KKR joins round for Chinese online education platform

Existing investors Sequoia Capital China, IDG Capital, Northern Light Venture Capital, Hike Capital, Lightspeed China Partners, Longfor Capital, GSR Ventures all re-upped. It takes the company's total funding since inception to $160 million.

According to AVCJ Research, Lightspeed provided the Series A in 2016 and then IDG and Hike led the first tranche of a $35 million Series B in 2018. Sequoia led the second tranche. A Series C round of $40 million, led by Northern Light and Wu Capital, closed in March.

GGV said it is the largest funding round for a Chinese education start-up focused solely on math and science. Earlier this year, Primavera Capital Group has led a RMB300 million ($45 million) Series D round for Yangcong 345, a platform dedicated to math teaching.

Huohua's target market is children aged three to 12 years. It offers small class sizes and interactive games. Founded in 2017, the company now has more than 60,000 students with a renewal rate of 80% and a referral rate of 75%.

The platform employs 1,800 lecturers who lead classes and tutors who provide support. Huohua claims its core competency is high-quality content and teaching staff. A one-hour course takes approximately five weeks or around 450 hours to develop. Lecturers must undergo a seven-round selection process, with only 5% of the applicants recruited.

The company is introducing artificial intelligence (AI) to its online courses. Classes are pre-recorded, students can choose their own learning pace and the AI system monitors individual learning behavior and adjusts content accordingly. There is no limit on the number of students that can participate. Huohua also plans to expand into Chinese-language learning.

China’s private education sector was worth RMB2.68 trillion ($387.6 billion) in 2018, underpinned by rising disposable incomes and parents who are willing to pay out if it means their offspring – usually an only child – can prevail in a fiercely competitive local school system. Even then, online-only services account for 9.3% of the market, suggesting strong potential for future growth.

A substantial amount of capital has been deployed in the K12 space, with the likes of Zhangmen, VIPKid, Zuoyebang and Yuanfudao raising rounds of at least $300 million. However, most of these companies are still loss-making because they are spending heavily on content and marketing.

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• Topics
• Greater China
• Consumer
• Early-stage
• Technology
• China
• GGV Capital
• KKR
• Sequoia Capital
• IDG capital
• Northern Light Venture Capital
• Lightspeed Venture Partners
• GSR Ventures
• Education