Deal focus: Q&A start-up Xueba to enter the classroom

Stuck on your homework? Ask Xuebajun. Students from kindergarten through grade 12 simply take a picture of the problem exercise with their smart phone, upload it to Xuebajun platform, and wait for a response. The Chinese mobile app, operated by Shanghai-based Xueba, runs the exercise through its question-and-answer database until it finds a match with answers curated by a team of educational professionals.

While Xueba is intended to supplemental to learning – offering support when teachers are unavailable – it raises concerns that students have become overly dependent on digital aids rather than solving problems on their own.

“Initially we were concerned about students would use it as a cheating app, but when we look at the average number of questions each student has scanned, it’s not that many. If they were using it to cheat, they would probably scan in every problem,” says Helen Wong, partner at Qiming Venture Partners. “Students know they can’t use the app in real exams, so they just use it to help them when they don’t understand certain areas.”

Convinced by Xueba’s business model, Qiming co-led a $50 million Series B round for the company alongside Trustbridge Partners in 2015. Last week, it raised a $100 million round led by China Merchants Capital and Grang Fight Investment, a PE arm of Chinese financial services group Far East Horizon. Vertex Ventures, Trustbridge and Qiming all re-upped, with strategic investors Anhui Wanxin Media and Yada Education also participating.

Xueba’s priority is monetizing its 60 million registered users. The company launched one-to-one online tutoring services last month on the basis that students who are still unsure after receiving answers from Xuba’s automated system may pay for a personalized service. Teachers go through the questions with students using online whiteboards and electronic pens.

Xueba also plans to expand its services into schools, addressing questions in class through artificial intelligence (AI) technology. Anhui Xihua, the largest textbook publisher in Anhui province, is expected to help access local schools.

“Xueba will help teachers grade the homework as well. In China, you have high quality teachers in major cities but weaker teachers in other parts of the country. Xueba’s AI solution can help level the playing field because it offers a standardized coaching. That would be a likely direction for the company,” Wong says.

China’s online education industry generated RMB119.2 billion ($18 billion) in revenue in 2015, up 19.4% year-on-year, according to iResearch Consulting. By 2018, it is projected to be worth RMB204.6 billion. Test preparation start-ups have attracted investor attention due to the education system’s exam-intensive nature. Both of Xueba’s two direct competitors have received VC funding: Zuoyebang, a spin-out from Baidu, and Yuanfudao, which has received substantial backing from Tencent Holdings. 

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• Topics
• Greater China
• Expansion
• Technology
• China
• Growth capital
• Venture
• TMT
• Qiming Venture Partners
• Trustbridge
• Vertex Management (II)