April 13, 2011
Today, OpenView Venture Partners announced our investment in Instructure so I thought it might interest some of you to know a bit more about the company and why we at OpenView are so excited to invest in this expansion stage company.
Aside from Instructure building a best-in-class LMS product with its Canvas LMS solution, Instructure has one of the coolest founding stories out there. The story starts with Josh Coates, newly “retired” from the software biz after selling the company he founded, Mozy to EMC. “Retirement” for Josh meant moving to Utah with his family and teaching computer science and entrepreneurship at Brigham Young University. In teaching a class on software and entrepreneurship, Josh gave his students an assignment to develop software for any area that they felt current software failed to satisfy the current need. Two of his students, Brian Whitmer and Devlin Daley, set out to create a better platform to facilitate interactions between students and faculty and voila, Instructure was born. There is a bit more to the story, but you get the idea. I think it’s incredibly cool that a great education technology company was born in the classroom. I’m very excited to be affiliated with the great team of people at Instructure.
Instructure managed to develop a product, Canvas, that is the first “Web 2.0” LMS. Canvas was built from the ground up using a – you guessed it – blank canvas and leverages the latest web technologies such as drag and drop file uploads, HTML5 video and speech-to-text conversion, all while integrating with commonly used social media platforms and student information software.
Current Canvas customers have to be some of the most enthusiastic and satisfied enterprise software customers out there. One faculty member said that tears came to his eyes upon first use of Canvas. Another said that the SpeedGrader™ has reduced her time spent grading student assignments by 50%!
The higher education learning management system (LMS) market has been dominated by BlackBoard (or companies BlackBoard has acquired) since institutions began using LMS in the late 1990’s. The LMS market has seen little disruption in the last decade with only four key companies vying for market share: BlackBoard, Desire2Learn, Moodle, and Sakai. Desire2Learn (D2L) is a Canadian company that was founded in 1999 and has a small amount of market share. BlackBoard is a publicly-traded company with an almost $1.3BN market cap and did approximately $450mm of revenues in 2010. D2L is a commercial vendor that offers full hosting and supporting services but does not make its code/development tools available without a purchase/contract. Moodle is an open-source vendor, which means that their product is essentially free and has a vibrant community of institutions/engineers that add/enhance the functionality of the underlying platform. Moodle (and Sakai) either needs to be hosted/supported by an academic institution or by a third-party hosting/supporting company such as MoodleRooms or rSmart. After BlackBoard, Moodle has the next largest amount of market share. Sakai is another open-source vendor and has the smallest amount of market share out of the four. For more on the LMS market, I highly recommend reading Michael Feldstein’s two-part blog series on the state of the LMS market.
The Market Opportunity:
The LMS market is a market in flux. BlackBoard has a largely dissatisfied customer-base and they provide a dated product that equates to the most expensive product/service available. Historically, BlackBoard has acquired and/or sued any commercial vendor that came close to competing. Because of BlackBoard’s massive market-share and litigious habits, very few companies were formed (and even fewer funded) to compete in the LMS space.
Given the current market dynamics and Instructure’s exciting product and team, it was hard to resist the chance to invest in such an incredible expansion-stage software company that has figured out a way to beat the competition in a fragmented market!