Labcast: OpenView Invests in Instructure

Venture Partner Firas Raouf stops in to discuss OpenView’s latest investment in Instructure, a Utah-based company in the learning manangement system (LMS) software market.  Firas goes into detail on the LMS space and why this is a good fit for OpenView.

For more on this investment, check out the feature in the WSJ here or the press release here.

Episode 24: OpenView Welcomes Instructure to the Portfolio

PODCAST TRANSCRIPT

Corey O’Loughlin:    Thanks for joining us for this week’s episode of Labcast. As always, I’m your host, Corey. Today we’re lucky to be joined by venture partner Firas Raouf who’s going to tell us about exciting news from OpenView.

Firas Raouf:    Thank you, Corey. Yes, this is Firas Raouf. I’m happy to announce that we have invested in an exciting company called Instructure. This is our first investment in 2011, and we’re quite excited about it.

Corey:    Can you tell us a little bit about Instructure, what space they’re in and what makes them interesting as a company?

Firas:    Instructure is a Utah-based company. They offer a product in the learning management systems market. Learning management system solutions are basically software solutions that allow educators, instructors, and teachers to use an online platform to build courses for their students. This could be both class-led courses that are augmented by an online interaction or it can be a completely online learning experience. As you know, there’s been quite a bit of growth in purely online education whether on higher education or K-12.

Corey:    That obviously makes it an interesting investment opportunity for OpenView. Are there any other reasons why this opportunity really stuck out?

Firas:    Well, there’s quite a bit of dynamics in the learning management system market. It’s not a new market. It’s actually a well-established market for the last ten years. There is a dominant player in this market called Blackboard. It’s a public company. Blackboard has been successfully offering LMS solutions to the education market for the last 10 years or so, and in the process have also acquired a number of the emerging companies in the field. More recently, there’s been a need on the educator and the student side for LMS systems to start catching up with other software solutions that they use, mostly around the movement toward the use of Facebook and Twitter and other social networking aspects in the daily lives of students. What Instructure is trying to do is bring some new technologies and new ways of interactions between educators and students around social networking and collaboration.

Corey:    Is Instructure’s greatest potential in higher education, or is there a potential beyond that level?

Firas:    Well, the LMS market is most mature in higher education. That’s where you’ve seen the most investments being done in adopting online teaching both for face-to-face classes and for purely online education. We believe that an untapped opportunity lies in the K-12 market which has not invested in these kinds of technologies. But now the opportunity is given the way Instructure is approaching the market with a very light system that is hosted that does not require any IT support and the price is very, very attractive not just to higher education but to K-12 schools as well.

Corey:    Firas, we’ve heard a lot about what Instructure is and what spaces it can be useful in, but around the office, I’ve heard a little bit of buzz about how Instructure is really enabling students to engage in a way that’s natural for them. Can you tell us a little bit about that?

Firas:    Most of the LMS systems today have been around for anywhere from five to 10 years. They’ve been built around more rigid interactions between educators and students. As we all know, students today use computing in a very different way, the aspect of moving away from email toward more Facebook-based interactions, Twitter-based interactions, text messaging. What Instructure has done is to provide flexibility both to the instructor and to the students in the way they communicate. Communication through email, Facebook, Twitter, text messaging — it really opens up more and more communication and collaboration between students and the educator.

Corey:    What is next for Instructure after the higher education market is tapped and the K-12 market is enabled for their product?

Firas:    I think the whole idea behind Instructure is to make the creation of education material and the dissemination of it be as seamless as possible and the interaction between educators and students to be as natural as possible. Their platform is extremely flexible in being able to evolve to the needs of different markets, whether it’s purely online higher education to a combination of in-class and online. In K-12, it will have a different application as well. I think other opportunities that are very exciting that they’re working on is the use of mobile devices to facilitate the interaction. They’re releasing a mobile version that will also include a tablet capability. To me, personally, I think in the long term the really exciting opportunity is to start basically providing this kind of technology outside of the United States, not only in Europe and Asia but all over the world and particularly in developing countries that are trying to catch up with more developed countries.

Corey:    That’s really a good opportunity for them and it makes you feel good at the same time. Firas, I know that a lot of companies that we’re considering investments in have opportunities from several venture capital firms. What made Instructure ultimately choose to take an investment from OpenView?

Firas:    That’s a great question, Corey. Instructure is an early-stage company. They have developed their product, released it, and have acquired a number of customers very, very quickly because of the uniqueness of their solution. Instructure is at a very critical phase in its evolution. It needs to very quickly develop the distribution model — the sales and marketing and support infrastructure to facilitate their growth in a very big market. The founders of Instructure are two students from Brigham Young University. They were joined by a person who was actually teaching an entrepreneurship class by the name of Josh Coates.

Josh is now the CEO of the company. Josh is an experienced CEO. He started two companies, one is Scale Eight and the other is Mozy, which successfully exited to EMC. He’s a pretty experienced CEO. What Josh has not done before is develop a distribution model in the education space. That’s what we specialize in. Our specialization through our Labs team is our ability to roll up our sleeves and help our portfolio companies develop their systems and processes particularly around distribution and sales marketing and support. He valued that operational expertise and the fact that we actually have resources within Labs to jump in and help the portfolio company build its own processes.

Corey:    That’s really great. It’s good to hear that the efforts of the Labs teams are really playing a role with our prospect companies. Thank you for meeting with us today, Firas. We really appreciate learning about the new investment. We’re excited to get working on helping them out in the Labs I know.

Firas:    Thank you.

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