Below is the transcript of a CNBC interview with Cindy Mi, Founder & CEO, VIPKid and CNBC's Everett Rosenfeld. The interview took place at CNBC's inaugural tech conference, East Tech West, in Nansha, Guangzhou.
ER: So, Cindy, thank you for joining me. For many of the audience who know your company, VIPKid, they'll know it's an education technology company that has been valued by investors at several billion dollars, but it's so much more than just a tech play. Can you tell us a little bit about what VIPKid does?
CM: Yes, so, VIPKid connects 4 to 15-year-old Chinese students, who want to learn English, after school, at the comfort of their homes, to teachers in North America, in the United States and Canada, so that teachers can teach the students, live, live streaming, real-time, one-on-one, in the comfort of their own home, as well, but they will then learn together, through this iPad, or this computer, so this is a connection between students and teachers that's never happened before in human history, but is creating such a great learning efficacy for our students, because they're so engaged with their big friends, and they're looking forward to have the classes every day. So, we were founded in 2013, and by now, we have half a million students, and over 60,000 teachers, that work with us on a weekly basis.
ER: So that's a business model that is really sort of global from the outset. It is connecting people, between China and the US, and I understand you're expanding to other countries, you have expanded to other countries, but primarily, you're looking at China and the United States, and it's a business model that depends on people trusting each other, and people wanting to learn from each other. To what extent does the state of US/China relations affect that business model?
CM: Well, we want a constructive and positive environment in our world of learning, and I know there are a lot of parents, and if you have a little kid, when you think about him or her growing up, and becoming a global citizen, how do they know about each side of the Pacific Ocean, and then begin to understand the other culture? Let me give you some examples on this.
CM: We're so proud of our teacher community, that we have 60,000 of them, and in Texas, we have over 7,000 teachers. So, we were in this teacher conference, it's called Journey, teachers initiate it, and they organized a conference themselves, August this year, and the former First Lady Laura Bush, joined the conference, and then 400 teachers got together, everyone just shared their passion about teaching children in China, and teachers tell me, they say, 'Oh, my students-, Jenny, she is my other daughter, in China,' and some teachers even share their story of their visiting China on their own expense, and then they say, 'I walk around my neighborhood, and tell my neighbours, and I say, 'Chinese people are amazing, the kids are so smart, the parents really respect me.'' You know, one time, one of our teachers had her birthday, and then, on the other side of the screen, it's the whole family, not just the kid, but candles-, like, grandparents, parents, and then they almost bow to the teachers, because we respect the teachers so much in China, and they really respect and appreciate everything the teacher has done for them.
ER: So, it is really creating people an opportunity to see each other, learn from each other-,
CM: And to understand each other, from when the child is so little, and the teachers then tell all their neighbours and students, in their K12 schools, how amazing China is. I think, when we talked just now, you said you were connecting the both countries, and then-, it's critical to the-, the future of the world, and by education, we're doing the same thing.
ER: And a lot of your teachers are not just in major US urban centers, where they may run in to Chinese people, periodically, they're from all parts of America, including rural America.
CM: Yes. We had another teacher conference in Florida, last month, in September. The city, Orlando, named the 29th of September VIPKid day. And one of our teachers is from Tampa, from a very-, a little-, a little city, and then she said to me, she said, you know, 'Without VIPKid, I can't have this extra income, to support the house mortgage, and then buy a car, so with VIPKid, my life is significantly different,' and we-, we're really grateful that we have such an amazing group of teachers to work with us.
ER: So, you mentioned you have 60,000 teachers?
ER: How many students do you have?
CM: Half a million students.
ER: And that is all within China?
CM: So, mostly within China, we also have some Korean and Japanese students. So, what we're really working on to build is a high-quality education program on the cloud, it's a future, cloud-based school, where all the students, from everywhere, can learn from all the teachers. We also have a Mandarin learning program, called Lingo Bus-,
CM: So we're enabling Mandarin learners, when they're 4 to 15 years old, out of the country, to learn Mandarin in an also immersive way, with a Chinese teacher, so we're doing this vice versa.
ER: I'm sure you have all kinds of package deals, so it's hard to ask, but what is the pricing structure like? Is this something that only the wealthiest can afford? Or is this-, is this very accessible to the average Chinese family?
CM: It is accessible to the average Chinese family, people pay about over 10,000 RMB per year, to learn with VIPKid, and, compared to this one-on-one model, they're paying this for the small classes, if they're learning offline.
CM: So, the benefits for the students are very tremendous, because then they can have a teacher, out of the 60,000 teachers, that is the most appropriate for the child, that can really, you know, create this curiosity for learning, and we match it with technology, so students can really, like, get the best teacher, due to their personality preferences, or the learning style, or the-, the other parents comment, based on the teacher, and then they-, they pay way less.
ER: How about on the other side of the equation?
ER: How much are teachers making, in a month? In a year?
CM: Teachers make about $20 US dollars per hour, it is 30 to 40% more than they would make offline tutoring, on average, on Payscale.com, one of the US payment websites, so teachers really love this, because they have the independence and flexibility, many of our teachers are stay-at-home moms, or previous or current K12 teachers. And if you read an article, just a couple of months ago, talking about teachers in the United States, the headline read, 'I'm a teacher in America, and I work three jobs, and I sell blood twice every month, to make ends meet. Because everyone wants to make a good income, and then pay for the-, the family, but if you are a stay-at-home mom, there's little chance you can have a part-time job, or a, like, teaching opportunity, as independent contractors, but VIPKid really opens the world, for the teachers, so that they can choose to stay home with their babies during the day, but choose to work from 4am to 8am in the morning, and then make the-, the good income for the family.
ER: So, we've talked about what VIPKid can do, but the proof is in the results. What does your retention rate look like? Are students, are teachers, sticking with the programs, course after course?
CM: So, for our students, we have a very high retention rate, our parents choose to stay with us, and, not only that, they refer our program to other parents. So out of the new students we get every month, over 65% are from existing parents' referrals. They talk about their students' learning experience on WeChat, and they share about it, and then other parents would sign up, so it's really very helpful for retaining everyone. And then on our teacher side, teachers really enjoy working with us, and every month, there are even 35 to 45 teacher meetups, across the country, and teachers stay, because they make a good income, and also they have this independence and flexibility teaching, and they feel that this is a great community that we work together.
ER: So, it's fair to say that both your student pool and your teacher pool are growing at a strong rate?
CM: Very strong rate. If you think about 2014, there was hardly education technology, edtech, and 2015, in March, we only had 20 teachers, and 200 students. And after 3.5 years, this is where we are. And I think it shows a very strong demand, from the parent side, wanting a global education.
ER: But where are the constraints? You know, where are the constraints on the demand-, on the student, the parent side? How many people want to do it? Where are constraints on the supply side? Are you going to run out of teachers?
CM: I think, no, we're not going to run out of teachers, there are about 4 million K12 teachers in the US, and many more that are retired, or-, or English language teachers. The demand side is, like-, the sky's the limit, too, there are so many children who want the program. I think the limit is, as a platform, how can we maintain the highest quality possible, where we're undergoing this rapid growth? How can we stay focused on quality, and learning efficacy, while we're working with so many teachers, and so many students?
ER: So you're focused on efficacy, you're focused on your community, but on the tech side, you have obviously a-, a-, a very functional video conferencing system. What's next? Are you working on other technologies? I heard something about looking at augmented reality and virtual reality.
CM: Yes, so the amazing thing about online education is, this little iPad is a student's 'i-classroom', so, so much technology can be implemented in there to increase their engagement and their learning efficiency. So, for example, for the matching technology we have, how can we match the half a million students to the 60,000 teachers, in the most appropriate way, recommendations, all the tagging, and everything. And then, for augmented reality, as you just mentioned, if the student wants to talk about a dinosaur, we-, instead of a plain picture, we work with content providers, like National Geographic Learning, and then they have all these vivid, visceral things we can turn in to, like, a lively dinosaur, that can almost, like, interact with the student, so she feels so engaged, and surprised. And also we have these virtual stickers for the classrooms, a teacher can turn herself in to a-, a princess, or-, or a hero, a superhero, and then the students are so enjoying the class, and then, for virtual reality, we have the museum tours, where all these, like-, our teachers make videos, to show the students what their hometowns look like, and we're implementing some of the VR, as well, to show, like, a virtual tour, as well. So, there is so much technology we can use, but only to enhance students' learning efficacy.
ER: That's really interesting, a lot of the things you just mentioned, because it is not just a rote, memorizing vocabulary, it seems like you're really aiming for an entire, sort of, cultural education. Is that accurate?
CM: Yes, that's very accurate. We believe that, as a 21st Century global citizen, it's where we want our children to be, so we're teaching them not only the language of English, grammar, vocabulary, but also reading, writing, math, social studies, science, and it's all blended in to the content of learning. So, this year alone, we've partnered with Houghton Mifflin Harcourt, Oxford University Press, Scholastic, and we even introduced Harry Potter to the-, our-, to our reading program, our reading library, students really enjoy reading this, and then we also partner with SSAT, to provide an online solution for students learning, as well.
ER: Thus far, a lot of-, a lot of your income, a lot of what you're doing, depends on people wanting to learn English, I know you have Lingo Bus, the Mandarin language. Are you seeing an increasing interest in people wanting to learn English? A decreasing interest? Where do you project that, going forward?
CM: I think we see an increasing interest in students learning English. The parents today-, you know, I want to understand who in the audience has children, if you don't mind raising your hands? Oh, wonderful. Well, I'm sure many of your children have learned a second language, if you're in China, English probably is the number one option, in-, in the US, hopefully, Mandarin, becoming the number one option. I think the-, the common theme here is, we are international parents, global parents, and we've been constantly communicating, interacting with our peers, in the business world, and everything, and then we want our children to be global, as well. So, think about this. If a student, from when they're 4 or 5 years old, talk to a teacher in, say Minnesota, or Florida, or Dallas, and vice versa, a teacher in Guangzhou teaches a student in New York State, or New York City, Mandarin, they get to know each other, and this cloud-based classroom not only would really encourage the learning, but also, as you mentioned, bridge the culture, this people-to-people connection, this is important, not just to build the knowledge base, but to really cultivate our children to be global citizens. So, we see a lot of growing interest in learning English not only in the cities. For example, in rural areas, we've helped 500 schools. Our teachers volunteered to teach those classes, online, live, every week, and then those students, they would spend their whole weekend preparing for it. One minute, self-introduction, they will paint a whole picture about it, and then say, 'My name is Peter. There are three people in my family,' and then they will share all of these with their teachers on the screen, when they're interacting together. So, this interest would also open the door for the-, for the rural kids, when they're so little, and get to see the world of potential, where they probably would not only go to Tsinghua, 'Beida' (Peking University) or, you know, Yale, or Stanford, and then to see the world, and then bring all this back, to the community where they come from, and I think this is the future we want for our education.
ER: So, from a business perspective, you have obviously achieved some scale, you are hard at work in implementing new technologies, and you have a-, you have a strong community, as you've said, in the United States. What are the barriers to entry, though, for a competitor? What's to stop a giant, established education company from setting up video conferencing?
CM: Mm. So, the technology is very challenging, we have now over 180,000 classes every day happening, and every two Chinese children who learn online to learn English, one of them is with VIPKid. I think the real barrier, though, is never technology, or growth, or scale. The real barrier, I think, is the passion for education from the team, and our teachers. That's the real barrier, for anyone to enter the market. And our teachers choose to work with us-, if you look at the YouTube videos, over 20,000 teachers uploaded their own experience with VIPKid, and-, and then there are so many Facebook shares, on their amazing experience interacting with the kid. So, that's the first one. The second one is the knowledge we learned, from all the interactions that are already happening in our platform, the efficiency, the way we analyze all the videos between-, the student/teacher interaction, we have all the data on students' learning outcomes, unit assessments, how we can go back to how we build the-, the curriculum product, so that we can design the best way to scaffold the content, and then we can create the most learning efficacy. So, these two, people, and also efficacy, are the most important barriers, and then I think that's also very important for education.
ER: Just really quick, we just have a few seconds left. Do you see the future of education moving entirely online? Do you see VIPKid being a model for schooling, you know, in decades ahead? Or will this continue to be supplementary to the normal education system?
CM: Yes, we have such a huge, tremendous respect for all educators, online and offline, trying to make it work better. Right? So, our thesis is, everything would be blended, or partially online, because it just helps with the data, it helps with efficiency, efficacy, everything can be so much more engaging and enriched, but I think the direction, generally, we would believe in, is one, it's going to be more personalized, because of the technology connection, teacher/student interaction, content, designed in a knowledge graph way, where we can personalize experience, and secondly, I think it's going to be more global. No student would only learn from the teachers in the country only, but, you know, summer camps is a good example, where American students will go to Europe, so a more global learning community would be there. And then, lastly, I think, more access to education, affordable education, where technology really helps lower down the cost, bridging better, connecting better, being efficient, teachers get paid more, students pay less, so we can then help-, there are still a billion people out there where they only have 3 US dollar a day as a living expense, so education is a luxury. So when we can then implement all these great technology, like, learning, for all these students, so learning is never a luxury, and then we can really build a personalized, affordable, and global online learning platform, for all the children. So, we want to start-, one sentence-, we want to start with afterschool tutoring, figure out how students can learn English better, and then apply this, and help more rural schools, and then gradually, you know, what we can do for the learning community and education field, to make learning better and more efficient for the students. That's our goal.
ER: Very interesting stuff. Cindy, it's been great talking to you thank you very much.
CM: Thank you.
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