I recently attended my first EdTech exhibition in China called GET Summit & Expo, Beijing. It hosted talks from known EdTech developers, influencers and investors. A host of domestic and international EdTech companies exhibited at the show.
The energy was high, and it seems that the EdTech market in China is ready to surge.
The stats say that the Chinese government invested around 1.07 billion dollars in edtech companies in the year 2015, and the edtech companies in China raised over 1.2 billion dollars in 2016.
The government there is set to invest $30 billion in edtech companies by the year 2020, in line with its 13th Five Year Plan.
Therefore, it is the right time for EdTech entrepreneurs to look towards the east, if they are planning to widen and stregnthen their footing in the industry. China’s investment in educational companies is on a roll, and it will be wise to try and find the right partners there before the market reaches the top of the bell curve.
EdTech in China
The education-related goals of the Chinese government are to ‘modernise education, raise the average length of education received by the working population, increase the quality of education…, encourage institutions of higher learning, vocational colleges, and research institutes to participate fully in the development of a national innovation system…, and to nurture the capacity of students for creativity, innovation, and starting businesses.’ – The 13th Five Year Plan (2016–2020), For Economic and Social Development of the People’s Republic of China.
The government is encouraging Chinese tech professionals working and living abroad to return and train the local resources.
China education investment is focussed on EdTech companies offering K-12 MOOC’s (Massive open online courses), SaaS, online tutoring, English learning, and teacher training.
Future focus will be on project-based learning, AI-based edtech, STEM products and robotics.
China’s huge population, hence a large edtech market size, and their cultural outlook of ‘spending on education as an investment’ are two important contributing factors to the growth of the market.
Also, there is a growth in access to technology by Chinese students and educators, and edtech companies are set to leverage that.
The Chinese government is open to international exchanges and cooperations in the field of education, and that is a great news for foreign EdTech companies.
The country’s focus on technology-backed education comes from the intention to prepare to shift the country’s positioning from a product-based economy to a service-based one. They aim to promote skill-based education and creative and innovative thinking among students.
In a few years, it’ll no more be ‘Made in China,’ but ‘Engineered in China’.
What I gathered on the whole trip about the trends in the EdTech market in China are compiled below.
The crux is that international companies need to localise their products, protect their IP, vet local partners, and be proactive, if they want to enter China’s fast-growing EdTech market.
How to enter
China is a HUGE market.
If you are an international or non-Chinese company planning to sell in China or to attract Chinese education investment, you will have to roll up your sleeves and dive in fully.
No half-hearted effort will work for this market, as it is big and fast-moving.
You either localise and evolve with the requirements of the market, or you will be left behind by a Chinese competitor moving and innovating faster.
Who to sell to
Recognise the target market for your edtech product–public schools, private schools, training schools, students/parents, teachers.
One truth about the Chinese education market, as about any other education market in the world, is that it doesn’t evolve as fast as the technology does.
The education sector, anywhere in the world, takes its own sweet time to adapt to and accept the evolving technology.
However, that’s not necessarily the case with the direct consumers in the sector, for example students and parents, who can make decisions independent of the slow-moving factors like state or school funding and plans. So, B2C market is a great segment to look at in China.
‘The juice will be in the B2C market rather than the B2B market. So, focus on making your product accessible to parents and students,’ said Bill Boyu Ning, a partner in Blue Elephant Capital, an EdTech investment company in Beijing. He was addressing a panel of British EdTech companies exhibiting with BESA, in Beijing.
Also, Private schools in China are increasingly looking for e-content, courses, SaaS, IoT, and other edtech products.
They are the right target market for foreign edtech companies, as the decision makers can be directly approached.
Public schools, on the other hand, have a complex, multi-layered decision-making system. ‘To get into public schools, you will have to file tenders through your local partners or office,’ says Pawan Lalwani (Founder & CEO at Language Your Way), who has a successively running English language learning app for primary school learners in China.
On talking to a few student and teachers, I gauged that Public schools are not very well-equipped with enough technology to run EdTech products.
International private schools, on the other hand, where parents pay the money required to teach their kids with advanced tools, are where your market lies, if you have a global product.
Many companies like Genius Lab and Creatica Lab offer after-school programs and workshops to public school students in China, to give students the opportunity to learn future-oriented skills and courses like 3D printing, coding and other STEM-related subjects.
What to sell
The China EdTech market is focussing on K-12 SaaS, tutoring, language learning, STEM products (Science, Technology, Engineering and Math), Project-based learning and MOOC’s.
Besides K12, online skill and vocational education, and online corporate training are also popular among investors.
On hardware front, the Chinese government has announced large EdTech-related spending to boost the ICT infrastructure.
The local investment companies and Chinese government is Investing on innovative ideas and quality tools.
Big players in the market, like TAL Education, have invested in companies like Minerva Schools, Knewton, and Volley. Most of these new startups that have been invested in are offering products that use adaptive learning, artificial intelligence (AI), and gamification in learning.
This move shows how TAL Education Group is moving from its brick-and-mortar tution centres to being a futuristic, blended learning provider.
The buzzwords in the EdTech market in China for current and future investments are xAPI or Learning data analytics, AI, Machine Learning, and Natural Language Processing (NLP).
‘The Edtech product profile in China will now move from high-quality content and LMS’s to AI-based products,’ said Bill Boyu Ning, Blue Elephant Capital.
For example, LiuLiShuo app uses AI to teach English to more than 42 million Chinese users. They have raised three rounds of funding so far.
All said and done, use the golden rule of choosing a product for your market, ‘identify what local problem your product can solve.’
Localisation of your product to enter the Chinese market is extremely important.
The requirement of your target market in China might be very different than that of the same segment in any other country.
Taking a leaf from Uber’s book, you must iterate your product as per the local behaviour and requirements.
Try and localise your operations and customer service as much as you can, with the help of local partners or through a local office.
The term ‘deep localization’ has been coined for the same by Ian Hunter, COO, WCBS, an LMS provider. In this article’s context, deep localisation of an edtech product means that it is not only important to translate your content and software into Chinese, but to also make it compatible with local devices, and communication and payment platforms.
Also, try to work with local marketing avenues. Place your apps on local play stores. If you have an android app, then you can place it on various Chinese android app stores. Here is a list of top 20-25 Chinese android App stores.
Localise your content and filter it in line with the local regulations. You do not want to be blocked out of China like Youtube and Google.
Partners and investors
When you enter the Chinese market, it’s best to work with a local partner or investor who knows the dynamics of the local market and competitors, and have operational insights. They can also work with you to localise the product, and modify it to have an edge over local competitors.
They will also make sure that your product is protected, and is abiding the local laws and regulations.
If you look for a local partner, spend time vetting your options before you finalise the one you can trust with your product.
Make sure that they have the potential to expand your market as per your expectations.
Many Chinese partners like to have an exclusivity clause in their contract. It is advisable to go for an exclusive partnership only after you have worked with them for a year or two and have the confidence that they can generate the revenue you expect your product to make in the market.
‘I prefer revenue-target-based contracts in China, and not unconditional exclusive contracts for the entire country, unless the distributor or partner has proved themselves. Province-wise exclusivity is still a better option, if exclusivity is what your partner insists on, but link that too to a sales-revenue target and time frame,’ said Pawan Lalwani (Founder & CEO at Language Your Way).
Many Chinese education investors are on the lookout for innovative and quality EdTech products to add to their portfolio.
For example, TAL, in its effort to go online, has invested in startups including Enuma, Knewton, Minerva Project and Volley.
Bill Boyu Ning from Blue Elephant Capital said, ‘We are more keen on investing in companies that are in their Seed or Series A round, as they are easy to mould to the requirements of the Chinese market than companies that are old and set in their ways.’
At the end of the day, even to attract investment, it’s about how well you can adapt to the Chinese market’s needs. Deep Localisation, as Ian Hunter pointed out, is the way to go.
List of a few top Chinese EdTech investors:
- Sinovation Ventures
- TAL Education
- WI Harper Group
- Fosun Group
- Yongjin Group
Intellectual Property (IP) and Corporate Taxes
Lastly, register your trademark and IP. Copyright registration in China is based on first-come-first-serve basis.
If you are from a country that is party to the NICE agreement, then you just need to transfer your copyright registration to China, but this process is important, too. Even before signing partnership, distribution or JV agreements in China, protect your IP!
You can file for copyright registration yourself, but for trademark registration, you are required to hire a local agent.
Also, hire a good tax and legal advisor to make sure your corporate tax payment is in compliance with the local laws, to avoid any hassle.
Chinese EdTEch market is huge and growing. The government and investors are spending on K-12 MOOC’s, online tutoring services, English language learning tools, vocational and skill training courses, and SaaS.
Now, the investors are hunting for AI-based, project-based, and adaptive learning products to add to their portfolio.
The best way to enter and sell in the Chinese EdTech market is to find a local problem to solve with your product, define your target market, localise your product, protect your IP, and find local partners, investors or team to operate in the region.
Chinese market is a world of its own, and complete focus of a full-time team is required to enter this market effectively.
Contributors: A shout out to Pawan Lalwani (Founder & CEO at Language Your Way) for his contribution to this article with his valuable insights on the Chinese market.
Read more EdTech news and articles.