Instructure:Go open source, get serious investment capital

Back in February, I wrote about Instructure’s risky move open-sourcing their Canvas LMS. The product was great, an easy-to-use, robust LMS with solid social features and a spectacular user interface. It was highly scalable and suddenly anybody (or at least anyone with a bit of Ruby on Rails experience) could fire it up on their own server. The question was, would anybody pay for Instructure’s hosting and support when they could host the LMS themselves?

The answer turned out to be an overwhelming yes. As Devin Knighton, Instructure PR Director told me, “Instead of the hundreds of leads their sales team was expecting from the announcement, we received thousands.” See, Oracle? You can make money from open source!

This much interest, though, obviously meant that Instructure needed to scale their sales and support teams fast. The company will be formally announcing tomorrow that, Instructure Canvas, the new entrant in the education learning management system market (LMS), has closed $8 million in a Series B round of financing led by OpenView Venture Partners, EPIC Ventures, TomorrowVentures, and Tim Draper of Draper Fisher Jurveston.

“We’re here for the long haul,” said Josh Coates, CEO of Instructure. “Our mission is to relieve teachers and students in all levels of education of antiquated technology. The investment will be used to scale the company’s operations and to keep up with market demand.”

Aside from Tim Draper, Google’s Eric Schmidt is among the big names investing in the company (via his VC firm TomorrowVentures). EPIC ventures wasn’t shy in their praise of their new investment either:

“At EPIC, we were searching for a disruptive play to serve the dynamic needs of students in the 21st century,” said Nick Efstratis of EPIC Ventures. “Instructure is that company.”

Not bad for a little startup looking to take on the likes of Blackboard, a mission that, according to the Wall Street Journal, Instructure may be ready to take on with this new round of funding:

[Instructure CEO, Josh] Coates, a World War II history buff known for restoring his own tank (technically a Hellcat Tank Destroyer), may need the financial ammunition to survive a long war against segment leader Blackboard. “It’s not the sexiest thing I’ve ever worked on, but I think it’s the most important,” he says.

Blackboard is quite entrenched, but serious competition in the marketplace, backed by serious investment capital, should be enough to jumpstart innovation both at Blackboard and industry wide. Tools for both synchronous and asynchronous online learning are developing quickly and Blackboard will need to rely on more than market share to avoid being pushed out by new companies with far more elegant products (like Instructure) or more open approaches (like Instructure and Moodle). Any way it goes, educational institutions, students, and teachers come out on top.