China EdTech Ventures Raised $1.48B under the COVID-19 Crisis
Financial markets across the world have been shaken by the spread of COVID-19, while education investment in China seems to buck the plummeting venture trend in the first quarter of 2020. From January through March 2020, 55 China EdTech ventures have raised about $1.48 billion (RMB 10.5 billion), according to data compiled by EDU INSIGHT.
Compared with the 1.86 Billion USD raised by 131 deals in Q1 2019, the number of financing deals in China EdTech space dropped 58 percent, but the total amount saw a lower decrease. JMDedu believes that it is mainly due to Yuanfudao’s latest round, which contributed 1 billion US dollars. When culling the top five deals, there has been an apparent decline year-on-year in the number of deals and the total financing amount.
Even though about 58% of the companies have been still at an early stage, 14 deals were closed in the financing round from B to G, and there was also a deal of debt financing, a deal of equity financing, and seven deals of strategic investment.
When we deep dive into the different sub-sectors, three sectors saw a concentration of investments: competency-based education (21 deals), vocational education (10 deals), and K-12 learning(7 deals) then followed by language learning(6 deals), educational informatization (6 deals), early childhood education(3deals), and higher education(2 deals).
In the sub-sector of competency-based education, 16 deals were closed in the STEAM education track, of which DFRobot and XinLiCheng both raised tens of millions of yuan in B round. Among the 16 deals, coding education for kids has accounted for 11 cases. And the financing amount of vocational education track was slightly more significant than competency-based education.
Although there are only seven deals closed in the K-12 learning sub-sector, its financing amount topped the list that 8.198 billion yuan accounted for 78.1% of the total. By contrast, STEAM education is on the rise that the K-12 learning’s leading position may be replaced. Moreover, Kaishu Story’s $66 million C+ round in early childhood education track is also worthy of attention.
As for the geographical distribution of financing deals in Q1 2020, from January to February, the deals were mainly closed in the big four first-tier cities, including Beijing, Shanghai, Guangzhou, and Shenzhen, accounting for 71.4% of the overall. In March, Beijing witnessed nearly half of the deals newly closed, and the numbers of the other three cities all decreased respectively. It is considered that the more severe the epidemic, the more chill the economic environment, so venture capitals more favor companies in the cities where educational resources are most concentrated at the current stage.
At the meanwhile, the suspension of the offline activities results in a slump of financing deals closed by education companies only having the offline business. Instead, EdTech ventures developing both online and offline have embraced more financing opportunities that the COVID-19 crisis has put the spotlight on China’s online education market.
As countries worldwide are acing challenges of combating against the coronavirus, leading companies in each sector will have more strength to get through the cold winter. At the same time, small-sized firms will be difficult to withstand the attack. Although having relatively good performance on financing among all the sectors, EdTech space should have a qualitatively improved capability, and cut the cost to get prepared to fight a “protracted-war”. And participants can cheer up that as the outbreak recedes, capitals will restore their confidence in the education market since education is always playing an indispensable role in our daily life.