covid-19 edtech Funding News On the Cusp Tencent

Edtech firm Huohua Siwei valued at $1.5 billion

Huohua Siwei

Huohua Siwei, an education platform backed by Tencent and short video app Kuaishou, has been valued at $1.5 billion after receiving its latest batch of funding amid intensified investor interest in China’s online education sector.

Why it matters: Massive investments have flowed into China’s edtech market since the Covid-19 outbreak which forced millions to remain sequestered at home.

  • China’s K-12 online education market received a combined RMB 50 billion ($7.72 billion) in 2020, exceeding the sector’s total funding in the preceding 10 years, figures from data intelligence agency Fast Data showed.
  • Services targeting the K-12 age range have attracted the most attention from investors once students pivoted to distance learning during the Covid-19 lockdown.

Details: Huohua Siwei, a K-12 online math and science education platform, received $150 million in a third batch of its Series E. Trustbridge Partners led the funding with participation from existing investors including Tencent, local media outlet LatePost reported.

  • The round followed a $150 million Series E1 in August and $100 million Series E2 in October. Together, the three batches total $400 million.
  • The latest financing round valued the firm at $1.5 billion, a 50% increase compared with the $1 billion valuation in August during the first batch.
  • LatePost cited a source as saying the company had recorded income of nearly RMB 1.5 billion on revenue of RMB 3 billion in 2020.
  • The Beijing-based company is reportedly gearing up for a $500 million listing in the US that could take place as soon as this year, according to a Bloomberg source. The report said that Huohua is working with Credit Suisse and Goldman Sachs on the proposed listing.

Context: Since its founding in 2016, the company has received a total of nearly $600 million in seven rounds of financing from tech peers like Tencent, Kuaishou, and Yuanfudao as well as venture capital firms including Sequoia Capital China, IDG Capital, and GGV Capital.

  • Investor interest in Chinese online education platforms has been increasingly focused on large platforms such as Huohua, leaving fewer opportunities for smaller players in the field.
  • Yuanfudao and Zuoyebang, two Chinese edtech unicorns, accounted for around 80% of the total funding received during the year, according to the report.
  • Xuebajun, an K-12 education app that received $200 million in funding since it was founded in 2013, is reportedly insolvent. Local media reports attributed the collapse of the company to its “1V1” or 1:1 teacher-to-student ratio model, which was criticized as costly and difficult to scale.