Beijing’s education crackdown severely hurt the after-school tutoring industry. Recently regulators cracked down on the DiDi rider app also. VCs like SoftBank were ready to invest billions of dollars in backing the user growth. Along with SoftBank, many investment firms are publicly traded in the U.S. or will be listed soon.
After the IPO, the Chinese authorities ordered tech giants to remove DiDi app from their app stores. Then, in the last week of July, Beijing targeted the education sector. Authorities hit tutoring firms from kindergarten to 12th standard by forcing them to minimise the operating hours, abstain from foreign investments and restructure themselves as non-profit organisations.
Shares of several firms such as Tal Education, Gaotu Techedu fell rapidly. These companies are industry leaders in China. They bear a loss of more than 75% over the last three months. Some of the tutoring start-ups even lost their way to public listing.
In October 2020, Yuanfudao, a tutoring start-up, bagged $2.2 billion from prominent investors like Tencent and Temasek. The total valuation of the company was $15.5 billion. Later in December, Yuanfudao competitor Zuoyebang bagged $1.6 billion from Sequoia China, Alibaba and other investors.
Experts suggested that the after-school tutoring industry can be a dominant market because of China’s huge population. However, there are already several prominent market players in the industry, and it requires more penetration with a cash-burning strategy to stay in the market.
The U.S. listed stocks of the Chinese education industry like OneSmart (ONE) could be removed from the New York stock exchange. OneSmart share price has been below $1 for more than two months. Still, major investors like SoftBank have hope for Chinese aggressive start-up culture. But when it comes to the education industry, many investment firms tend to look at the other markets in Asia. A leader from the education industry said that India also has a strong potential for education platforms.