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Founded Year

2014

Stage

Series E - II | Alive

Total Raised

$3.435B

Last Raised

$1.6B | 6 mos ago

About Zuoyebang

Zuoyebang is an online education company that provides study platforms and services targeting K-12 students. The platform is a comprehensive study tool for school work search, efficient practice, learning, and discussion.

Zuoyebang Headquarter Location

Beijing, Beijing,

China

Latest Zuoyebang News

China’s next big regulatory clampdown: EdTech

Jun 22, 2021

Asia Times Menu China’s next big regulatory clampdown: EdTech Chinese EdTech services have boomed during the pandemic but regulators are starting to squeeze the lucrative online industry EdTech services have proliferated and profited in the pandemic era in China. Image: Twitter China’s booming EdTech industry is under tough new regulatory scrutiny, stirring worry and doubt among the many firms that have recently cut lucrative niches in the growing online space. China’s two largest EdTech unicorns, Zuoyebang and Yuanfudao, were recently fined 2.5 million yuan (US$386,000) each for reputedly misleading customers with false advertising and unfair pricing respectively, according to wire reports. The penalties have rung warning bells across the entire industry, with several EdTech firms now reportedly halting their investment and other business expansion plans until there is more regulatory clarity from Beijing. That has put a certain brake on the fast-accelerating online industry. China’s EdTech firms have expanded rapidly in the pandemic age as traditional school learning has been forced online, a shift that has boosted exponentially demand for related edtech services including online tutoring. China’s EdTech market reached 423 million users in 2020, according to the Statistical Report on Internet Development in China, marking a 110.2% increase over 2018. Venture capital (VC) has fueled the boom, with over US$10 billion flowing into China’s EdTech market in 2020, a 150% increase over the previous year. That represented over 63% of the global education venture capital allocated last year, according to a report by Blue Elephant Capital Management, a Chinese education and EdTech venture capital firm. Leading EdTech firms Zuoyebang and Yuanfudao are backed by some of the region’s highest-flying investors and tech companies including Alibaba Group Holding Ltd, Softbank Group Corp, and Tencent Holdings Ltd. According to Holon IQ research, there were 25 EdTech unicorns worldwide as of May 17 this year. Together, they have raised over $16 billion in funding over the last decade and are now collectively valued at $74 billion. Four out of the top eight EdTech firms hail from China, the same research shows. But Beijing is now taking a harder look at EdTech firms’ business models to prevent, among other things, unfair pricing, misrepresentation of services and outright fraud. In March, Chinese President Xi Jinping warned that the fast-moving pace of so-called “platform” companies that are working with and funding EdTech firms is “not standard and risks exist”, according to China’s state broadcaster CCTV. Soon thereafter, in April, GSX and Koolearn were among four EdTech companies handed maximum fines by regulators for “falsely claiming that the price for its online courses before discount was much higher than it actually was.” Several other EdTech firms have since been hit with punitive fines for various alleged online wrongdoings. That’s causing a rethink of expansion plans across the industry. EdTech startups VIPKid and Huohua Siwei, alongside Zuoyebang and Yuanfudao, have recently suspended their IPO plans, according to wire reports. KrASIA reported recently that GSX laid off 30% of its employees due to regulatory tightening, while VIPKid’s merger with Qimeng English and Math Thinking resulted “in layoffs for half of the combined workforce.” VIPKid later refuted the report, though it confirmed it had undertaken business and staff changes. China’s EdTech firms have boomed through the pandemic. Image: Facebook The regulatory uncertainty has some looking outside of China for funding and markets. Leading EdTech firm Zhangmen has filed for an IPO on the New York Stock Exchange, skipping over China’s capital market due to difficulty in “renewing existing licenses and or acquiring newly required ones in [light of] the changing regulatory environment,” a Caixin Media report said. Yuanfudao, Zuoyebang, and Zhangmen did not respond to requests for comment for this story. One cause for the regulatory squeeze is the Chinese government’s concern about the unequal distribution of EdTech resources across the country. Laptops and other electronic devices required for e-learning are not accessible to all families, sparking government concerns that unregulated EdTech markets will exacerbate already sensitive income inequality issues. Veronica Zhou, a partner with Blue Elephant Capital, said in a Beyond Unicorn’s podcast that in China’s major cities – Beijing, Shanghai and Shenzhen – families “spend on average 20- 30% of their disposable income on their kid’s education. This trend has been growing over the last few years, and…is developing in the second-tier cities in China [as well].” That’s putting new pressure on many lower-income families to shell out for additional tuition classes provided by EdTech companies in order to keep pace with children from wealthier families. Low barriers to entry in the EdTech market have contributed to the venture capital boom, resulting in high degrees of pricing competition and student-luring rivalry among firms. “Competition now plays out in the form of financing rounds – if one doesn’t raise money, it immediately loses out in the market competition,” said Chu Zhaohui, a research fellow at the National Institute of Education Sciences under the Ministry of Education, in a CGTN report. As a result, big Chinese private tutoring companies like Yousheng Education and Xuebajun collapsed and declared for bankruptcy respectively, having been edged out by up-and-coming EdTech rivals. A Chinese primary school teacher edits a video lesson he recorded in an empty classroom for his students who have had their classes suspended due to the Covid-19 coronavirus. Photo: AFP / Issac Lawrence Another problem arising from the financing-dependent nature of the industry is that EdTech companies often expedite hiring to secure funding more quickly and thereby fail to conduct proper checks on instructors’ backgrounds and qualifications. Zhou, for one, is undaunted by the rising regulation and bullishly predicts many more EdTech unicorns will rise in the years ahead. “[Being] in the primary investment market here…we could see another ten very, very good potential unicorns coming up,” Zhou said. “Right now, we have three education companies in China that have over a 100 billion renminbi in revenue every year. And that number is about to increase.”

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Research containing Zuoyebang

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CB Insights Intelligence Analysts have mentioned Zuoyebang in 2 CB Insights research briefs, most recently on Feb 4, 2021.

Expert Collections containing Zuoyebang

Expert Collections are analyst-curated lists that highlight the companies you need to know in the most important technology spaces.

Zuoyebang is included in 3 Expert Collections, including Education Technology (Edtech).

E

Education Technology (Edtech)

2,201 items

S

Sequoia Capital China Investments 2018-2019

149 items

U

Unicorns- Billion Dollar Startups

727 items

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