Hillhouse leads $1b round for China’s Yuanfudao

Tencent Holdings, Boyu Capital and IDG Capital also took part in the round. It comes 15 months after the company received a $300 million investment led by Tencent at a valuation in excess of $3 billion. Yuanfudao became China’s first online education unicorn in 2017 on closing a $120 million round, which was also said to be the largest-ever private equity commitment in the space. Now that status belongs to the most recent investment.

Founded in 2012 by former NetEase executive Yong Li, Yuanfudao claims to have served more than 400 million users. Its core product is a program of online courses aimed at elementary and middle school students. It also offers pre-school programs, databases of test exams and customized practice papers for self-study, and a smart app through which students can get assistance from teachers by uploading snapshots of textbooks. A similar system is used to check math problems.

Since inception, Yuanfudao claims to have awarded more than 250 million daily grades through its online tuition programs, provided 800 million practice papers, and answered 36 billion homework questions via the smart app.

Online education providers in China have seen a surge in demand in response to the coronavirus outbreak as schools have suspended classes and authorities have encouraged social distancing. In early February, Yuanfudao held its first mass-participation free class. Such was the level of interest – it attracted five million users – that the system is said to have crashed.

In addition to its online presence, the company has built out a sizeable offline footprint. There is a headquarters in Beijing as well as teaching and research centers in 11 other cities. Yuanfudao employs more than 15,000 people.

AVCJ Research's records show that the company received a Series A round from IDG in 2012, and a $7 million Series B led by Matrix Partners China the following year. In July 2014, Matrix and IDG returned with a $15 million Series C, while CMC Capital Partners and New Horizon Capital co-led a $60 million Series D round in 2015. Tencent committed $40 million for a minority stake in the company in 2016 and then featured in the Warburg Pincus-led $120 million round in 2017.

Several other K-12 online education start-ups have received substantial private equity funding, though not to the same extent as Yuanfudao. English language tuition specialist VIPKid secured $500 million in 2018 – though its subsequent round was said to be smaller, at $150 million – while Zhangmen and Zuoyebang both received $350 million in 2018 and 2019, respectively. Most of these companies are still loss-making because they spend heavily on content and marketing.

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• Topics
• Greater China
• Technology
• Consumer
• Expansion
• China
• Education
• TMT
• Hillhouse Capital Management
• IDG Capital Partners
• Boyu Capital
• Tencent
• Growth capital