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A classroom in Xingtai city, Hebei province, China. Photo credit: dewater / 123RF.

China purportedly surpassed the US last year in the amount of funding being plowed into education-focused startups, so it’s no surprise that another milestone has just been reached: China now has its first billion-dollar educational startup.

With US$120 million this week invested in a tutoring service called Yuanfudao – valuing it just over US$1 billion with a claimed 160 million registered users across its three apps – the sector has reached new heights in China, highlighting a decade of sudden and rapid growth.

Online education in China is set to be worth US$30 billion by 2018, according to iResearch data, nearly double the market size back in 2015.

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C+ for effort

Despite the ubiquity and breadth of educational services for both adults and children, online providers are not finding it easy. Investors around the world were more cautious last year than in 2015, leading to a smaller flow of money into the so-called “edtech” segment.

And with only five percent of China’s online education firms earning a profit in 2015, dozens of the hundreds that have sprung up in recent years have been forced to shut down.

“A lot of our peers have gone out of business because they failed to raise funds, and venture capitalists are now more picky when it comes to online education projects,” said Tong Zhe, chief executive of video courses startup Wanmen, last year speaking to the South China Morning Post. “And now we are more cautious and prudent in using our money.”

Despite the glittering new unicorn, cautiousness and frugality look set to be the ongoing themes in 2017.

But fast-growing China will inevitably present entrepreneurs with new boom areas within the educational space. With China predicted to be the source of 37 percent of all STEM (science, technology, engineering, and mathematics) majors by 2020, startups focused on STEM have a lot of room for quick growth – and will therefore be a lot more attractive to tech investors.

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