China Online Education slips on trading debut, VCs re-up

China Online Education's stock opened at $20.25 on June 10 and peaked at $20.60 before closing at $18.98. The company, which operates English-learning mobile app 51 Talk, earlier sold 2.4 million American Depository Shares (ADS) in its IPO for $19 apiece, according to a prospectus.

No venture capital shareholders made partial exits through the offering. DCM remains the largest single shareholder with a 23.9% stake, while Sequoia has 17.3% and Shunwei Capital Partners owns 12.7%. The new $20 million investment - $15 million came from DCM and $5 million from Sequoia - is in class A ordinary shares that have less voting power than the existing stock, which are categorized as class B.

Founded in 2011, China Online Education develops online and mobile education platforms that allow Chinese students to take one-on-one live interactive English lessons with overseas teachers. The 51Talk mobile app is used to manage lesson bookings, pre-lesson preparation and review materials. The average price for a 25-minute lesson is about RMB30 ($5).

The company claims to be the largest online English education platform in China by gross billings and number of available foreign teachers. For the year ended December 2015, a total of 5.9 million paid lessons were booked, there were 68,500 paying students, 86,500 active students, and 4,700 available teachers. Gross billings reached RMB353.3 million.

China Online Education posted RMB154.7 million in revenue for 2015, up from RMB52.2 million the previous year. Net losses widened to RMB327.5 million from RMB101.7 million in 2014.

The company received seed capital from ZhenFund in 2013, and then a $2 million Series A round from DCM and a $7.7 million Series B from DCM, Shunwei and Duowan Entertainment Group. In 2014, Sequoia joined the existing investors to provide $28.2 million in Series C funding, and then last year Huaxing Capital Partners led a $20 million Series D round. The existing investors also re-upped.

In January 2015, China Online Education acquired industry peer 91Waijiao.com - another ZhenFund portfolio company - in order to consolidate its market-leading position.

Citing a Frost & Sullivan report, the company said China's private education market reached RMB1.01 trillion in 2015 and is expected to be worth RMB2.16 trillion by 2020. Meanwhile, the online English education market generated gross billings of RMB18.3 billion in 2015 - up from RMB3.4 billion in 2010 - and is projected to reach RMB160.9 billion by 2020.

Due to market volatility, only two VC-backed Chinese technology companies went public in the US last year, compared to eight in 2014. E-commerce site Wowo raised $40 million in last April, while Yirendai, an online peer-to-peer (P2P) online platform owned by CreditEase, completed a $75 million IPO in December.

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• Topics
• Greater China
• IPO
• Technology
• Expansion
• Sequoia Capital
• DCM-Doll Capital Management
• Shunwei Capital Partners
• Growth capital
• Exit
• Education
• TMT