VIPKid is finalizing a deal to raise about $500 million at a valuation of more than $3 billion, according to people familiar with the matter, a price tag that could make
it the world’s largest online education startup.
The Beijing-based service, which links mainly North American tutors with Chinese children, is putting the finishing touches on a deal, said the people, who declined to be named because the matter is private. Its targeted valuation is pre-money or prior to closing, they added. A successful transactionwould roughly double its valuation in less than a year.
Getting foreign teachers to tutor students over the internet is big business in China, thanks to an increasingly affluent middle class and job market that prizes both education and English-language proficiency. The online English-tutoring market is on track to hit 52 billion yuan ($8 billion) by 2019,according to iResearch.
That’s attracting investors: iTutorGroup is raising as much as $300 million at a valuation of about $2 billion and preparing for an IPO next year. Leading players such as New Oriental Education & Technology Group Inc. and TAL Education Group have
gone public in the U.S. and seen their shares soar. Other companies competing in the space include DadaABC and 51Talk.
Read more: China’s Tiger Moms Try Virtual U.S. Tutors Amid Education Boom VIPKid reported a near six-fold jump in ‘cash sales’ to 3.54 billion yuan in 2017, including multi-year contracts, based on presentation materials for investors obtained by Bloomberg News. Chief Executive Officer Cindy Mi told Bloomberg in September her company should rake in revenue of 5 billion yuan or about $750 million in 2017. A VIPKid spokesman declined to comment on the fundraising but said the company’s cash sales for the fiscal year ended March was about 5 billion yuan.
VIPKid had 296,363 students and 38,724 teachers as of 2017 -- a sharp increase from the 3,305 students and 404 educators it had just two years earlier, according to its investor materials.
By 2019, it’s projecting a near 10-fold rise in students to 2.4 million, and 281,369 teachers.