Whales English Raised 100 Million RMB in Series B Financing Led by Sino-Ocean Capital

BEIJING, Feb. 21, 2020 /PRNewswire/ -- In 2019, the student renewal rate at Whales English has continuously remained at 80-85%, which is significantly higher than the industry average. 

Through its commercial operations, it has achieved positive cash flow in only ten months, and net cash flow throughout 2019.

In the education industry, such remarkable achievements also allow Whales English to receive an olive branch offered by the capital market in 2020.

Recently, Whales English, the leading brand of online K-12 English group classes, announced that it had obtained 100 million RMB in Round B of Financing. 

This round of financing was led by China's leading alternative asset management institution - Sino-Ocean Group Holding Limited (hereinafter referred to as "Sino-Ocean Capital"). Leading the investment, Hike Capital and Fresh Capital co-invested, and China TH Capital served as the exclusive financial advisor. 

Tom Wu, CEO of Whales English, said that after this round of financing, they will use the funds to improve product quality and service efficiency. They do not attract new users with discounts but mainly rely on getting new students by actual learning results and word-of-mouth marketing by the parents. They do not spend money arbitrarily and do not seek celebrity endorsements.

Whale's high financing provided a "lift" to the industry, with refined operating income rising nearly fivefold

Whales English is the only online K-12 English education brand in the market that is targeted at a "cultivating excellence" strategy. It is aimed at students aged 3-18 years. The selection of the native English-speaking teachers, the original American textbook material and implementing the "Three-fixed model" strategy (Fixed teacher, Fixed students and Fixed schedule) are all conducted very strictly to maintain high quality. Through the original intensive reading and heuristic teaching style, they help children improve their comprehensive ability of listening, speaking, reading, writing, starting from zero-based English, so as to cultivate their skills and increase international competitiveness. In 2018, it became the only enterprise that has been selected as a key project of the 13th Five-year Plan by the Ministry of Education of the People's Republic of China.

The capital market returned to a more sensible level in 2019, and the criteria for judging projects are more stringent, which also makes the advantages of companies with clear development ideas, precise positioning and excellent products, to stand out firmly. 

This time, Whales English was able to obtain 100 million RMB of financing, which undoubtedly brought a lot of positive energy to the online education market as it was tormented with frequent negative news. The company also pointed out a new, fresh direction for the course of K-12 English in China.

According to statistics, Whales English has been in the leading role for the K-12 English group-class education industry in 2019, and has entered the Top Five in the online K-12 English industry in China. 

With the general growth slowdown in the industry, the company bucked the trend with growth of nearly five times. 

The rapid growth of premium users and income mainly depends on the renewal of premium users and word-of-mouth referrals. The virtuous cycle of not wasting money has instead brought more rapid and stable development in the cold winter.

The cost of customer acquisition has been maintained at around 2,000 yuan, which is about 1/5 of the industry; the renewal rate at maturity has always remained at 80-85%, and the proportion of new students from referrals is as high as 60-70%. This is much higher than the industry average and shows it an excellent renewal and referral rate that ensures the healthy and consistent growth of the company. Since the company's formal commercial operation at the end of 2017, it has achieved positive cash flow in only ten months. In 2019, it achieved net operating cash flow inflow throughout the year.

In this regard, Tom Wu said that the children's English circuit had entered the second half, and enterprises should focus on sustainable and refined operations. This requires understanding two cores: 

Firstly, positioning should be differentiated and targeted at user value. Positioning is much simpler than just a brand name and a slogan. It needs to be highly valuable to users and sufficiently different from other schools. Enterprise strategies and resources should also be invested around positioning. 

Secondly, the product must be effective. Only if the product is effective, then it can trigger and bring high benefits for both user and school, resulting in increased renewal and referral rates. High renewal rates will bring a longer user life cycle and stronger profitability; high referral rates will reduce customer acquisition costs and also have a positive effect on renewals itself. These two core indicators reflect to some extent whether an education company can finally build a healthy economic model.

Highly favored by capital, and confidence in Whales comes from understanding education

Whales English has always followed the "Three fixed" model strategy, which means having fixed teachers, students and schedules to bring children a better experience and learning effect and to maintain quality consistency. 

At the same time, it also understands the key of operation of the education industry. 

The product focuses on the essence of education. The underlying logic of education runs through the core of education. Even during difficulty in the industry, it will also get the attention and affirmation of the capital market.

As the lead investor, Lin Chuan, Deputy General Manager of Sino-Ocean Capital and Managing Director of Equity Investment Business, very much recognizes the development model and path of Whales. He pointed out that it is the first online education company of Sino-Ocean Capital to invest in the equity investment sector. 

In his opinion, there are quite a number of online education enterprises that do not run out, and believes the fundamental reason is that they do not grasp the core of education, and just blindly expand the scale and neglect the product effect and operating efficiency. Whales English does not blindly pursue the development speed of its competitors, nor does it rely on the mainstream method to fall into the category of other educational organizations. 

It returns to the essence of education with a clear differentiated value orientation of "Training and Cultivating Excellence"; with the goal of real learning effects of products, more resources are invested in the grinding of educational products, providing users with real effective and valuable products, so that the company can obtain more users' recognition, and sustain a healthy growth driven by word-of-mouth, forming a virtuous circle.

Ms. Deng Jingyin, Investment Director of the equity investment team of Sino-Ocean Capital, said that Sino-Ocean Capital has been paying close attention to the domestic online education market. The business model, market performance and experience of team members of Whales are in line with the overall investment logic, industry analysis and judgment of Ocean Capital for the online education industry.

"We believe that Whales English has run through the nature of education will definitely stand out and successfully counterattack in the fierce competition in the second half," Lin Chuan pointed out.

The old shareholder and angel investor Hike Capital also continued to add this round of investment. Founding partner Xu Shi has been very optimistic about the logic of Whales English training since he invested in 2017. 

Excellent and efficient courses to ensure quality and differentiated business logic, avoiding inefficient expenditure, seizing the essence of education, do profound research on their existing user base and industry status, focusing on user needs, and improving product effects. 

Whales English is a company that does things in a down-to-earth way, puts education first rather than data. Its healthy economic model is absolutely leading in the online education industry, and its rapid development has always been in the right direction.

Xiao Xiao, a partner of Fresh Capital, said that Whales English has far exceeded expectations in the past year and a half. Not only has it achieved qualitative changes in brand positioning, innovation of teaching products and Internet products, it also respects the heart of commerce, and through continuous improvement of operating efficiency, it achieves rapid growth without burning/wasting money. Xiao Xiao also continues to be optimistic about the team led by Tom Wu who follows the Internet education concept of initial education, effect orientation and value creation.

Jiang Kaiyang, the Vice president of the China TH Capital, said that Whales English had formed a highly differentiated positioning with the value of "Cultivating Excellence". 

Firstly, "Cultivating Excellence" aims at the effect and selection, which is significantly different from children's enlightenment English. This also allows the company to cover the learning needs of subjects at the stage of K12. 

Secondly, "Cultivating Excellence" is proven to be a more efficient teaching method.

The best way to learn a language is to use heuristic and conversational teaching in a follow-up mode. In the end, "Cultivating Excellence" is an essential requirement. The course covers from the basics to the college entrance examination level, and shows it is the best brand communication method for children of different age groups. We also continue to be optimistic about the understanding and persistence of the Whales English team's underlying logic in education, and hope that they can help more Chinese children learn English more efficiently and confidently.

Speaking of the development plan for 2020, Tom Wu said that the first goal is still to focus on the improvement of teaching products, teacher quality, and user service, and continue to improve user satisfaction; the second goal is to open source and reduce expenditures, and continue to grow healthy. 

At the same time, it optimizes customer acquisition costs, improves operational efficiency, and brings the economic model to the next level. 

The third primary goal is to continue to pay attention to the growth of its employees and the introduction of new talents, improve the sense of accomplishment and satisfaction of employees, and make Whales English become the most cohesive and collective company in the online K-12 English Education.

SOURCE Whales English