Zuoyebang
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Chinese online education app Zuoyebang raises $1.6 billion from investors including Alibaba
The rivalry between China’s top online learning apps has become even more intense this year because of the COVID-19 pandemic. The latest company to score a significant funding round is Zuoyebang, which announced today (link in Chinese) that it has raised a $1.6 billion Series E+ from investors including Alibaba Group. Other participants included returning investors Tiger Global Management, SoftBank Vision Fund, Sequoia Capital China and FountainVest Partners.
Zuoyebang’s latest announcement comes just six months after it announced a $750 million Series E led by Tiger Global and FountainVest. The latest financing brings Zuoyebang’s total raised so far to $2.93 billion. The company did not disclose its latest worth, but Reuters reported in September that it was raising at a $10 billion valuation.
One of Zuoyebang’s main competitors is Yuanfudao, which announced in October that it had reached a $15.5 billion valuation after closing a $2.2 billion round led by Tencent. This pushed Yuanfudao ahead of Byju as the world’s most valuable edtech company. Another popular online learning app in China is Yiqizuoye, which is backed by Singapore’s Temasek.
Zuoyebang offers online courses, live lessons and homework help for kindergarten to 12th grade students, and claims about 170 million monthly active users, about 50 million of whom use the service each day. In comparison, there were about 200 million K-12 students in 2019 in China, according to the Ministry of Education (link in Chinese).
In fall 2020, the total number of students in Zuoyebang’s paid livestream classes reached more than 10 million, setting an industry record, the company claims. While a lot of the growth was driven by the pandemic, Zuoyebang founder Hou Jianbin said in the company’s funding announcement that it expects online education to continue growing in the longer term, and will invest in K-12 classes and expand its product categories.
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VCs pour funding into edtech startups as COVID-19 shakes up the market
A few weeks back, The Exchange looked into the pace of edtech exits, noting that over time, the sector has delivered rising exit volume. All startup verticals want to demonstrate a history of liquidity, so you might imagine that even before the COVID-19 pandemic, edtech fundraising was rising due to its improving exit profile.
The Exchange explores startups, markets and money. You can read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.
And dollars invested into edtech startups did increase, with 2018 and 2019 recording historically elevated results concerning edtech venture capital deals and venture capital dollars invested.
However, with COVID-19 pushing more students to learn from home and forcing schools to invest in new tooling and other digital capabilities that support remote-learning, a strengthening exit market and a market shift toward edtech services has led to an explosion in venture capital investment in the sector.
According to CBInsight’s data concerning the state of edtech venture capital activity, startups in the sector have already surpassed their 2019 venture capital dollar tally and are on track to set a new record in 2020, besting even 2018’s elevated result. Whether more total edtech deals will be closed in 2020 is less clear, but if current pace holds, 2020 should come somewhat close to 2018’s edtech deal count.
What’s driving the huge boom in edtech’s venture capital results? Let’s dig into just that.
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