Funding pours into online services and sites as sector expands

Investors are pouring into China's online educational market as the industry expands.

A total of 149 online projects have received funding, worth $910 million, since 2013, according to Pan Pengkai, CEO at the English Language Teaching product provider ALO7 in Shanghai.

In March, Linked-F Financial Training announced an angel round of investment of 10 million yuan ($1.57 million) to extend its business operation.

The Internet educational platform will use the funding to beef up its online presence.

During the same month, 17zuoye.com completed another round of financing worth $100 million. The website is a kindergarten to 12th grade (K12) online educational platform which connects students, teachers and parents.

"The number of online registered users for educational platforms is predicted to exceed 100 million by the end of 2015," Pan said. "The market is expected to be worth 120 million yuan."

But Chen Xiangdong, former executive president of China's largest privately-owned education group New Oriental, has warned that fledgling companies have to act quickly to attract funding.

Once an educational site has been rolled out, it has between 12 to 18 months to find investors, Chen pointed out.

"If they fail to attract funding by then or their products are not in demand, they will be eliminated from the marketplace," he said. "Up to 30 percent of the current online educational enterprises will go out of business."

Data provided by research company Analysys International showed that the Internet educational market was worth up to 84.1 billion yuan last year.

Between 2010 and 2014, the industry increased by 33.1 percent, and the sector is projected to be worth 198 billion yuan in two years time.

Analysys International expects that K12 online educational services will show steady growth even though it is only 2.7 percent of the total online market.

In another report, this time from search engine giant Baidu Inc, growth rates in K12 sites reached 94 percent annually, which outstripped other sectors in the industry.

But despite the rising funding trend, there are still investors waiting to see how the online industry shapes up.

Zhang Yilong, a well-known investor who has been involved in startups such as 3W coffee, peer-to-peer, or P2P, lending platform Renrendai and online recruitment site Lagou.com, has no plans to move into the market, especially the K12 sector.

"If the students can see their burden relieved with the help of the Internet, I will give full support to online education. But up till now, I have seen no such a sign," he said.