What is Yuanfudao?
Yuanfudao is a Chinese online education and tutoring app, as well as an educational technology company, which offers services for subjects from kindergarten through grade 12 which can also check homework by taking a picture of it (Pandaily.com). It first launched in 2012 and has since provided tutoring to over 200 million students with approximately 2 million of those being paying users (Jing, 2019).
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The company has transitioned from one-to-one tutoring after China added after-school training regulations for the first time, stating, “off-campus training institutions should have stable teaching resources, and should not hire in-service [sic] teachers who work in campus” (Shiyu, 2019). Yuanfudao's latest round of funding earned them US$ 300 million, bringing their worth in upwards of US$ 3 billion (Bastone, 2018).
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The MarketBased on the numbers since Yuanfudao's inception in 2012, every year approximately 14.79 million students will be taking the exam to get into senior high (statista.com) and another 9.31 million students will be taking an exam to get into college/university called the Gaokao. Not only will these students be looking for every edge they can get, but their parents and teachers will also be utilizing resources to ensure their success. These so-called “tiger” parents which push their children to succeed and are willing to spend a significant amount of money and time on their child's after-school education are pushing the online education market on a path to triple to “150 billion yuan (US$22.33 billion) by 2022” (Jing, 2019).
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The CompetitionWhile there are many other Chinese online tutoring services and apps to try and take advantage of China's rapidly growing online education industry, Yuanfudao is one of the largest and most varied educational tech companies in Asia. Additionally, Yuanfudao is currently the only app that also can mark assignments by simply taking a picture. This feature appeals to not only students, but their parents and teachers, checking “an average of 70 million arithmetic problems a day, saving around 40,000 hours” (Jing, 2019). While not as big Koolearn (Moh, 2018), Yuanfudao is still one of the largest and heavily funded edtech companies in a competitive yet rapidly growing market.
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One of the ways Yuanfudao has managed to not only survive, but thrive, has been their remarkable ability to raise capital. The company boasted cash reserves of “'US $100 million in [their] bank account before landing [their final US$300 million round of financing]” which helped them be “immune to the so-called tech winter, which [saw] the venture capital pool almost dry up in China” (Jing, 2019).
Yuanfudao has attracted investment by expanding their focus beyond just tutoring, to developing the technology behind it, going as far as to “establish an AI research institute in 2014 and incorporat[ing] speech recognition, handwriting recognition and other technologies to its existing photo search engine” (Lee, 2018). |
The Verdict
Based on the aforementioned information, Yuanfudao has all the aspects of a safe buy.
Educational technology is a booming market not just in China. With growth of “$5-trillion globally-per-annum . . . [and] with investment in edtech set to reach $252 billion globally by 2020” (Bainbridge, 2016). Edtech is a relatively safe and rapidly growing sector of investing, with China, and their ingrained culture of education as being a priority, being one of the largest markets with the potential for the most return. This is echoed by Gordon Ding, the Managing Director of Warburg Pincus who is one of the leading investors in Yuanfudao, when he said, “'Education is a lasting theme in which every Chinese will invest significantly in'” (Jing, 2017). Despite ample evidence for the opposite, even if there was to be a market crash in edtech, Yuanfudao has varied their product to grow to more than just a tutoring company as well as amassed a safe buffer of funding in case of any unforeseen issues that may arise from any further legislation or branching out into new technology. |
References
Bainbridge, D. (2016, August 13). Edtech is the Next Fintech. Techcrunch. Retrieved from https://techcrunch.com/2016/08/13/edtech-is-the-next-fintech/
Bastone, N. (2018, December 26). A Homework App That Instantly Solves Problems for Students With the Snap of a Photo is now Worth $3 billion.
Business Insider. Retrieved from https://www.businessinsider.com/yuanfudao-homework-assistant-app-funding-2018-12
Chinese National College Entrance Exam Acceptance Rate by Year. (n.d.). Retrieved from https://en.wikipedia.org/wiki/The_National_College_Entrance_Examination#Acceptance_rate_for_each_year[7]
Jing, M. (2019, February 11). Tencent-backed AI startup checks math homework to help parents, teachers. Tech in Asia. Retrieved from https://www.techinasia.com/tencent-ai-startup-check-math-homework
Jing, M. (2017, May 31). Tencent invests further in Chinese online tutor Yuanfudao. South China Morning Post. Retrieved from https://www.scmp.com/tech/start-ups/article/2096401/tencent-invests-further-chinese-online-tutor-yuanfudao
Lee, D. (2018, December 25). Yuanfudao Completes Another Round of Funding, Bringing Valuation to Over $3 Billion. Pandaily. Retrieved from https://pandaily.com/yuanfudao-completes-another-round-of-funding-bringing-valuation-to-over-3-billion/
Moh, R. (2018, July 18). Chinese Digital Education Player Koolearn.com Seeks HK Float. Kr-Asian. Retrieved from https://kr-asia.com/chinese-digital-education-player-koolearn-com-seeks-hk-float
Number of high school graduates in China between 2007 and 2017 (in millions). Statista. (n.d.). Retrieved from https://www.statista.com/statistics/227252/number-of-high-school-graduates-in-china/
Pandata: A Guide to China's Tech World. (n.d.). Retrieved from https://pandata.pandaily.com/company/yuanfudao
Shiyu, T. (2019, January 16). Yuanfudao Terminates Its One to One Online Education Section. Equal Ocean. Retrieved from https://equalocean.com/education/20190116-yuanfudao-closes-its-one-to-one-online-education-function
Bastone, N. (2018, December 26). A Homework App That Instantly Solves Problems for Students With the Snap of a Photo is now Worth $3 billion.
Business Insider. Retrieved from https://www.businessinsider.com/yuanfudao-homework-assistant-app-funding-2018-12
Chinese National College Entrance Exam Acceptance Rate by Year. (n.d.). Retrieved from https://en.wikipedia.org/wiki/The_National_College_Entrance_Examination#Acceptance_rate_for_each_year[7]
Jing, M. (2019, February 11). Tencent-backed AI startup checks math homework to help parents, teachers. Tech in Asia. Retrieved from https://www.techinasia.com/tencent-ai-startup-check-math-homework
Jing, M. (2017, May 31). Tencent invests further in Chinese online tutor Yuanfudao. South China Morning Post. Retrieved from https://www.scmp.com/tech/start-ups/article/2096401/tencent-invests-further-chinese-online-tutor-yuanfudao
Lee, D. (2018, December 25). Yuanfudao Completes Another Round of Funding, Bringing Valuation to Over $3 Billion. Pandaily. Retrieved from https://pandaily.com/yuanfudao-completes-another-round-of-funding-bringing-valuation-to-over-3-billion/
Moh, R. (2018, July 18). Chinese Digital Education Player Koolearn.com Seeks HK Float. Kr-Asian. Retrieved from https://kr-asia.com/chinese-digital-education-player-koolearn-com-seeks-hk-float
Number of high school graduates in China between 2007 and 2017 (in millions). Statista. (n.d.). Retrieved from https://www.statista.com/statistics/227252/number-of-high-school-graduates-in-china/
Pandata: A Guide to China's Tech World. (n.d.). Retrieved from https://pandata.pandaily.com/company/yuanfudao
Shiyu, T. (2019, January 16). Yuanfudao Terminates Its One to One Online Education Section. Equal Ocean. Retrieved from https://equalocean.com/education/20190116-yuanfudao-closes-its-one-to-one-online-education-function