Online K-12 Education IPO In The Great Recession: Archipelago Learning Co-founders Cameron Chalmers, Dave Muzzo, And CEO Tim McEwen (Part 7)

SM: What is your sales model? Do you do direct sales, telesales, or other approaches?

DM: We have a marketing group that does a lot of Web optimization, e-mail marketing, and direct mail marketing. We generate leads that go directly to the salespeople. They get an appointment at the building with the principal and the department heads, where they do a demo and close the account. Those accounts and close any time from the first meeting through 60 days. We look at how many appointments we are getting and how many demos we have completed to determine which percentage of those are turning into purchase orders.

CC: Our number one marketing tool is word-of-mouth. We have found that 68% of customers have heard about us through word-of-mouth rather than direct mail or e-mail. It’s been that way for four years.

SM: You had an IPO recently. Can you talk about that process?

TM: It was a very successful IPO. I think we are very pleased with the institutional investors we have as our base. We went public on November 20, 2009.

SM: That was when the market was in the absolute pits. Why did you choose that time to go public?

TM: We were unique in that we had a SaaS business model in the education space, and we really position ourselves as a SaaS company rather than a traditional education company. We pulled in people from the investment banking side who understood the SaaS model and who could help not only get interest generated by investors, but also help us to position ourselves in the education space. As we did the IPO and the roadshow, people really understood the uniqueness of our business model. They saw our strengths in our differentiated products, the fact that we had grown successfully, and that we still have a long runway ahead of us.

We decided to go out when we did because we had such a compelling story. We felt that we would get a lot more attention in a market like the one last fall versus a highly active IPO market.

SM: What was the IPO like? What did it open at?

TM: I think all companies moving toward an IPO can find it challenging to go through the whole process of preparing for an IPO as well is running the day-to-day business. You have to prepare the S-1 and do the roadshows. I think the analogy that a couple of us have used is that it reminded us of the movie “Apollo 13” where there were always things that had to get done quickly to prevent crashing. On the day of pricing it felt like we landed in the South Pacific in the sun, and it was all worth it. Now we have a war chest on the balance sheet.

SM: What did you price at?

TM: We priced at $16.50 which was the mid to high end of the range. We have been told that in terms of IPOs last year, especially small-cap ones, that ours was one of the most successful if not the most successful. We raised about $115 million. We went in asking for $100 million, but there was a lot of demand. As we look to continue to grow we have a lot of organic plans, and we also have a war chest to back us up now. We can now make purchases and acquisitions to accelerate our growth.

SM: You said you only have 20% penetration into your marketplace, so that business alone will give you a lot more growth.

TM: That’s correct. The first state that we entered, Ohio, is now 60% penetrated.

SM: I love this story. Great entrepreneurship, Dave and Cam. Congratulations on your success.

This segment is part 7 in the series : Online K-12 Education IPO In The Great Recession: Archipelago Learning Co-founders Cameron Chalmers, Dave Muzzo, And CEO Tim McEwen
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