Ning Boyu, founding partner of Blue Elephant Capital: Looking forward to the second half of the education industry

Ning Boyu joined TAL in October 2008 and has witnessed its rapid growth. From Lejiale English to Mobi Thinking Center and Strategic Investment Department, Ning Boyu's 30 to 40 years were inseparable from TAL. In 2015, Ning Boyu left the Strategic Investment Department of TAL and founded Blue Elephant Capital with the support of TAL. Blue Elephant Capital is also an invested company of TAL.

Ning Boyu has served 40 projects invested by TAL and independently invested in 67 projects at Blue Elephant, with a total of 107 projects. He has accumulated a lot of knowledge about the education industry. At the invitation of TAL, he made a speech at the TAL Managers Conference and the New Year Conference 2019. The highlights are as follows:

2013-2023 is the golden decade of the education industry. In 2013, Coursera completed its B round of financing with 60 million US dollars, reaching the scale of a quasi-unicorn, the first quasi-unicorn in online education. Since 2013, online education has developed explosively. 2013 can be said to be the first year of online education. 2019 is the second half of the education industry. When I was interviewed by Startup Dark Horse, I put forward a view: 100 listed education companies will emerge in the education industry in 10 years . This view is gradually being verified. It is a high probability event that 100 listed education companies will emerge in 2023. Several factors:

(1) The right time : mobile Internet enters education.

(2) Geographical advantage : class consumption upgrade.

(3) Renhe : There are a large number of Internet and education giants that cultivate a large number of mid- and senior-level talents, resulting in a high level of talent overflow.

(4) System: The institutionalized market was loosened and the capital market was also liberalized.

From 2013 to 2023, urban populations will be divided into different groups according to their spending power. By 2023, China's 1.4 billion population will be divided into: 1) 800 million ordinary people, 2) 200 million wealthy urban people, and 3) 400 million urban upper middle class. The 600 million wealthy and upper middle class people will have a huge spending power . They will become purchasers of family education and users of TAL.

Education is a reproduction of class . Today, we see that 200 million people are wealthy, 400 million are urban upper middle class, and 800 million are urban and rural populations. The future social structure may be 90% ordinary class, 9% middle class and 1% wealthy class. We expect that the polarization of social wealth will become more and more serious in the future. No matter how hard you work, you can feel the relative downward shift of class .

TAL is a miracle in the history of the development of education companies. Why? The United States has grown at an average annual rate of 2% over the past 150 years, China has grown at an average annual rate of 6% over the past 40 years, and TAL's annual growth rate is 60%, which is no less than any other Internet company. From this perspective, it is important to choose the right aircraft carrier. If someone offers you a position on a rocket, don't be picky about whether it is close to the window.

The government is investing more and more money into the education industry every year, with fiscal expenditures of 4% of GDP each year. The motivations for achieving this ratio are:

1) Political nature : For the sake of political stability, the government needs to maintain a high level of control over education.

2) Competitiveness : Education is a national competition accelerator, which is the key to competition between countries.

3) Morality : Provide basic educational services to the general public.

Why should we invest a lot of money in education informatization? Because technology is not only an important way to solve the problem of universal education, it may be the only way.

We have previously analyzed the sources of money for the education industry, which are mainly divided into two categories: 1) middle- and high-income families, and 2) the government and ordinary families.

The first group of people, mainly middle- and high-income families, pursue educational quality , such as full-time international schools, early childhood education and study abroad, and extracurricular quality education; correspondingly, the entrepreneurial direction of education may be internationalization, such as new schools, industrial chain extension, new categories and new products, and online products.

The second group of people, typically represented by the government, mainly pursues educational equity. They focus on products such as K12 school informatization and improving learning efficiency and effectiveness; correspondingly, the entrepreneurial direction of education may be localization , such as introducing new teaching models, new content and informatization.

On the right are the four key variables of education quality and education equity:

1) Demographic Dividend Society

2) Consumption Upgrade Economy

3) Politics

4) Technology

Entrepreneurs have different characteristics at different stages. For example, a large number of Internet talents poured into online education in 2013. What kind of entrepreneurs are suitable for starting a business in what field? There are some matches between entrepreneurs and fields.

Those who work in media and communities are 1% of the connectors in the crowd, and those who work in tools and content are 4-5% of product managers. B2C training is entrepreneurs, and B2B is politicians. Why? B2B is an entrepreneur's business, and it requires a high level of personal connections. If you want to sell something to a school, you need to know what the principal thinks, what the parents think, what the students think, what the leaders think, and you also need to know the decision-making chain of the entire school. Because To B is decision-making chain management, and To C is cognitive management. From this perspective, different types of entrepreneurs are suitable for different businesses.

10 years of training industry, every 10 years:

In 1993 , New Oriental was founded and within 10 years it completed a nationwide chain of English training.

In 2003 , the predecessor of New Oriental was founded, and within 10 years it completed a nationwide chain in the K12 general practice field.

In 2013 , Internet people found education, and educators found the Internet. In the first half of the golden decade, VIPKID came out.

In the second half of 2018 , artificial intelligence began to be combined with education. We are thinking, can educational services be completely AI-based in the next five years?

The education industry has proven in the past five years that online education is a real proposition. When a new product appears, there will always be early adopters, but there is a gap between early adopters and early majority. If you can't cross the gap in users, you will be limited. Looking at online education today, we have already crossed the gap. Online children's English, including KID, has made 25 million calls and affected 25 million families. Each family affects 5 families around them, and the number of people affected is very large. From this perspective, user awareness is not a problem. If a considerable number of user experiences can be achieved, online education is a real proposition.

We made a prediction that in the field of training, the scale of online education may exceed that of offline education in the 10 years from 2013 to 2023.

Existing education subcategories are all worth innovating in an online way.
New education subcategories are all worth creating in an online way.

In the future, many types of education will exceed people's imagination, and these types of education may not even exist now. If we divide the subjects from -1 year old to vocational education, from quality education to English, we will get an online education grid, and every part where the horizontal and vertical axes interact has entrepreneurial opportunities.

The onlineization of training categories actually has a development sequence. The first quadrant, with strong knowledge and low complexity, is the most suitable for online training. On the contrary, the fourth quadrant, with strong operability and high complexity, is not very suitable for online training, but a solution will be found in the future. Because the process of human society migrating to the virtual society has different speeds and rhythms, but a solution will be found in the end.

The evolution path of B2C. Offline training and online training have taken similar paths. In the final analysis, it is to seek a balance between educational experience and profit margin, and finally achieve a good model.

Product experience may include: 1) information transmission and 2) emotional transmission. Business model, to put it bluntly, is profit margin. Entrepreneurs need to find a balance between educational product experience and profit margin.

The rule of B2C technology application is that connection is the process of data collection, and after connection comes better data application.

China's public school informatization started in 2000, when it was mainly computer companies and publishing houses. In 2006, Quantong launched a new category, a platform for home-school interaction. In 2008, Seewo appeared, mainly providing all-in-one computers. In the future, many new things will appear in schools. Schools can be compared to mobile phones. In the future, schools will need four things: 1) new hardware, 2) new operating systems, 3) new applications, and 4) new services.

Life in first-tier cities is actually the same all over the world. People in first-tier cities are global people. However, life and resource allocation in second-, third-, and fourth-tier cities are very different from first-tier cities. China's education is very uneven, and education expenditures vary from region to region. Education expenditures in the central region are the lowest.

Education can be understood as an egg. The eggshell is called light education, the egg white is called medium education, and the yolk is called heavy education. Light education is like knowledge payment, like Get. Medium education is training. Heavy education is full-time school.

The penetration of science and technology into education must be from light to heavy. The light area is online education, and the heavy area is educational informatization.

There are three categories in the B2B field, providing new hardware, new systems or new content. Typical players in these three categories are seewo, iFLYTEK and Tuowei. In the past, they mainly solved the problem of data collection. In the future, the focus may be on using data to drive and improve the efficiency and methods of connection.

In the past ten years, from 2013 to 2015, there were mainly single-point breakthroughs in technology. From 2015 to 2018, the model began to blur. Today's world is completely flat. From 2018 to 2023, the second half may turn to B2B2C. The integration of different product forms, the integration of different technical forms, the integration of the system inside and outside, the integration of online and offline, and the integration of domestic and foreign.

In the second half of the education B2B, there will be deep integration, and there are two types of opportunities. The first is the digitization of teaching materials and supplementary materials, and the second is supply chain + AI. These two types of services are particularly good and can be extended to C-end services. Some of the companies we invested in have naturally extended their B2B to C.

In the primary market of China's education industry from 2013 to 2018, the company that invested the most in the education industry from 2016 to 2018 was TAL Education Group, followed by Blue Elephant. TAL Education Group invested in approximately 100 projects, while Blue Elephant actually invested in 67 projects.

It is not groundless that there will be 100 listed companies in the education industry in 2023. We can see the future of the secondary market of China's education industry from the development of the US medical industry. In 1970, the US medical industry accounted for only 8% of GDP, but today it accounts for 18% of US GDP. In the past, the medical industry was always discussing whether it should be for-profit or non-profit. In the past, the medical industry was a small store model, but now there are more than 400 health care groups. In the past, the medical industry accounted for 2% of the capital market, but now it accounts for 16% of the market share in the United States. A large number of medical companies are capitalized.

The same is true for China's education industry. Schools are struggling with whether to be for-profit or non-profit, and technology penetration is relatively slow. All of this will be different in five to ten years.

In the education industry, Blue Elephant Capital has invested in 67 projects, which are mainly divided into three categories: education quality, education equity and industry services. Representative projects in education quality include Hua La La, ViaX and Timing, while projects in education equity mainly include Zhihuiliu, Youshikoudai and Hexin Technology. In addition, we have also invested in several industry media, such as Ruiyi, Blue Whale Education, New School, New Consumer Insider and New Wisdom.

In his speech, Ning Boyu also envisioned the future of Blue Elephant: Technology is the only way to solve the problem of universal education. Blue Elephant's vision is to build education with capital, to use capital to help and influence the education industry, to serve enough good entrepreneurs, and indirectly to serve enough users. Invest in education entrepreneurs and influence 1 billion people around the world.

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