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Five Years of Investing

in Education Technologies

by Angela Bao

· EdTech,Portfolio,Thesis

In 2016, more than $1.5 billion was poured into 167 venture deals in China’s education technology (“edtech”) sector, cementing the country’s position as an emerging global innovator in education. The sum, tracked by the local research company JMDedu, slid somewhat from 2015, by 15% in local currency terms or 25% in USD. But the growing army of startups on a breakout trajectory, and the intensifying interest from secondary market players, left the Year of the Monkey with a solid report card overall.

As seen in numerous other tales, the speed of change in China can be dazzling. In 2013, China’s edtech funding was barely a quarter of that in the U.S.; two years later, China had surpassed the U.S. by a 30% margin (EdSurge puts U.S. edtech funding at $1.45 billion and $1.03 billion in 2015 and 2016, respectively). Although both markets present a billion-dollar opportunity for startups, a closer look into the funding landscape would expose quite different industry dynamics and learning priorities.

In China, K-12 remains the most active segment, plowing more than half of the venture funding last year for the country’s 180 million kids and teenagers. Adult learning has been on a rapid rise, tripling the 2015 level to $330 million in total investment. However, the latter’s figure was dwarfed by the nearly $600 million the U.S. counterparts scored. In 2016, 9 out of the 11 most-funded U.S. deals (ClassDojo and Degreed tied for No.10) serve, or partly serve, adult learners, while 7 out of China’s top 10 were strictly for K-12.

At Sinovation Ventures, as a venture fund investing in technology startups across the Pacific, we manage an active edtech portfolio of over 25 companies today. We began focusing on the sector in China five years ago, when the Internet and mobile Internet started transforming the education system. In late 2013, we set up an office in Silicon Valley and have invested in 10 edtech startups in the U.S. so far. We are often asked how we perceive the Chinese and U.S. markets, and whether and how our strategies are different. Here, I would like to share some of our findings and what we are focused on for the next 12-18 months.

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When people talk about China’s education landscape, often times the first thing that comes to mind is how obsessed the Chinese parents are with test scores and private tutoring. The best-known Chinese education companies such as New Oriental (NYSE: EDU), TAL Education Group (NYSE: TAL) and Xueda Education (NYSE: XUE, delisted in 2016) have all benefited handsomely from this unwavering faith in supplementary learning.

Although these modern companies emerged only over the last two decades, the tradition of exams and tutoring in China can be traced back to 14 centuries ago. In 605, during the Sui Dynasty, an Imperial Examination (Keju) system was established to replace the prior hereditary and appointment systems - the latter based mostly on aristocrats’ recommendations - to select civil servants into the bureaucracy. Learning and hard work were, for the first time, institutionalized as a deciding factor to attain upward social mobility. That was also the only clear path that poor families could embrace to turn around their fate overnight.

Abolished in the early 1900s, the Imperial Examination system had a profound impact on Chinese society, cultivating a learning culture centered on grades. Its legacy can be still felt through the lens of today’s modern public servant examination - known as the “National Exams” - and numerous other exams in students’ earlier lives. What makes the competition even greater is that, unlike many developed countries, China doesn’t have a solid layer of mid-ranking schools. If you miss out on the few top-tier schools, the quality of lower-ranking institutions diminishes rapidly. From as early an age as three, when interviews and tests for both parents and kids are common even for kindergarten admission, to mid-20s (graduate school exams and professional skill certifications), every step is a difficult battle in the world’s most populated country.

Public data shows that only 0.6% of Chinese junior high school graduates will get accepted by a top 100 “model high school”. Over 40 percent of those graduates cannot get into any high school at all, because there are not enough seats. Of the high school population, only one in every 200 can get into the so-called “C9” - the best nine universities in China including the famed Peking University and Tsinghua University, both located in Beijing. The stakes are so high that the surest way that parents can remove the roadblocks for their (most often) single child is to buy them supplementary learning. That explains why Chinese households spend an average of 20 to 30% of their incomes on education, a fact most of my U.S. colleagues find shocking.

Before the Internet and mobile Internet became a sweeping force in reshaping the Chinese economy, supplementary learning mostly took place in learning centers spread across the country. Because of the natural challenges of expanding physical classrooms while maintaining high teaching standards, none of the largest education companies won a significant market share, in what is a very fragmented market. In fact, despite TAL, New Oriental, and Xueda each owning hundreds of learning centers in China, their combined market share in K-12 remains a single-digit. Hundreds of thousands of smaller players are active in regional markets, quenching the parents’ thirst for good education.


The fast penetration of the Internet rewrote the education arena’s handbook all across China. In 2006, Internet penetration in China hit 10%; by 2011, it rocketed to almost 40%. Mobile Internet users also exceeded a quarter of the total population. By 2013, nearly half of the population had access to the Internet through computers and over a third through smart phones. The ubiquitous connectivity has not only lowered the barriers for consumers to access content, but also brought down the cost for companies to acquire users.

In 2011, we made the first edtech investment in Duobei, an online publishing platform made for ordinary people to teach audiences their areas of expertise, from IT to photography and investment. In 2012, heartened by Duobei’s growth, we doubled down in the company and started investing actively in online education, as one of the first venture firms in China that had a clear edtech focus.

Given Chinese families’ traditional focus on K-12 tutoring and certifiable skill development, we started with the private after-school market. The formal school system received the majority of education funding, just as in the U.S., but the entry barriers to that centralized system were incredibly high for startups. We concluded that to build a profitable, consumer-facing education business, the model needs to either address a mass-market problem by offering a standard experience at a low price (“content-centric”), or cater to a niche market with defensible, quality services coming with a premium price tag (“service-centric”).

Under this thesis, we became an early investor in VIPKID, The One smart piano, BoxFish, and TopSchool Education. VIPKID pairs Chinese K-5 kids with North American teachers for 1:1 online learning, all in English, on its proprietary platform. Boasting tens of thousands of students today, VIPKID fulfils the unmet needs of Chinese middle-class families by providing access to fluent English speakers and an encouraging environment for self-expression. The One democratizes piano education for learners at all ages. It turns the phone or tablet connected with a smart LED keyboard into a piano teacher. It’s popular among Chinese parents as the interactive experience makes practice fun. The company has also rolled out thousands of piano classrooms in more than 250 Chinese cities where many see playing piano as a novel, distinguishing skill. BoxFish absorbs the best practice of English learning in western countries and infuses them into an interactive curriculum tool for K6-8 teachers. After forming a strong brand among over 3.5 million students and 350,000 teachers, it has now evolved to also address the needs of younger kids for immersive learning. TopSchool Education offers online small classes for TOEFL learning and assessment, and connects students in lower-tier cities with high-quality teachers to make excellent education more equitable.

In the U.S., on the other hand, we’re more focused on innovative and quality content, as premium services appear to lack the essential rapid growth potential for venture-backed startups. For content, we focus on STEM (science, technology, engineering, and math), which we believe forms the basis of knowledge for kids and young adults in a modern digital economy. We hence invested in Kodable, Wonder Workshop, One Month, and Ucai. Kodable creates a full K-5 basic programming logic curriculum, which is used by over 50 percent of U.S. elementary schools and by users in more than 100 countries. The curriculum requires no relevant background from teachers, which has facilitated its fast adoption. In early 2017, Kodable also introduced the world’s first elementary computer science standards with measurable outcomes. Wonder Workshop is a global leader in blended learning for programming and science. Its inaugural pair of robots, Dash and Dot, are highly recognizable smart toys today with hundreds of thousands of users in the U.S., China and elsewhere. One Month and Ucai, based in New York and Beijing respectively, provide coding training for the Internet-native workforce in the two largest economies in the world.

As a cross-border venture firm, a major part of us partnering with U.S. and Chinese founders is to help them grow internationally, if and when desired. That applies to education as well, despite the drastic differences between Chinese and U.S. learning systems. Wonder Workshop’s launch in China came a few months after the Series B funding which we co-led. The fund’s founding partner Dr. Kai-Fu Lee, the former President of Google China, personally hosted Wonder’s launch event at our Beijing office, which attracted massive attention from Chinese press, parents and education companies, for want of similar products in the local market. A successful crowdfunding campaign with the Chinese e-commerce giant JD ensued, followed by multiple distribution orders stamped by some of the largest Chinese STEM players. In 2016, Wonder Workshop’s annual flagship event Wonder League Robotics Competition attracted over 5,000 participating teams. The Chinese market is awaiting a local version to be rolled out soon.

Besides quality content and services, we have also invested in various technology tools that address the acute pain points of schools’ administrators, teachers, parents, and students that had no solution to before the mobile Internet reigned supreme. In China, we continued focusing more on family and student needs. Our investments in this category include Qinbaobao (“Dear Baby”, a family-centric app dedicated to socializing while sharing baby photos), IvyDad (a Wechat-native product offering rich educational resources and information for Pre-K families), and ClassBox (a curriculum and class calendar-based social networking tool for millions of college students).

In the U.S., the school system is by design more open to startup innovation. Various levels of government and private sector players have earmarked significant dollars for segments such as instruction, school administration, and instructional staff services. School and district leaders, and individual teachers, also have more autonomy - and more importantly, discretionary budgets - to experiment with new ideas, compared to their counterparts in China. The different dynamics led to the following investments, which have also inspired our China investment strategy and exchanges with Chinese industry leaders: Securly (cloud-based smart web filtering for schools, with intelligence to enable student sentiment analysis), Kaymbu (a tablet-native tool that empowers early childhood educators and engages parents for learning support), Swivl (a software and robotic hybrid solution to personalize classroom and assessment experience), Swing Education (Uber for substitute teachers that also caters to other school administrators’ human resource needs), and ClassWallet (an all-in-one money management platform for K-12 and higher-ed institutions, eliminating the need for paperwork or receipts).

Since 2015, we started exploring a third edtech category in both the U.S. and Chinese markets: the application of big data, machine learning and other artificial intelligence technologies in education. The prevalence of smart devices and high-speed connectivity around us enable data acquisition from almost every aspect of our lives. That lays a critical building block for applying machine intelligence to traditional industries like finance, transportation, education, and healthcare. At Sinovation Ventures, we have made investments in about 30 AI startups since 2013, and we believe certain education segments are ripe for AI disruption today. Over the last year and a half, we have invested in Xueba Class (a tool that automatically generates lesson plans and exercises for math tutors to personalize student learning), WriteLab (a writing and grading assistance tool that applies machine learning to open-ended English essays), and 7net (“Seven Day”, an OKR and machine intelligence solution for K-12 exam grading and cluster analysis). Some of our previous investments will also benefit from the rise of AI and the democratization of machine learning techniques, thanks to their natural advantages in acquiring massive data, such as BoxFish, Wonder Workshop, VIPKID, and Securly.


In the fall of 2016, we raised two fresh funds - one in USD and the other in Chinese RMB - which total $675 million. The new capital will allow us to continue backing extraordinary founders and meaningful, transformative businesses. At Sinovation Ventures, we are committed to funding founders in the world’s two largest markets side by side, and we have a full-services specialist team, including a growing Artificial Intelligence Institute (based in Beijing and in Seattle), to support our portfolio companies.

We are on a mission to support exceptional edtech founders. For the next 12-18 months, we will particularly focus on the following edtech segments. If you run a Seed / Series A / Series B company and want to share your ideas and plans with us, we are all ears! (Email me at: angela at, or Twitter: @AngelaBaoBeibei)

  • Products powered by advanced technologies such as natural language processing and machine learning that can unlock the potential of the existing data in education

  • Modern learning solutions that empower career discovery and enhancement

  • Pain point-driven technology tools for either school administrators, or teachers, or parents, or students, that are 10x better than incumbents that can become the industry’s “new normal”

  • Products and tools that serve international students in the U.S.

(Our portfolio companies are hiring!)