Chinese edtech firms’ $7.8b fundraising frenzy masks some hard truths on profitability

Source: bantersnaps/Unsplash

China’s edtech sector, one of the biggest beneficiaries of the coronavirus-induced tech adoption, attracted several billions of dollars from bullish investors in 2020. These investments, though, are not risk-free as the edtech firms’ path to profitability still remains sketchy, given the top dollars they have to spend on customer acquisition, and user retention.

Edtech emerged as one of China’s most well-funded industries by private equity (PE) and venture capital (VC) investors in 2020. According to proprietary data compiled by DealStreetAsia Research &Analytics, there were at least 52 PE-VC transactions totaling about $7.8 billion in the Chinese edtech sector last year.

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