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Billion Dollar Unicorns: VIPKid is the Newest Kid in the Club

Posted on Tuesday, Sep 5th 2017

The Global E-Learning market is expected to grow 7.2% annually over the next decade to $325 billion by 2025. The growth in the market is expected to be driven by emerging trends of gamification of learning, implementation of IT security, cloud-based solutions, and growth in online content & digitization. China’s VIPKid is a leading Billion Dollar Unicorn  player in the space.

VIPKid’s Offerings

Beijing-based VIPKid was founded by Cindy Mi and Jessie Chen in 2013. Prior to setting up VIPKid, Mi was working at building a brick-and-mortar tutoring business with her uncle. Mi was inspired to set up VIPKid because of a troubling experience in her childhood. As a kid, she had relocated to a remote northeastern region in the Heilongjiang province in China. At her new school, her math teacher wasn’t very welcoming to her and often ignored her in the class. Mi started reading science-fiction magazines in the class. But she was caught reading them one day and the teacher asked her to get out of the classroom, calling her the worst student. Mi still gets nightmares about her teacher. She is convinced that teachers have considerable influence on children’s lives and she needed to work in the field of education to help build this relationship.

Mi also loved reading English, and would often spend her allowance on books and magazines. By 15, she was tutoring other students and a few years later, she dropped out of high school to start a language-instruction company with her uncle. The traditional tutoring center did well and she helped expand the business to several learning centers in Beijing over the next ten years. But Mi wanted to do more.

She returned to school and spent a semester at Cornell University in Ithaca, New York. In 2013, she met with former Google China chief Kaifu Lee and talked with him about the idea for VIPKid. Since then things haven’t been the same. For the next year, Mi worked on developing the software and curriculum. Today, VIPKid offers Chinese students access to the North American elementary school education, online. Kids aged five to twelve can connect with American instructors to study English, Math, Science, and other subjects. VIPKid’s software operates like a video-conferencing solution where a 25-minute lesson is offered in the subject through a presentation, real-time audio, and video links.

VIPKid’s teachers are hired through referrals and social media. It tests and screens its applicants and trains the selected teachers for a week. Once the training is completed, the prospective employee needs to pass a final test before they can begin work. Unlike schools, VIPKid does not require teachers to have a degree in education, but it expects them to have some teaching experience. Teachers earn around $20 an hour.

VIPKid’s Financials

Education is a very lucrative market in China. Most Chinese families value education and are willing to pay a premium for quality education. VIPKid claims to offer good quality education at affordable prices. It sells lessons in the form of bundles. Parents pay about $1500 for a block of 72 classes and can select the course and the teachers they want to enroll with. It does not disclose detailed financials, but it has revealed that it has monthly revenues of $60 million and is projecting to end the current year with $750 million in revenues. It has more than 20,000 teachers who connect with over 200,000 paying students from 32 countries.

VIPKid has been venture funded so far with $325 million in funding from investors including Sequoia Capital, Tencent Holdings, Northern Light Venture Capital, and Matrix Partners China. Its latest round of funding was held last month when it raised $200 million from Sequoia Capital and Tencent Holdings at a $1.5 billion valuation.

Despite the rising valuation, VIPKid is aware, and wary, of rising competition. There are global offerings like those by Rosetta Stone and Duolingo that offer non-interactive inexpensive classes for language courses. Then there are several localized offerings as well. TutorGroup’s VIPABC brand has been offering mathematics and language classes with many North American instructors in China for the last two decades. More recently, 51Talk began offering a service that connects students with Filipino instructors at a much lower cost. Given that VIPKid has several North American tutors on its roster, 51Talk also began offering a premium service for students wanting to connect with North American instructors. VIPKid will need to continue to innovate, if it wants to remain successful.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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[…] VIPKID is an online ESL learning platform based in China and was just named one of China’s newest Billion Dollar Unicorns. […]

What is VIPKID? A quick overview in 12 bullet points. – The Schoolhouse Mommy Friday, October 27, 2017 at 2:36 AM PT