According to research reports, the market for learning English in China is growing 25% a year and is expected to be worth $21 billion in revenue by the end of 2016. China state media claims that the country has as many as 400 million English-language learners at the beginning of the decade. Billion-Dollar Unicorn club member TutorGroup (Private:TUTOR) is catering to this high-growth market.
Shanghai-based TutorGroup was launched in 2004 by brothers Dr. Eric Yang and Ming Yang to help deliver language lessons online. The company was set up when the brothers wanted to find a way to deliver quality education while overcoming limited accessibility and the cost of school-based learning. The two wanted to build an education system that would leverage data analytics to find the best learning behavior. To solve this problem, the two built a way to use technology and people to scale student-customized education, thus forming TutorGroup. Its technology platform enables it to scale up by automatically recommending class size, learning pace and course content.
TutorGroup's flagship products include vipabc, TutorABC, vipabc junior and TutorABCJr for English training and TutorMing for Mandarin Chinese. The company's online platform connects more than 2,000 teachers in 40 countries through real-time class sessions. It has delivered more than 5 million classroom sessions through its language portals.
The company has some very interesting teaching techniques as well. For instance, last summer, it launched TutorGlass, a wearable device that allows students to hear and see what the consultant is seeing through a computer or portable device. One of the first classes using TutorGlass was a demonstration of Western cuisine that detailed the selection of ingredients, cutting skills, entrées, main courses and desserts over a five-week period and allowed students to cook from a subjective view and learn some cooking vocabulary words and phrases.
TutorGroup has become the biggest English language learning institute in the world. Its teaching material includes over 10,000 hours of course content. Its predictive and analytic platform relies on a database of user preferences and feedback that it has collated over the past 12 years. It then integrates this learning with analytical algorithms and predictive capabilities to deliver an optimal teacher-student combination along with content on a real-time basis. For students, its platform is able to recommend the best course size, learning pace, a skilled teacher and suitable content. For teachers, it is able to deliver a class suited to the teacher's skills.
TutorGroup is privately held and does not disclose its financials or user metrics. It provides courses for users for free and also offers courses to organizations where it charges a fee. Pricing details are not available. The company is venture funded so far with $315 million from investors including Alibaba Capital Partners, Cyber Agent Investment, CyberAgent Ventures, GIC, Goldman Sachs, Qiming Venture Partners, Russia-China Investment Fund, SBI Holdings, Silverlink Capital and Temasek Holdings. Its last round of funding was held in November 2015 when it raised $200 million from GIC, Goldman Sachs, Russia-China Investment Fund and Silverlink Capital at a valuation of over $1 billion. Prior to this round, TutorGroup had raised $100 million in February 2014 at an undisclosed valuation.
TutorGroup plans to use the funds to increase the courses that it is currently teaching. The core focus will be to target Asian and American consumers who want to learn Chinese.
TutorGroup's high valuation brings me back to my discussion on another online language learning company - Duolingo. I had spoken earlier about my discomfort with reference to companies like Duolingo which do not have a defined revenue model, but continue to see their valuation rise. Duolingo offers language courses for free, but it earns revenues from its user testing business. TutorGroup also offers free language courses and appears to have an enterprise arm for revenues. But without further details on its financials, it is hard to say whether the billion-dollar valuation is justified.