Tencent to Invest in Udemy as the Online Institute Plans IPO

Tencent to Invest in Udemy as the Online Institute Plans IPO

Tencent Holdings Ltd is leading other investors in a funding round that puts the value of the online education startup Udemy Inc. at more than $3 billion, Bloomberg reported, citing sources.

The development is coming at a time when Udemy is contemplating pursuing an initial public offering, according to people familiar with the matter.

It is not clear how much Tencent is investing in the San Francisco-based startup, but Udemy said on Wednesday that it has raised $50 million in a round to put the company’s value at $3.25 billion before the new round of investment.

According to regulatory filing in Delaware, Udemy is looking to raise $100 million in new funding. It is not established if the new round of funding lives up to the expectation.

However, Tencent’s involvement in the fundraising underscores its liberty where its Chinese counterparts are under restriction. Except for its super app, WeChat, which recently came under the US radar, Tecent has more to worry about in China than in the United States.

In the US, Huawei is banned while TikTok is fighting to stay in business. Outside the US, they are operating under serious scrutiny from other governments, under pressure from Washington, and lack the freedom to invest in American companies.

Last year, the Committee on Foreign Investment in the United States (CFIUS), a US government panel that reviews deals for potential national security risks, revisited ByteDance acquisition of Musical.ly (TikTok) in 2017.

The review ushered in a new wave of scrutiny that spurred Washington to issue the 45 days divestment ultimatum to the short video app. But it also became contagious, touching WeChat, which has become popular among Americans.

The CFIU had unanimously recommended that president Trump take the action in order to “protect US users from exploitation of their personal data.”

Nevertheless, it was a sequel of Huawei’s ordeal extended to both WeChat and TikTok, although with a peck of lifeline – the court rulings stopping the US government from forcing a sale. The Chinese telecom giant, unlike its Chinese siblings, has had it hard from the Trump administration’s national security punchline, and it is barely surviving.

While Huawei and TikTok’s parent company, ByteDance, battled to stay alive, Tecent was roaming around the world with enviable freedom, investing in whatever it deems fit.

Beyond its core gaming and social media empire, Tencent invests in China and increasingly outside it, grooming upstarts in everything from supplying fresh vegetables to building electric vehicles. Tencent has investment in a range of US companies, including Epic games, Reddit, Warner Music Group Corp. and Activision Blizzard, the report said.

In the era of COVID-19, when virtual life has become the new normal, Tencent saw an investment opportunity in online studies. As the pandemic shut conventional schools, Udemy, Coursera, Hubspot etc became top destination for students, opening an array of investments that Tencent is cashing in on.

Udemy Chief Executive Officer Gregg Coccari said the pandemic generated “five years of worth of growth in five months” for Udemy consumer business.

Udemy, like Coursera, offers professional, technical and personal development courses, as well as an array of classes like cybersecurity and guitar. Data from its website said it has enrolled 35 million in more than 130,000 online courses.

In China, Tecent is pushing its in-house learning platform through competition with online learning platforms TAL Education Group, ByteDance and NetEase while investing in startups such as Yuanfudao and VIPKid offering after-school tutoring.

Tencent’s investment in Udemy represents a larger interest in online education outside China. According to Bloomberg, Tecent’s largest investors include Naspers Ltd., the South African parent company of Prosus, which is also an Udemy backer. With the new round of funds, Udemy, which was earlier in the year valued at $2 billion, will become one of the most valuable education technologies in the world.

While the new round of funding puts Udemy closer to IPO, the educational institute said there is no set date yet.

“We’re of course preparing the company for that eventuality if the board so Chooses, we haven’t taken any steps,” Coccari said.

He added that Udemy has millions of dollars and there have been inquiries from blank-check companies, which allow a business to public through a merger rather than an IPO, but no decision has been taken yet.

“It was all inbound interest, nothing that we were chasing at all. The board will consider any kind of options that we have in the future,” Coccari said.

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