Hillhouse leads $55m round for Chinese online education start-up

The four-year-old company previously received a Series A round from Northern Light Venture Capital in 2015 and a Series B the following year from Northern Light and Matrix. In March, Tencent and Matrix committed a $20 million in Series C funding.

Kaochong helps students sitting the China’s College English Test. It comprises two bands that are compulsory for non-English majors with more than 11 million students participating every year. The company also offers preparation courses for the National Postgraduate Entrance Examination – sat by more than two million people per year – as well as for examinations for overseas study.

“Despite the fact that Kaochong is growing relatively slowly, we will continue to put resources into developing our core education business, using technology to diversify ways of learning,” said Li Haoyu, the company’s founder and CEO, according to Chinese media. "Our team understands that education is a slow-moving business.”

While China’s overall education market is expected to see relatively modest expansion over the next few years, rising from RMB4 trillion in 2017 to RMB4.55 trillion in 2022, online education is on a much faster growth curve. IResearch Consulting projects compound annual growth of 19.9% over the same period as the market hits RMB431.6 billion in value.

There has been a lot of PE and VC investment in the sector, albeit in different segments. A lot of capital has entered the online K12 education space, with VIPKid raising $500 million earlier this year, while Zuoyebang and 17zuoye closed rounds of $350 million and $250 million, respectively. Sunlands Online Education, Liulishuo and Hujiang have won investor support for product offerings that focus on post-secondary, adult and professional user bases.

Sunlands went public in the US in March, with Liulishuo looking to follow suit and Hujiang targeting Hong Kong. Despite the investor frenzy around education, these three companies have yet to turn a profit.

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• Topics
• Greater China
• Expansion
• Consumer
• China
• Hillhouse Capital Management
• Education
• Tencent
• Matrix Partners