VIPKID Completes Series D Round Financing At $200 Million, Aiming To Provide 20,000 Job Opportunities For Americans
摘要： Shen Nanpeng believes that VIPKID’s value lies in its ability to solve the employment issue in the U.S. VIPKID achieves a highly efficient matching mechanism for the education resource demand in China and supply in the U.S, helping tens of thousands of American teachers find more employment opportunities.
Shen Nanpeng believes that VIPKID’s value lies in its ability to solve the employment issue in the U.S. VIPKID achieves a highly efficient matching mechanism for the education resource demand in China and supply in the U.S, helping tens of thousands of American teachers find more employment opportunities.
On the way to VIPKID’s financing press conference venue, Shen Nanpeng received a phone call from a foreign journalist who asked Shen about the founding of Ctrip over a decade ago. As a co-founder of Ctrip, he was often asked by people during roadshows: What barrier did Ctrip enter?
Shen Nanpeng, Sequoia Capital Global’s partner and Sequoia Capital China’s founding and executive partner, was considered as the man who have bought down half of China’s Internet industry. This time he also attented VIPKID’s press conference for the startup’s D round financing. According to open data, Sequoia Capital has to date invested in nearly 500 projects after entering China in 2005. But it’s very rare for Shen to show up at financing press conference for endorsement.
Being less than four years old, VIPKID has already become the hottest brand in the online English education for children sector in China.
On August 23rd, VIPKID announced officially to have completed its D round financing at $200 million. The financing was led by Sequoia Capital, strategically backed by Tencent, and followed by YF Capital, Matrix Partners China, Zhen Fund and ZTwo Capital etc., setting a world record in financing on K12.
It’s worth noting that VIPKID is the second investment project for Sequoia Capital in China, with TouTiao, which was said to have raised $2 billion in financing recently, being the first. Without a doubt, VIPKID is now the hot lucky star in the VC community. It’s one of the few unicorns that emerged from the education industry.
When startups were still choosing between Alibaba and Tencent’s side, VIPKID was already favored by both Internet giants. During series C, Alibaba’s YF Capital strategically invested in the education startup. And in series D, YF Capital continued to pour in while Tencent also joined the financing as a strategic investor.
“We have been with this company for four years. VIPKID is quite a special company on our lists of startup projects,” Shen said.
Shen’s Sequoia Capital China invested in VIPKID in October 2014 during series A round. When a project is developing well, it’s natural for the early investor to continue to pour in through the following rounds of financing. But it’s very uncommon for a startup to have every investor personally endorsing the project.
VIPKID is raising money every year. Its financing progress is stable and firm as the valuation soars. It has become a classic case of how a unicorn company came into being.
What intrigued TMTPost is the reasons behind the company’s sky-high valuation. What caused it exactly? And what kind of barriers VIPKID’s model has set?
“As a platform-level company, there is no barrier that we can’t cross as a company,” Shen told TMTPost. From his perspective, a leading company should bring forth the best execution and services.
As an investor, VIPKID’s model unleashes the potential of teachers despite generating exciting financial and operation performances, Shen said. “VIPKID’s model offer endless potential students in China an opportunity to access to online education.”
“There are many people wanting to do great things. They only express their ideas and eagerness. But only very few people make their ideas happen,” Shen commented, referring to the case of solving the employment issue in the U.S.
“At least, it was a seemingly unknown Chinese company named VIPKID that gave out a solution that can in fact resolve part of the issue,” Shen said.
As a strategic investor of the D round financing, Tencent’s senior vice executive president Tang Daosheng shares similar thoughts on this matter. According to him, VIPKID achieves the highly-efficient allocation of education resources from the U.S. to China, helping tens of thousands of American teachers find job opportunities.
According to VIPKID’s released data, to date its platform has 20,000 foreign teachers from North America. It receives tons of resumes on a monthly basis and the monthly acceptance rate is lower than 10%.
American salary survey site PayScale’s data show that currently American public school K12’s teachers earn an average yearly salary of around $40,000, which is not very high in the U.S. On VIPKID’s platform, each class (taught by a foreign teacher and lasts for 25 minutes) is priced at around ￥130.
It’s easy to tell that VIPKID offers appealing incentives to the teachers in America. During the same period in last year, VIPKID only signed down 2000 teachers in North America. And the number has grown to 20,000.
Last year, Bloomberg’s journalists reached VIPKID and personally flew to China to interview VIPKID. After the interview, Bloomberg used the title If the U.S. Won't Pay Its Teachers, China Will to describe VIPKID.
Asides media attention, VIPKID also drew the attention of renowned investment organizations like MatrixPartners China.
MatrixPartners China poured in $5 million in VIPKID’s A round financing together with Sinovation Ventures and Sequoia Capital in October 2014. In the same month next year, MatrixPartners China, Sequoia Capital and Sinovation Ventures invested another $20 million in the startup’s B round financing.
Last year, MatrixPartners China’s founder Zhang Ying brought over 30 CEOs from the companies MatrixPartners China has invested in to the Silicon Valley’s Burning Man Festival, in which event Zhang planned to have a closer observation of these startup founders. Mi Wenjuan was, of course, one of the CEOs. Mi Wenquan left quite a deep impression on Zhang Ying because, said Zhang, quote on quote, “Mi Wenquan works hard and plays hard. She is very open and she is genuine.”
Mi Wenjuan stayed at the Burning Man Festival to the very end of the event. As the event proceed further, Zhang Ying grew more and more exciting. “At that year’s festival, those founders that stayed to the very end, are doing great now. And most of them are female entrepreneurs,” she said.
“People that have done business with her all feel that it’s comfortable around her. I think it’s during the B round or C round financing she was confused. She didn’t want to hurt our feelings,” Zhang said, recalling that Mi Wenjuan was trying to cater to every investor, which wasn’t a very good signal.
Zhang noticed the situation and told Mi Wenjuan her concerns. “You can never satisfy everyone. Investors could be very troublesome sometimes. You need put your company and current investors in your priory list.”
MatrixPartners China’s name however didn’t appear in the C round investor list from VIPKID.
In the end, Mi Wenjuan has been improving at a rapid speed that surprises Zhang. When she saw Mi Wenjuan again, Zhang Ying talked to her on the details of the latest financing. “She is very determined. She knows what she should do, and what she shouldn’t do. And she knows who to talk to. She is confident and very stands her ground.”
Zhang Ying believes that Mi’s confidence comes from the business growth, the very fundamental of her company. “In addition to that, her personal growth and her team’s development also contribute to the backbone of the company. She knows what she wants,” Zhang Ying told TMTPost.
Statistics show that by August this year VIPKID has amassed over 20,000 teachers in North America, attracting over 200,000 paying members from 32 regions and countries around the world. Each month, 2.19 million classes are offered on the platform. This year the revenue has surpassed ￥400 million in July. The year-round revenue is estimated to reach ￥5 billion.
Of course, there are many other one-on-one online course platforms in the Chinese English education market today. For instance, we have 51Talk, which has gone public on New York Stock Exchange. We also have traditional education giants like New Oriental and Xueersi etc. offering one-on-one English tutoring programmes to the customers.
New Oriental’s founder and Zhen Fund’s founder Xu Xiaoping recalled that when New Oriental went public in New York Stock Exchange in 2006, during that time the education group had already realized an annual income of about $1 billion ($96 million according to New York Stock Exchange’s data). VIPKID on the other hand is merely four years old. “I think Yu is feeling dangers now,” he said. In comparison, 51Talk, which also focuses on one-on-one online English tutoring, had an annual gross income of ￥870 million in 2016 when it was listed on New York Stock Exchange in 2016.
“This round’s financing amassed $200 million. I believe it’s very hard for any company to compete with VIPKID on the long run. But there will always be competition, winners and losers. So everyone needs to fight,” Zhang said.
“Cindy (Mi Wenjuan) has a team that’s tough and competitive. And this is what most startup teams don’t have,” Northern Light Venture Capital’s founder and board manager Deng Feng said. “I talk to her every six months and I always feel her growth. She takes your advice and make her own decisions. She knows what she is doing.”
As a matter of fact, entrepreneurs and investors’ opinions and demands often crash with each other. If both sides are too strong with their ideas, the financing process might end up in a failure. There are also cases where the entire project or company was aborted. As the actual operator of a company, the balance and conflicts between the investors and founders are essential.
Deng believes that it’s unwise for the founder to complete neglect investors’ advice, but it doesn’t mean the founder has to follow the investors’ instructions entirely. Mi Wenjuan is very good at balancing this nuance. “She listens to you, but she also makes her own decision. She will tell you what she thinks is right,” Deng commented.
Sequoia Capital China’s vice president Zhai Jia is the actual operator of the investment project of VIPKID. He told TMTPost that he knows all directors at VIPKID. “Even if you sent them messages on WeChat in the middle of the night, you would get a reply in ten minutes. If your company’s team could be like this, I am sure you would do well.”
“Cindy is constantly improving herself, and learning. She is a founder that puts the resources from investors and shareholders into efficient use,” YF Capital’s board manager Li Na said. VIPKID’s development reminds her of the encounter with New Oriental years ago. She sees more opportunities and hopes in emerging startups.
“VIPKID is transforming the industry,” retired basketball star Kobe Bryant said in an interview with Los Angeles Times last year in August as he decided to invest in VIPKID in five minutes. “You don’t always see such quality companies. You shouldn’t hesitate to make an investment. We are looking for companies that can create social value and educate children to grow and develop.”
From Mi Wenjuan’s perspective, VIPKID received the largest sum of investment in this very industry, a reflection of the major success of sharing education model in a global scale. With this concept, they have internally incubated online one-on-one education platform for kids Lingo Bus, which mainly targets overseas children aged between five and 12. Also driven by national policy, this platform also satisfies the demands for education in the Chinese language.
Startup companies would face incredible challenges if they just simply followed the trend and copy from successful models instead of creating a business model that generates value for users. On Zhihu, Mi Wenjuan made the following comment on the question on How to kickstart a startup project in online education:
“In the earlier 18 months doing VIPKID, we had never considered mass expansion. All of the staff paid their attention to refining the product. It occurs to me that from the long run there won’t be an obvious boundary between Internet and traditional business. The two realms will continue to merge further and the very nature of both fields are about business and user demand.”
When being interviewed by TMTPost, Mi Wenjuan stated that the investment received during this round of financing would be put into the development of fundamental Internet infrastructure. VIPKID has students from 32 countries, where all sorts of Internet conditions appear. To ensure a smooth and stable experience of the online courses, this has proven to be essential. As a matter of fact, this is also one of the reasons why Tencent chose to make this investment. VIPKID is working closely with Tencent on cloud service, AI, Internet education, and education charity etc.
VIPKID’s rapid develop in the past few years also brought forth many challenges. It has grown from a small startup team with less than 100 employees to a large-scale company of over 3000 people. Mi admitted that for her comrades in the startup team, it has become a major challenge to find a way to maintain high operation efficiency transiting from a small startup to a big company. This is the issue she strives to solve now.
It’s worth noting that online one-on-one tutoring model has been constantly questioned on its profitability. 51Talk’s annual report shows that the platform lost ￥515 million in 2016. Mi Wenjuan responded that VIPKID is not a listed company yet and therefore she won’t talk about profitability. “The investment we get will be used to support R&D and improve customized training and the performance of the system. So we look forward to the profitability in the future,” she added.
VIPKID’s financing record
December 2013, angel round, ￥3 million from Sinovation Ventures.
October 2014, A round, $5 million from MatrixPartners China, Sinovation Ventures and Sequoia Capital.
October 2015, B round, $20 million from Northern Light Venture Capital, MatrixPartners China, Sequoia Capital, and Sequoia Capital.
April 2016, investment from Zhen Fund.
August 2016, C round, $100 million from YF Capital and Sequoia Capital.
August 23rd 2016, strategic investment from Kobe Bryant’s Bryant Stibel. This is the second Chinese innovative company that Kobe has invested in after Alibaba. American education VC foundation Learn Capital contributed to the forming of the agreement and was involved in the investment.
August 23rd 2017, D round, $200 million from Sequoia Capital, Tencent, YF Capital, MatrixPartners, Zhen Fun, and ZTwo Capital etc.
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