Warburg Pincus leads Series D for China's Gaosi Education
Gaosi Education, which provides tutoring services to schools and other educational institutions in China, has raised $140 million in Series D funding led by Warburg Pincus.
It is described as the largest-ever funding round in China’s “K12-to-B” education space – a sub-segment of an online education industry that is dominated by players that sell directly to end-users. The investment was announced at a conference hosted by Gaosi, at which Yucheng Xu, the company’s founder and CEO, outlined a platform-oriented strategy underpinned by the integration of online and offline services.
Established in 2009, Gaosi describes itself as an open source education business that develops teaching materials and outsourced services for schools as well as running after-school programs delivered through classroom instruction, one-to-one services, and online. It claims to work with more than 5,000 educational institutions in 1,600 counties and cities nationwide, serving over 12 million students.
The company’s 700-strong teaching and research team designs curriculums for elementary, junior and high school levels. The core subjects are English and mathematics, but high school-level courses also cover sciences, history and politics. In addition, Gaosi has over 50 teaching centers, primarily in Beijing.
Xu said the new funding would go towards investment in R&D, introducing additional S2B2C services, and creating content suitable for delivery online and offline. Chuan Li, Gaosi’s president, drew parallels between education and new retail, emphasizing the importance of multi-scenario integration of online and offline services.
The company received Series A funding from Morningside Ventures in 2011 and then a RMB400 million ($59 million) Series B led by JD Capital in 2015. The Series C, completed in 2017, saw CMC Capital Partners and AlphaX Partners take the lead in a RMB550 million investment. Other participants included Sinovation Ventures, China International Capital Corporation, Loyal Valley Capital, and Hina Group.
China’s K12 online education market is expected to be worth RMB150 billion by 2022, up from RMB44 billion by the end of this year, according to iResearch Consulting. A lot of capital has been drawn into the space, with the likes of Zhangmen, Zuoyebang, 17zuoye and Yunfudao raising sizeable rounds. More specialized language learning platforms such as VIPKid and Dada ABC are also well-backed.
However, investor sentiment might be cooling, with the Financial Times reporting recently that VIPKid was struggling to raise $500 million in new funding at a targeted valuation of $5.5-6 billion. There are concerns about the sustainability of the B2C business model, based on the number of free lessons said to be given away in order to build market share.
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