Chinese education calls the tunes

First half figures for investment in China's education sector were notably up on those from last year. Thanks to President Xi’s encouragement, the trend is unlikely to slow down.

Online music education platform Peilian.com said on Friday that it had raised $150 million in Series C funding from eight investors.

Tiger Global led the round, joined by existing investors Tencent, Orchid Asia Group, GSR Ventures, Bluerun Ventures, Longcapital and BHG Longhills Capital. 

Peilian will use some of the proceeds to cooperate with music schools, and plans to invest $8.7 million in 100 partnered schools for research and development of music education. The platform said that it intends to collect more data so that it can use artificial intelligence to develop online courses and products.

Peilian was founded in 2014 and completed $600,000 of angel funding from Bluerun Ventures that same year.

The platform launched its online musical courses in March 2016 and received undisclosed Series A funding from GSR Ventures only a few months later. The company knew that it was heading along the right lines when Tencent and Orchid Asia led an over $14 million Series B investment in January this year, joined by GSR Ventures, Bluerun and Longcapital.

China is encouraging more investment in education. “We will continue to raise investment limits, especially for education and healthcare, which draws foreign investors’ attention as there is a huge domestic lack of investment,” President Xi Jingping said at the China International Import Expo on Monday morning. He added that Beijing would also relax restrictions to attract more foreign investment.

First half figures for investment in education this year reached Rmb14.7 billion ($2.1 billion), not far off 2017's full year figures of Rmb15.1 billion, according to a report from education research firm Jiemodui.com. Average deal amounts have been rising too. In H1 they hit Rmb66 million, up from 2017’s Rmb60 million and notably higher than 2016’s Rmb56 million. 

Cream of the crop at the moment is Chinese online English education platform VIPKID. It raised $500 million in June which shows quite how hot the market is. 

Apart from traditional online language tutoring, a large portion of the investment goes into extracurricular education for children under 18; precisely where Peilian.com fits in.

 

Peilian says that it has more than 500,000 clients. Over 90% of these are monthly active users and about 80% of them choose to re-purchase its services. And monthly sales are up at Rmb80 million. 

“Peilian’s data is quite impressive,” Tian Yu from Spright Capital told FinanceAsia. “That is why Peilian is leading the online extracurriculum education sector. New competition is all about service now, and it is really important for education startups. Peilian seems quite good at it.”

Tian says that the $150 million raised is the highest amount for a startup in the extracurricular education market to date, and that the fundraising amount has proved its value. “For most online tutoring platforms, the completion rate and re-purchase rate are always a headache. But Peilian’s data proves that it can survive in the competitive extracurricular market.” 

President Xi’s encouragement at the China International Import Expo should be seen as a welcome gesture for foreign investment in the education sector. Interest from the capital markets is only likely to increase. 

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