According to the statistics, 242 financing cases took place in the primary market in the education field in 2017, which amounted to 2.3 billion USD (15 billion RMB).
The total amount of education financing in the primary market in 2017 was 19% higher than that of 2015, when the online education became a hit. We expect at least a 20% increase will take place in 2018.
If we say that in 2015, the bloom in online education was driven by technology, the investment growth in 2017 mainly came from the diversity of different business models.
In terms of the round, the investment in the D round and after accounted for 28%, while in 2016 it only took over 8% of the total. Meanwhile, the sum of A- and B-rounds fell from 61% to 30%. The money paid by large institutions shifted from the early stage to the latter stage. It was expected that this status will maintain in 2018. Meanwhile, the investment in A and B rounds fell from 61% to 30%, suggesting that big institutions were more willing to invest money in the maturer companies.
In terms of the fields, more money was poured into K12, STEM, education SaaS, knowledge-based pay, and study abroad. The amount of financing in these fields doubled compared to that in 2016. Language learning and STEM education each achieved a 50% growth rate.
The hottest track in 2017 was online one-on-one tutoring. Zhangmen.com, Breeze Education, Onlyhi, Sanhao.com, Leo1v1, 1mifudao.com received financing from tens of millions to several hundred million RMB last year. The investment disclosed reached 140 million USD (900 million RMB).
The trend is continuing. Breeze education and Onlyhi received several tens of millions RMB of financing in January, 2018. Sanhao.com even disclosed hundreds of million RMB in April.
It can be expected that with the drive of capital, resources and markets will be further gathered to the head players. The competition among companies will become even more intense.
Online Foreign Language Studies for Children
Among the 26 language training cases financed in 2017, half were related to foreign teachers’ live broadcasts: one-on-one foreign tutoring, one-to-many foreign teaching, and foreign teachers for training institutions or public schools.
However, after several years of capital chasing, the online foreign teaching circuit gradually exposed the problem of low renewal rates. While online foreign teachers did improve children’s confidence in speaking the language, parents found that after a year of learning, the real improvement of children’s language learning skills was not as obvious as expected, which naturally led to the low renewal rate, the low user stickiness, and the short life cycle of the products.
The reasons are various, but mainly due to that most companies on the market did not pay enough attention to teaching and researching. Instead, they put more emphasis on getting the users’ traffic, even at the expense of the quality of teaching.
In 2017, the financing events and the amount for education in the pan-quality category (non-STEAM qualifications) nearly doubled. In terms of the numbers of financing, the sports circuit is the most active, followed by music and literacy. In terms of the financing amount, sports also made the greatest contribution to the growth of total financing, followed by integrated art. Taken together, sports were undoubtedly the most popular track in 2017.
In the sports industry, there is a large market demand for adolescent training. The user acceptance is high and the cash flow is stable. According to the estimated made by the insiders, the market size of sports training field has reached 15 billion USD (100 billion RMB). From the demand side, according to the statistics from the State Sports General Administration, 94.6% adolescents participated in one or more physical exercise at least once a week, and among them, 84.6% got professional guidance outside schools.
Sports events can be divided into dimensions such as public and niche, groups and individuals according to their characteristics. While the barrier of the niche activities is relatively higher, as the coaching resources, marketing channels and branding are limited, and therefore can lead to higher concentration and unit prices; the problem is that the ceiling of the market is also relatively lower. In the contrast, the mass project has a wider audience, but it faces problems such as low concentration, no standardization system, difficulty in long-distance expansion and low customer price. In the field of youth sports training, group projects are believed to be able to cultivate children’s group cooperation and communication skills; therefore, are more popular among parents.
In 2017, the cases that got financed included basketball (3 cases), baseball (1 case), rugby (1 case), tennis (1 case), and two multi-category projects. It can be seen that group projects are still the mainstream of youth training. At the same time, the minority group project is getting more and more attention.
Pan-quality education (sports, music, dance, art and critical thinking) will become a must. However, the subdivision can be substituted by each other. They key is to create differentiated products that are hard to be replaced. Meanwhile, to promote abilities of scale management and operation.
In 2018, the following tracks will gain more attention.
1. Online Steam Education, which includes “smart” musical instruments, online art classroom, online critical thinking development courses, etc. In 2018 Q1, VIP training and Growth Insurance just belong to this category.
2. Multi-category complex products, which will mainly be offline intuitions, like The Art Life and Doing Now.
3. Education SaaS systems, which include customer acquisition tools, live broadcast tools, management platforms and data analysis systems. Both EEO and Xiaoguanjia Educational Tech (both received investment in April) fell into the category.