Investors eye web education prospects

VIPKID, online English-teaching startup, raises $200 million in D financing round

For evidence that investors are bullish on the growth potential of the online education sector in China, look no further than the large-scale financing netted by VIPKID, an online children's English education startup.

VIPKID announced on Wednesday that it has finished the D round of financing and received an investment totaling $200 million.

This has been the largest financing globally for the K-12 online education sector. The investment is led by Sequoia Capital and other investors, including Tencent Holdings, Yunfeng Capital and ZhenFund.

Founded in 2013 and incubated by Cheung Kong Graduate School of Business, VIPKID focuses on teaching English through one-on-one video courses. It aims to integrate top language teachers from North America, and provide English learning experiences to Chinese children aged between 4 and 12.

By 2018, the market scale of online education in China is expected to reach 200 billion yuan ($30 billion), with a growth rate of nearly 20 percent every year, according to consultancy iResearch. More than a quarter of investments in online education focus on K-12 education, followed by early childhood education and vocational training, iResearch said in a report.

For online education, most customers come from major cities, and second-and third-tier cities with good economic foundations and internet environments, iResearch found.

Neil Wang, president of consulting firm Frost & Sullivan in China, said the reasons online education platforms can attract investments is that there are many pain points of traditional English education sector, such as the shortage of foreign teachers in China and the lack of personalized coaching.

"The online education sector faces some challenges, too. It's hard to supervise and guarantee stable teaching quality, and online education requires self-control of the students. Besides, there isn't a comprehensive assessment standard to evaluate learning effectiveness," Wang said.

He added that the key for online education websites to grow is to improve their course resources and expand the available teaching time.

"Online education platforms should also provide tailored services to students by making specific study plans and choosing suitable textbooks for different students. Those platforms may also upgrade the levels of their technology services to better assist the teaching."

Edwin Chen, executive director and co-head of Asia Small/Mid-Caps Research of UBS Securities Co Ltd, was not very optimistic about the fast growth of online education in China.

"Online classes have very limited measures in disciplining students who sit in front of computers," Chen said.

In addition, "one-on-one" classes are the most popular for online education, and such a small scale restricts the expansion of teaching through the internet, Chen said.