After a US$40 million strategic investment and US$120 million Series E in 2016 and 2017 respectively, Tencent raises its stakes in YuanFudao.com (YFD) with fresh funds of US$300 million. Existing investors Warburg Pincus, Matrix Partners and IDG also took part in this round.
With a steady track record of one financing every year since its establishment in 2012, YFD’s valuation has risen to more than US$3 billion to date.
YFD is an online tutoring platform that started out as an image-recognition tool for students to search school questions online. Now it has expanded to a platform for online tutoring and subscription courses to students from primary to high school levels, spanning from English and Mathematical Olympiad to Geography and History.
Currently, YFD has more than 1 million paying users among their 160 million registered users and reaped an annual revenue of US$ 220 million to date. Its retaining rate has increased from 30-40% since its founding, to 70-80% this year. Customer acquisition cost (CAC) is as low as a few hundred yuan as compared to TAL Education’s CAC of about 1,200 yuan (TAL Education is an NYSE-listed Chinese online education platform).
As the number of internet-savvy young parents grows, CEO Li Yong and his team are “strong believers in the adoption of online learning”. In early 2014, the firm launched their own artificial intelligence research centre and positioned itself as a technology company to explore possibilities on language, writing and image recognition services to help mark students’ homework. Four years later, the team ranked first in the world, in MS MARCO (human-generated machine reading comprehension dataset) as well as The Stanford Question Answering Dataset. Funds for this round will continue to be invested in this field for a better learning experience for the students.
2018 has been an impressive year for the Chinese education industry where many online education platforms are receiving support from the capital market (link in Chinese), and players are expected to face stiffer competition in coming years.