KKR leads $150m round for China education platform

Existing investors including GGV Capital, GSR Ventures, Sequoia Capital China, IDG Capital and Longfor Capital - the investment arm of Hong Kong-listed Longfor Properties - re-upped. It takes the company’s overall funding to $340 million. Huohua raised a $30 million extended Series D round from video-sharing giant Kuaishou in April. This followed a $85 million Series D led by KKR and GGV in August 2019.

Founded in 2017, Huohua targets children aged three to 12 years. Its classes are small - with six to eight children - and tend to feature interactive games. Users have increased significantly in recent months, rising from 150,000 in April to 250,000 today. More than 3,000 lecturers lead classes, supported by 1,200 tutors.

Huohua claims average monthly revenue of RMB200 million ($29 million), while its customer renewal and referral rates are 80% and 85%. The completion rate for the company's core mathematics classes is 99.3%.

Artificial intelligence-enabled (AI) classes began in July following a 12-month pilot project. Classes are pre-recorded and students can choose their own learning pace, with the AI system tracking individual learning behavior and adjusting content accordingly. There is no limit on the number of students that can participate. Zebin Shan, the company's CTO, said that sales reached tens of millions of renminbi in the first month.

Huohua wants to establish itself as a multi-disciplinary platform. It has expanded into English-language learning, offering classes for children aged 3-5, and launched a Chinese-language option last year.

“I have become a user myself, having started as an investor. Huohua Siwei has always been a leader in the field of quality education for 3-9 year-olds. The product iteration rate is really fast. The most important thing is that the entire team insists on high-quality products,” said Hong Yu, an executive director of GGV Capital.

Jian Luo, Huohua's founder, told a press conference that his R&D team numbered 1,000 with a monthly budget of RMB30 million. The company previously said that a one-hour course takes about five weeks, or 450 hours, to develop. Lecturers must undergo a seven-round selection process, with only 5% of applicants selected.

According to AVCJ Research, Lightspeed China provided the company's Series A round in 2016 and then IDG and Hike Capital 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 of last year.

Online education has become a popular investment theme as the COVID-19 outbreak led to school closures. Yuanfudao, one of the market leaders, recently saw its valuation soar to $7.8 billion on closing a $1 billion funding round led by Hillhouse Capital.

English-language learning is a key area for most players. There are also several specialists in this field, with Palfish, which is also known as Banyu, recently raising a $120 million Series C round led by Tao Zhang, founder of Dianping.com, and FutureX Capital. In the math education space, Primavera Capital Group has led a RMB300 million ($45 million) Series D round for Yangcong 345. 

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• Topics
• Greater China
• Consumer
• Technology
• China
• GGV Capital
• KKR
• Sequoia Capital
• Education
• GSR United Capital
• IDG capital