Instructure in the IPO Pipeline

Within educational institutions there is an increased demand for learning management systems (LMSs), which help to integrate technological solutions with traditional methods to assist with classroom learning. Analysts peg the domestic LMS market to be worth $1 billion. Within the LMS, online courses are becoming a very popular segment. According to research by Ambient Insight, the number of post-secondary students in the U.S. taking online classes is estimated to grow 11% annually over the period 2010 through 2015 to 21.13 million. It is not just massive open online courses (MOOCs); today the Internet is being used as an effective teaching aid by both higher education providers and by K-12 schools.

Instructure’s Canvas

Salt Lake City, Utah–based Instructure was founded in 2008 by computer science graduates Brian Whitmer and Devlin Daley. Within the education industry, most learning management systems have been built as complex legacy systems. Driven by the growing online focus and the belief in an open source platform, Instructure was founded to serve as a new standard for technology in education.

Instructure’s LMS program was launched in 2011 under the name Canvas. Canvas is targeted primarily at higher education courses and has been created with input from instructional design groups at universities including names like the University of Southern California, University of Nevada and Las Vegas, and Berkeley. The platform helps integrate web services with classroom teaching and includes simplified graphic tools for student grading and assessment. With social networks in mind, the platform also provides limited access to a user’s information on sites like Facebook and Twitter. Canvas also lets instructors record media content and tie the instruction to a measurable outcome.

Canvas is also helping bring technology advancements to the K-12 levels. Like its higher education version, the school version comes with features such as a simple user interface, media upload, easy grading, and mobile access. To customize to requirements at the school level, the platform has built-in features like measuring and reporting against state standards and the ability to connect with parents to share course insight.

Besides the LMS, Instructure is also enabling MOOCs through the Canvas Network. Launched in 2012, the Canvas Network is a collection of open online courses by teachers and educational institutions. The network now delivers more than 40 open online courses and has created a hybrid version that lets schools choose to make their courses open to public, or make them private for their own students.

Instructure’s Financials

Today, the Canvas platform is being used by more than 425 educational institutions and six million teacher and student users across the country. A version for teachers is available free to help them build courses and teach them on the web. For educational institutions, Instructure offers a limited period free trial version that can later be followed by a paid product that comes with system support and enhanced features. The company’s financials are not disclosed, but it has booked more than $90 million in contracts with educational institutions. It has recorded double-digit revenue growth over the past three years.

The company’s biggest customer win was its engagement with Cisco for the Cisco Networking Academy, the largest education program in the world. The Academy is one of the largest corporate responsibility programs that partners with more than 10,000 educational institutions to teach networking and ICT skills to more than one million students spread across 165 countries. Last year, Cisco entered into a multi-year contract with Instructure to use Canvas as their learning platform on the cloud.

To date, Instructure has received funding of $50 million from investors that include Epic Ventures, Josh Coates, OpenView Venture Partners, TomorrowVentures, and Bessemer Venture Partners. Earlier last month, they announced the receipt of $30 million funding round led by Bessemer Venture Partners and other existing investors. The new round of funding has led to speculation that the company may be looking to go public.