The Financial Times is reporting that China’s online English tutor startup VIPKid is struggling to raise a $500 million round of funding that would value the company at $5.5 billion to $6 billion.
According to the report, some investors have concerns over the company’s high costs and worry it has an unsustainable business model. The Information first reported the fundraising and revealed the company’s financials in January. The data showed that net losses were growing, as was revenue.
In the first ten months of 2018, the company’s revenue grew to 3 billion yuan, with net losses already at 2.2 billion yuan. In fiscal 2018, the company spent 1.2 billion yuan acquiring new users, up from 345 million yuan the previous year. The company estimates that new user acquisition costs will grow to 2.1 billion yuan in fiscal 2019.
Even though some investors are skeptical, some private equity firms are still interested in participating in the latest round, according to a person briefed on the matter. The company’s existing investors include Tencent, Coatue Management and Sequoia Capital.