SoftBank Seeks Investment in Chinese Education Startup

(Bloomberg) -- SoftBank Vision Fund is seeking to invest about $500 million in China’s Zuoyebang as it seeks a stake in the country’s vast online education market, people familiar with the matter said.

The fund, created by SoftBank Group Corp., and Zuoyebang are still finalizing terms of the deal and the details could still change, the people said, asking not to be identified as the details are private. The education technology startup has already raised more than $500 million in funding from investors including Coatue Management, Goldman Sachs Group Inc., Sequoia Capital China and GGV Capital.

Founded in 2014 by Chinese search giant Baidu Inc., Zuoyebang targets primary and secondary school students in China. The company, which was spun out from Baidu a year later, created a mobile app that lets students upload homework questions and search for answers. Zuoyebang has also expanded into live-streaming courses and one-on-one mentoring, with a reported 300 million registered users.

China is one of the main investment locations for Tokyo-based SoftBank’s Vision Fund, an almost $100 billion pool of money that’s become the world’s largest technology investor. It’s already backed businesses in sectors as diverse as robotics, ride-hailing, e-commerce and semiconductors. The fund has put billions into Chinese ride-hailing giant Didi Chuxing and taken stakes in ZhongAn Online P&C Insurance Co. and food-delivery upstart Ele.me.

Zuoyebang didn’t respond to requests for comment during the China holiday, while a representative for the SoftBank Vision Fund declined to comment.

An investment in Zuoyebang, which translates as "homework help,” would give SoftBank the chance to back a potential leading player in the Chinese education market, which is expected to grow to 2.9 trillion yuan ($422 billion) by 2020, according to a report by Deloitte. The company faces competition from a growing number of startups in the online education space in China, including Yuanfudao and 17zuoye.

Leading companies in the industry, including New Oriental Education & Technology Group Inc. and TAL Education Group., have already gone public in the U.S. and their share prices soared for years. But in June, Carson Block, a short-seller who runs Muddy Waters, said he was betting on a decline in TAL shares, in part because of rising competition from online rivals and its alleged overstatement of profit. TAL shares have dropped more than 40 percent from their June peak, while New Oriental’s stock has also tumbled.

--With assistance from David Ramli.

To contact the reporter on this story: Selina Wang in San Francisco at swang533@bloomberg.net

To contact the editors responsible for this story: Jillian Ward at jward56@bloomberg.net, Peter Elstrom

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