Deal focus: Speed pays off for Ince with Eeo

With parts of China still under lockdown and many investors holding fire amid the uncertainty, the team at Ince Capital was looking for areas that might benefit from COVID-19. Education was a no-brainer, but rather than back an online education provider, the venture capital firm chose to focus on start-ups that were helping traditional schools move online.

“We know how much people spend on after-school tuition in China. There are hundreds if not thousands of Chinese companies in this space, with $1 million to $100 million in annual revenue, and spread across the country in second, third, and even fourth-tier cities. They had no choice but to move teaching online during COVID-19, which meant more demand for online video tools,” says J.P. Gan, founding partner at Ince.

Eeo Education soon emerged as a viable target. Founded in 2014, the company’s progress had been unspectacular, but the product was strong. ClassIn is a software-as-a-service (SaaS) platform that effectively serves as Zoom for schools. Students log in and the teacher can divide them up into as many as 50 different groups, each with its own collaborative blackboard and audiovisual communication area. The teacher can move in and out of groups, asking questions.

“The three founders have been in the education industry for many years, they were previously at Xueda Education, which went public in the US,” Gan explains. “They know what teachers want and they know what after-school tuition companies want.”

New Oriental Education & Technology and TAL Education Group incubated the business, providing Series A funding. Ince was the sole investor in a $35 million Series B round in July – the largest commitment made to date by the firm’s debut fund. This came on the back of Eeo’s customer base growing tenfold to 60,000 schools in response to COVID-19, with 20 million monthly active users. The company’s revenue in February alone was double the full-year total for 2019.

New Oriental and TAL remain customers and they have been joined by the likes of Beijing University, Tsinghua University, and an assortment of top Chinese high schools. Eeo works with educational institutions in 35 countries, having received inbound inquiries from around the world. However, keeping up with domestic demand has been hard enough. One of the reasons Ince invested was that the company’s technology was scalable – and that has been put to the test under COVID-19 with more servers continually coming online.

Ince and Eeo signed a term sheet in April and the deal closed in July. Four months on, the company has just raised $265 million in Series C funding at a pre-money valuation said to be in the region of $750 million, which makes it a unicorn. Hillhouse Capital led the round, with participation from Tencent Holdings, SIG, Gaocheng Capital, and Ince. The valuation is twice what it was at Series B.

New product innovations include ClassIn X, a learning management system for organizing schedules and uploading homework assignments. Gan compares the service to that of US-based Blackboard, describing it as the first step towards becoming a fully integrated education software provider.

As a B2B supplier, Eeo is paid upfront for its services and doesn’t follow a high-cash-burn model like education providers, which attract end-users through heavy subsidies. “We are selling shovels to the gold diggers and we think we have the best shovel and the best infrastructure,” Gan adds.

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• Topics
• Greater China
• Technology
• Consumer
• Expansion
• China
• Ince Capital Partners
• Hillhouse Capital Management
• Education
• Tencent
• SIG
• Gaocheng Capital