With $30M Led by Bessemer, Education Startup Instructure Eyes IPO

Instructure, an education startup set on knocking learning management system (LMS) Blackboard off its throne, has raised $30 million in a Series D financing round meant to help the company move closer to an eventual public offering.

The startup, which has previously raised about $20 million in venture financing, said the round included existing investors EPIC Ventures, OpenView Partners and TomorrowVentures, but was led by Bessemer Venture Partners – a firm chosen for its cachet, as well as its IPO expertise.

“That’s where we’re headed,” said CEO Josh Coates. “We are here to be a permanent, standalone company and get on the NASDAQ.”

In the last two years, he said, the company has closed about $92 million in contracts with more than 400 colleges, universities, K-12 schools and corporations. With its browser-based software, teachers and other clients can distribute class documents, encourage class collaboration, track student progress, grade assignments and carry out plenty of other course-related tasks.

Instructure still captures just a small part of the total LMS market, but it’s starting to show that it can be a contender to more established industry players likeBlackboard, Moodle and Desire2Learn. Coates said the new funding is intended to accelerate growth and product development and “throw gas on the fire.”

One area of particular interest for the company is its Canvas Network, a recently-launched service for creating and hosting online courses. While the national conversation around massive open online courses (MOOCs) has largely focused on Silicon Valley startups Coursera and Udacity, as well as the MIT- and Harvard-backed edX, Coates said Instructure is gaining traction with its own approach to the new kind of course format.

Since launching the Canvas Network in October, the company said 30 institutions have created 40 courses. (For now, all courses on the Canvas Network are free, but Coates suggested that options for generating revenue for schools could be on the horizon.) But, in contrast to its buzzier rivals, Instructure doesn’t just focus on hosting courses from elite schools, and it gives schools the flexibility to experiment with classes of different sizes and pedagogical approaches.  While Coursera recently launched partnerships with a group of state schools to explore a range of uses for MOOCs, it, like edX and Udacity, has mostly focused on a model that distributes content from top-tier universities to worldwide classes of tens of thousands of students.

“We want to use this tool as an experiment for our institutions,” Coates said. “We think it’s going to be a really powerful tool to educate in the future, but we don’t think it’s going to revolutionize education. We think it’s a component of education evolving.”

As for the IPO, while he said it’s the goal, the timing is sometime “in the next few years.”

“Wall Street is fickle and there are a lot of things to consider as we approach that goal,” Coates told me. “That’s the track we’re on but we’re focused on building a strong, healthy business, and when we’re ready to access the public markets that’s when we’ll do it.”