Tencent-Backed Edtech Startup Seeks Funding at $20 Billion Value

Tencent Holdings Ltd.-backed Yuanfudao is seeking fresh funding at a valuation of more than $20 billion, people familiar with the matter said, as the cash-burning battle in China’s online education arena shows no sign of abating.

The Beijing-based tutoring app is planning to raise at least $1 billion and has held discussions with investors including Boyu Capital and DCP Capital, according to people familiar with the matter. The funding round has yet to be finalized and the size will depend on investor interest, the people said, asking not to be identified as the information isn’t public.

The latest fundraising comes less than six months after a $2.2 billion round that valued the startup at $15.5 billion, the most among edtech companies globally, Yuanfudao said at the time. The tutoring upstart is competing with top teaching providers like TAL Education Group as well as the education wings of internet giants like ByteDance Ltd. for a bigger share of China’s private education industry.

Yuanfudao -- backed by investors like Hillhouse Capital and IDG -- is seeking to boost its valuation ahead of a possible stock market debut in 2022, said the people. Yuanfudao said in a statement that it doesn’t have any formal fundraising plans. Boyu and DCP declined to comment.

China’s edtech firms are replenishing their war chests after splashing out hundreds of millions to grow their operations during 2020’s pandemic lockdowns. The country’s online education startups attracted a total of $9.2 billion last year, more than quadruple the funds raised in 2019, according to research firm Zero2IPO Group. In January, close rival Zuoyebang raised $1.6 billion from investors including Alibaba Group Holding Ltd. and SoftBank Vision Fund.

The unfettered expansion has drawn the ire of Beijing, which has signaled its intention to rein in the mounting influence of tech companies in the world’s No. 2 economy. The country’s education ministry has hit out at questionable behaviors from the companies, ranging from excessive advertising to the use of unapproved teaching materials, the official paper of the Communist Party’s disciplinary watchdog wrote last month. Yuanfudao, for its part, has sponsored popular web series as well as China’s annual Spring Festival TV gala this year.

Founded in 2012, Yuanfudao offers a variety of online education products from live-streaming courses to test prepping, with more than 400 million users across China. The firm has also set up offline teaching facilities, with more than 30,000 employees.

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