Industry News

China’s Edtech Sector Continues to Expand

By Cait Etherington
May 02, 2019

Last June, Chinese edtech company, VIPKid made headlines when it raised $500 million in funding. While 2019 hasn’t seen any deals quite so large to date, the Chinese edtech sector continues to grow at a rapid pace and to attract investors from around the globe.

According to GET, which offers insights on China’s edtech sector, the first quarter of 2019 saw 131 deals in edtech worth $1.86 billion USD. Competence-based education, language learning, and education informatization were top ranked sub-categories in the first quarter. Moreover, the edtech sector appears to be continuing to grow in China despite a lagging national economy.

Within China’s active edtech sector, a few recent deals have made significant headlines, including Gaosi’s $140 million Series D funding round in April.

Beijing’s Gaosi Education Raises $140 million

As reported on CX Live on April 19th, Gaosi Education secured $140 million in Series D funding. This represents one of the largest single investments to date in China’s college prep exam industry. Warburg Pincus led the funding round.

Gaosi, which is now in its tenth year of operation, offers courses focused on test-taking strategy and is specifically designed to help students crack China’s notoriously difficult university entrance exam. The company joins forces with other education enterprises and runs its own online classes (a familiar equivalent in the United States would be the Khan Academy, which partners with the College Board to help students prepare for the SAT).

Following news of its laudable $140 million funding round, Gaosi said it hopes to invest in both new product design and its AI solutions for education.  

This isn’t the first time Gaosi has attracted large sums of money from investors. Gaosi previously raised $180 million from China International Capital Corp. Ltd. and Kai-fu Lee’s Sinovation Ventures among other investors.

Why Chinese Edtech Currently Seems Unstoppable

As Navitas Ventures reported in 2018, Beijing currently has the highest concentration of edtech companies per capita globally, including 120 companies operating in the edtech sector. New York trails behind with 117 edtech companies. The Bay Area is currently home to only 91 edtech companies. But why is China, and specifically Beijing, home to a higher concentration of edtech companies than any other place in the world and why does the sector seem likely to continue growing over the next decade?

Most analysts agree that China’s edtech sector is now benefiting from several key factors.

To begin, China is home to close to 1.4 billion people, many under the age of 24.  Like India, then, China has the population to support the rapid scaling of its edtech sector, which seems bound to soon overshadow edtech markets in both North America and Europe.

Second, Chinese families value education, and they are willing to pay a lot of money to ensure their kids thrive. A recent article in the South China Morning Post reported that even families of preschoolers will often spend as much as 26% of their income on education.

Third, unlike the North American market that remains largely driven by private investment, the Chinese government continues to pour a lot of money into edtech. This investment includes the MOOC Times Building–a high-rise building in Beijing’s startup district that offers free space to edtech startups.

Finally, while Chinese edtech is currently dominated by companies focusing on K-12 and higher education solutions, there is speculation that moving forward, Chinese edtech could expand. A recent article by Ronald J. Kantor and Justin Paul in the Bangkok Post suggests that Chinese edtech is well positioned to also transform training and HR over the next decade. If Chinese edtech increasingly pushes into the training sector, the impact in China and globally could be significant.

Photo Anthony Chong, Pixabay.