Academic exams are very important in China as they determine the type of universities, secondary schools and elementary schools in which students obtain a degree, the future that awaits them.
Parents are willing to invest generously to help their children succeed in school. A startup that capitalizes on this need is Yuanfudao, a six-year-old startup that has attracted a line of great investors. The company announced this week that it has raised $ 300 million in a funding round led by existing investor Tencent, China’s largest social media and games company.
Other round participants include Warburg Pincus, Matrix Partners China and IDG Capital . The new injection raised Yuanfudao’s valuation from around $ 1 billion at the time it pocketed $ 120 million in 2017 to surpass $ 3 billion.
China’s test-oriented culture has spawned a billion dollar tutoring market. As the affordable mobile Internet becomes common, much of that teaching effort is being done online. A report by research firm iResearch shows that China’s K-12 online market will reach 44 billion yuan, or $ 6 billion, by the end of this year and triple to 150 billion yuan by 2022.
Yuanfudao, which means “ape tutor” in Chinese, runs a number of services including live courses, a database of exam problems, and a popular homework help app. The latter scans homework problems and solves them instantly with the snap of a camera. The startup also operates an artificial intelligence research institute, which could train its task app to be smarter.
Yuanfudao says it serves more than 200 million users, including students and their parents who use the startup’s apps to check on their children’s learning progress.
Yuanfudao told TechCrunch that he makes most of his income from the sale of live courses. It plans to use the proceeds from the latest round to fund investments in AI research and development, as well as to improve the user experience of its applications.
The startup is in a heated race to fight for Chinese students and parents. Other companies with similar homework help services include Zuoyebang, which is backed by Chinese search giant Baidu, Coatue Management, Sequoia Capital China and Goldman Sachs. Another is Yiqizuoye, which has Singapore’s sovereign wealth fund Temasek as an investor. A wave of Chinese companies that started with a focus on adult education have also entered the K-12 race, including New Oriental and 51Talk, both listed on the New York Stock Exchange.