Chinese online English education platform VIPKID has raised $500 million in its latest round of funding, demonstrating just how hot China’s private equity market is getting.
As a result of the successful series D+ round of capital raising -- which saw Tencent, Sequoia Capital, Yunfeng Capital and technology-focused hedge fund Coatue Management all chip into the venture -- the five year-old startup is now worth over Rmb20 billion ($3.7 billion), the company said on Thursday.
If so, VIPKID is now worth more than all of China's publicly listed education firms except for US-listed TAL Education and New Oriental Education.
That is a very rare scenario because in most cases privately held companies tend to be valued less than their listed counterparts. While private firms tend to be smaller and less profitable since they are often at an earlier stage of development, public companies not only tend to have greater scale and profitability but their shares typically command a higher valuation because of the deeper well of liquidity in their market and the wider investor base they can access.
VIPKID is yet another example of private fundraising above the $100 million mark, an amount even some public companies would find hard to raise from a large group of sophisticated investors. However, China’s booming private equity market has seen even billion-dollar deals of late, with Ant Financial, Manbang and JD Logistics being the latest examples.
All these large-ticket investments underscore the heavy demand for promising startups among the investment community. Competition for high-growth unlisted companies is high partly due to the underperformance of Chinese stocks over the last two years, prompting investors to seek alternative investment opportunities in the private sector.
VIPKID’s latest fundraising, the world’s largest single-funding round for a private education company, also chimes with the trend of investing in tech-focused startups that are poised to disrupt how traditional companies operate.
Investors are paying a higher price for online education firms like VIPKID compared with traditional school operators because they are able to transform the way knowledge is shared and teaching is conducted. The increasing popularity of online teaching means learning is no longer limited at schools.
VIPKID is taking it a step further too by connecting English-learning students with the best teachers – native English speakers.
The Beijing-based company, which was selected by FinanceAsia as one of the 10-most disruptive startups last year, recruits over 40,000 teachers in North America and connects them with over 300,000 students in China and 34 other countries. It is the only e-learning platform in China that has an established community of North American teachers.
Whether that is enough to satisfy the standards of British English speakers is another matter but it still sets the bar high for quality online learning in English.
“We are looking forward to exploring the future scope of online education with VIPKID and help it expand internationally,” Haifeng Lin, general manager of merger and acquisitions department at Tencent, said.
Cindy Mi, VIPKID’s founder and chief executive, said the company will use the new funds for recruiting new teachers in North America, investing in new technologies and products, and expanding the firm's global network of students.