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VIPKid reshuffles business units ahead of IPO

Written by Song Jingli Published on     2 mins read

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China’s online education sector has been slowing down after students returned to school in the second half of 2020.

Beijing-based online education provider VIPKid kicked off IPO plans last month, 36Kr reported on Monday, citing newly appointed chief marketing officer Zhao Yicheng.

The company, which is known for its one-on-one online English tutoring service with North American instructors, has recently been streamlining its business. Last month, it shut down Dami Wangxiao, which was created in January 2020 by combining its large-group class service Fengxiao and small-group product SayABC. The entity raised USD 80 million from investors, including Tencent and Sequoia Capital China.

Qimeng English, which offers entry-level courses for kids, and Math Thinking were merged, resulting in layoffs for half of their combined workforce. The Zhongwaijiao Peiyou unit, which hosts courses delivered by English teachers of North American and Chinese origin, has also been downsized by half.

Company leadership is slimming down too. COO Liu Huan, who was appointed in March 2020, and CFO Gui Lei, who joined at the end of 2019, have departed. The same goes for senior vice president Xu Xiaofei and chief academic officer Liu Jun.

VIPKid refuted on Monday reports of the downsizing’s 50% scale but confirmed that there have been business and staff changes within the company. Most of the management reshuffle took place amid the COVID-19 pandemic last year, and there haven’t been any changes recently, the firm said. “The company’s business segments are running normally,” it added.

“It ran too fast”

“VIPKid is cutting part of its business to save costs after the market has been squeezed by competitors and the sector, in general, has been slowing down after students went back to school in the second half of last year,” independent analyst Wu Di (also known as Wudy) told KrASIA on Monday. She nevertheless still feels optimistic about the company, which “just ran too fast.”

VIPKid, which was founded in 2013, was one of the earliest edtech upstarts to gain favor from investors including Sequoia China, Jack Ma’s YF Capital, Sinovation Ventures, and Tencent, which led the Series E funding round in October 2019. The company, however, didn’t manage to attract any further funds when online learning became extremely popular last year, aside from the Dami Wangxiao deal. Competitor Yuanfudao, meanwhile, closed four rounds in 2020, bagging USD 3.5 billion in total, while Zuoyebang locked in USD 2.35 billion in two rounds.

There has been fierce competition in a market where profitability is a challenge. Larry Chen, founder and chairman of GSX Techedu, told analysts that the top ten players in the market spent more than RMB 10 billion (USD 1.5 billion) on traffic acquisition and branding in July and August last year, citing third-party data. His company saw a net loss of RMB 1.393 billion (USD 213.5 million) in 2020, after generating profits of RMB 226.6 million and RMB 19.7 million in 2019 and 2018.

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