knowbox said it has 100,000 students online. The company didn’t mention its profitability in its latest press release. As the regulations tighten, investors are likely to find more value in those companies with the ability to make money from online education platforms.  

¬ Haymarket Media Limited. All rights reserved.
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