Instructure, a Salt Lake City-based startup that recently entered into educational learning management market (LMS) introducing Canvas, has closed $8 million in Series B round of funding. The round was led by OpenVeiw Venture Partners, EPIC Ventures, TomorrowVentures, and Tim Draper, team member of Draper Fisher Jurveston. Firas Raouf of OpenView has joined the board of Instructure Canvas as part of funding. The company will use this funding for hiring more staff and scale up the operations to meet the market requirement.

The startup provides cloud-based LMS with brand name Canvas that offers extensive features centered on user-friendliness, integrated grade-book, assessment tools, discussion boards, web chat, rubric, and multiple assignment submission options. The grading tools offered by Instructure Canvas facilitate the educators by reducing the time spent on grading.

Instructure Canvas was co-founded in 2008 by computer science graduates, Josh Coates, the present CEO of the company, Brian Whitmer, and Devlin Daley, at Brigham Young University. Coats had also worked at the university on a volunteer position in 2007.

“We’re here for the long haul,” the official press release issued by the startup quoted Josh Coates saying. “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.”

Canvas went open source on February 1st of this year, making it accessible to thousands of schools districts and universities that have begun evaluating it and engaged Instructure in their plans to transition their existing LMS solutions. Currently more than 30 education institutions have switched from Blackboard to Canvas.

“We were compelled by Josh and his team’s vision of delivering outstanding user experiences to those in the education market,’ said Firas Raouf of OpenView Venture Partners. “We received passionately positive feedback from Instructure’s customers that was driven primarily by their user experience with Canvas. The LMS market is long overdue for a new learning platform built on the latest Web-based technologies.”

Canvas claims leveraging the leading edge of web technologies by using drag-and-drop file uploads, HTML5 video, and automatic speech-to-text conversion. It also integrates with popular Web 2.0 tools and social media platforms like Google Docs and Facebook.

Instructure, a startup that develops and open-source online learning management system, has raised $8 million in Series B funding led by OpenView Venture Partners, EPIC Ventures, Eric Schmidt’s Tomorrow Ventures, and Tim Draper of Draper Fisher Jurveston. This investment brings Instructure’s total funding $9.2 million.

Instructure’s software, Canvas, presents a more streamlined online course management product than competitors like Blackboard. The hosted SaaS solution features an integrated gradebook, assessment tools, discussions, multiple assignment submission types, rubrics and web chat. The SaaS also includes drag-and-drop file uploads, HTML5 video and automatic speech-to-text conversion. And it integrates with Google Docs and Facebook.

In February, Instructure announced the availability of Canvas as an open source software product. The company is now servicing more than 30 educational institutions, the majority of which have switched from Blackboard to Canvas.

Instructure is led by Mozy Founder Josh Coates, who sold the online backup solution to EMC for $76 million in 2007.

Here’s a commercial the team created for the product, based on the Apple “1984″ commercial.

Instructure Canvas, a new entrant in the education learning management system market (LMS), has closed an US$8m Series B funding round, led by OpenView Venture Partners, EPIC Ventures, Tomorrow Ventures and Tim Draper of Draper Fisher Jurveston (DFJ).

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

On February 1st of this year, Instructure announced the availability of Canvas product as open source software. Since then, thousands of school districts and universities have begun evaluating Canvas and engaged Instructure in their plans to transition from their existing LMS solutions. The Salt Lake City, Utah based company now says it is servicing more than 30 educational institutions – the majority of which have switched from Blackboard to Canvas.

Outstanding User Experiences

“We were compelled by Josh and his team’s vision of delivering outstanding user experiences to those in the education market” said Firas Raouf of OpenView Venture Partners. “We received passionately positive feedback from Instructure’s customers, that was driven primarily by their user experience with Canvas. The LMS market is long overdue for a new learning platform, built on the latest Web-based technologies.”

A Disruptive Play

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

Canvas is Instructure’s cloud-based learning management system and is built primarily around usability and ease of use. It streamlines standard LMS features like the integrated gradebook, assessment tools, discussions, multiple assignment submission types, rubrics and web chat. Its grading tools, including SpeedGrader™ for the iPad, which reduces the amount of time educators spend grading assignments.

Canvas pushes leading edge web technologies, by embracing features such as drag-and-drop file uploads, HTML5 video and automatic speech-to-text conversion. It also integrates with popular Web 2.0 tools and social media platforms like Google Docs and Facebook.

Instructure, provider of an open-source learning management system (LMS) called Canvas, announced Thursday that it has closed $8 million in a Series B round of financing led by OpenView Venture Partners, EPIC Ventures, TomorrowVentures (Google CEO Eric Schmidt’s investment vehicle), and Tim Draper of Draper Fisher Jurveston.

As part of the funding, OpenView partner Firas Raouf has joined the company’s board of directors.

While Instructure itself admits to being a “new entrant” to the education LMS space (a humbling breath of fresh air compared to the typically overzealous pride-soaked press release), that doesn’t mean they can’t have big, disruptive ambitions:

“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.”

Coates co-founded Instructure in 2008, just a year after his first startup creation, online data backup solution Mozy, sold to EMC for $76 million.

Instructure’s core LMS product, Canvas, was made available as an open-source product on February 1st of this year. While the LMS is completely free, most institutions require hosting and support, which is where Instructure makes its money. The company claims that, at the moment, it serves more than 30 educational institutions, most of which had previously been Blackboard customers. Coates says over four thousand schools have contacted him about the product.

If it’s true (and there’s no reason to doubt it), then Blackboard could have a problem on its hands.

(Most recently, Blackboard has been doing pretty well, having just announced in early February year-over-year revenue growth of 19 percent, to $447.3 million. But then, Instructure’s LMS had only been released two days prior.)

Canvas draws its power by taking a more flexible and modern approach in contrast to other standard LMS platforms, like Blackboard, and by incorporating systems like Google Docs, Facebook, Twitter and mobile. And, no matter what happens to Instructure as a business, its LMS will always be available as an open-source solution.

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.

Vator Splash is a must-attend high-tech event where promising startups are discovered, lessons from prominent founders are learned, views from blue-chip venture capitalists are heard – and wine is continually served. Now the popular event is heading down to LA.

Vator is looking for the most promising high-tech startups to present onstage at The Highlands Hollywood in Los Angeles. If you’re a startup that’s under three years old with no more than $1 million in financing, be sure to apply to the Splash LA competition today. It’s free and it’s great exposure.

As always, the competition consists of popular and judged vote rounds. Ten finalists will make the stage and get in front of venture capitalists mostly from the LA area, including Anthem Venture Partners, Crosscut Ventures, Greycroft Partners, Javelin Venture Partners, Mission Ventures, MK Capital, Rho Capital Partners, Rustic Canyon Partners, Walden Venture Capital. More to be announced soon.

We know the LA area is an hotbed for emerging companies — and venture capitalists are seriously taking notice. Rustic Canyon and Javelin Venture Partners are backing Vator Splash LA to ensure the event rocks the house.

If you want to check what will be the hottest LA event for startups, there’s still time to get tickets using the VentureBeat discount. Click here and use your VentureBeat discount code “VB25″ to get 25% off the ticket price.

In addition to seeing the top 10 finalists, attendees will also get a chance to hear two amazing entrepreneurs, who will share their nuggets of wisdom about entrepreneurship. Demand Media co-founder and SVP of M&A, Shawn Colo, will talk about starting hist company in 2006 and building it to being one of the hottest IPOs this year. He’ll also share his views on the future of digital media. Zorik Gordon, founder and CEO of ReachLocal, will share his lessons on building his company in six years to becoming one of the hottest IPOs last year. Zorik will also talk about his views on the future of local.

We hope to see you there. And, remember – if you want to get onstage, be sure to enter the Vator Splash LA competition, before the earlier applicants run away with the popular vote.

At Splash, entrepreneurs learn from leading founders, such as Zynga’s Mark Pincus, Zappos’ Tony Hsieh, Peter Thiel, Twitter’s Dick Costolo, Pandora’s Tim Westergren — all of whom have keynoted past Splash events. Investors from top VC firms, such as Andreessen Horowitz, Anthem Venture Partners, August Capital, AngelPad, Alsop Louie, Arizona Bay, Bessemer, Blue Run Ventrues, Bullpen, Canaan, Claremont, CMEA, Crosslink Capital, Crosscut Ventures, DFJ, FirstMark, First Round, Founders Fund, Granite VC, Greycroft, Greylock, Google Ventures, Hummer Winblad, Industry Ventures, Intel Capital, IVP, Jafco Ventures, Javelin Venture Partners, Khosla Ventures, Lightspeed, Madrona Venture Group, Mayfield, Mission Ventures, MK Capital, NEA, North Bridge, Norwest, NYC Seed, Oak Investment Partners, OpenView Partners, Polaris, Redpoint Ventures, Rho Capital Partners, RRE, Rustic Canyon, Scale, Shasta, SoftTech VC, SV Angels, TechStars, VantagePoint, Venrock, Walden Venture Capital, and 500 Startups, and more are attending or have attended the Splash events.

Two big pieces of news this week in ed tech.

Earlier in the week we found out that Cisco is shutting down the Flip video camera division, two years after purchasing the company for $590 million.

And then today we hear that Instructure Canvas, an up-start LMS start-up company out of Utah has received $8 million in a Series B round of financing, led by Open View Venture Partners, EPIC Ventures, TomorrowVentures and Tim Draper of Draper Fisher Jurveston. For those of us who fantasize about Google getting serious about the education market, the fact that Google Chairman Eric Schmidt is behind TomorrowVentures may give us some cause for hope. Closing this funding round is a major accomplishment for Instructure and its CEO Josh Coates. These investments show the importance of having experienced leadership, leadership with serious skin in the game, such as Coates.

I have no idea if the learning management system offered by Instructure will gain enough traction to succeed in the marketplace. I see many things that I like about the technology that Canvas is built on and the platform they have developed, and I also have some serious critiques of the companies strategic business model. You can read my 2/6/11 post “Instructure’s Canvas LMS: 7 Cheers & 7 Critiques“, to see my ideas, as well as the great discussion that this post generated.

What I do know, however, is that $8 million (or $80 million) is a very smart investment for these VC firms, exactly the sort of bet on education technology that funders should be making. Investing in ed tech start-ups is also what big companies like Cisco (and Microsoft and Google and Oracle and Apple and Amazon and HP and IBM etc.) should be doing with the massive amounts of cash they have on hand, rather than chasing yesterday’s hot technology, as Cisco did with Flip.

The global education market will be disrupted, and some ed tech start up will reap the massive rewards of catalyzing that disruption. Instructure thinks that it has cracked the code to disrupt the academic technology market by offering Canvas as an open source product, and indeed the company reports that “thousands of universities” have downloaded the LMS to poke the tires. To date, Instructure has signed contracts with over 30 institutions to provide Canvas as the LMS. At what point of adoption does Canvas get on the radar of Blackboard or D2L, or of institutions thinking about re-signing with either of these companies or moving to Moodle?

This investment in Instructure Canvas, and the recently announced $20 million 3rd round at Kaltura are early signs of this investment trend. Most of these investments will not pay off, but a few will enjoy massive returns. Who knows, Instructure could be one of those winners.