KKR and GGV Lead Huohua's Series D Financing of USD 85 Million
COVID-19 and China
A pile of books and letter stands. Image credit to Element5 Digital on Unsplash

Source from GGV, world-known investors KKR and GGV co-led a Chinese early childhood education (ECE) company for K12 kids, Huohua Siwei(火花思维, Spark Thinking in Chinese context), series D financing round with a deal value USD 85 million.

As early as in March, Huohua announced the series C financing round of USD 40 million led by Northern Light Venture and followed by Sequoia China and other investors. With only five months passed, Huohua announced the second financing round of the year. The company completed four rounds of financings in less than three years.

Founded in 2017, Huohua is a young company in the online education field but an unignorable force. Huohua focuses on quality education at an early stage of kid's education. While Huohua is specialized in mathematical thinking, Luo Jian (罗剑), the founder of Huohua, once said that math education had the most penetration rate in K12 education as high as 46.9%. Choosing mathematical thinking is a strategy for Huohua to open the market without deliberately educating the market; in the meantime, avoid intensive competition with English education companies in China.

Said by Luo Jian in May, 75% of the transaction volume was referred by pre-existing customers and a student renewal rate as high as 80%.  In the ECE and quality education field, Huohua has no matched competitors currently in China, while most of these companies stayed at early stages ranging from seed round to series B.

Future competitors exist. The online education unicorn VIPKID released its mathematical thinking education (considered a type of quality education) platform Luna Education (噜啦数学), which targets at children of age 5-10. Worth to mention, another platform, VIPthink (豌豆思维), completed series A funding of USD 15 million in January, which was led by DCM China and followed by Sinnovation Venture. VIPthink's monthly revenue increased to CNY 28 million (USD 4.1 million) in this May, while in June 2018, the number was only CNY 300 thousand (USD 44.1 thousand).

After English education, mathematical thinking education has become the next sought-and-after field. As in 2018, the population of age 0-14 in China was 235.23 million. The education market in China has a solid customer base and especially for online education, which can ignore the restrictions on space or time. However, education is a sensitive nerve for the nation and the state has been implementing rules and regulations to formalize the market.

Besides the tending-stricter regulations, the acceptance of online education has plenty of room to improve. According to a survey conducted by Weibo in 2018's K12 education, 28% of respondents inclined to choose online education only, 36% of them preferred offline education, and 35% of the pool chose a combination mode of online and offline education.

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