B.C.’s billion-dollar debut: Thinkific surpasses rare valuation milestone as online course platform’s stock soars on IPO

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In the mid-2010s, the Vancouver area was home to several emerging tech companies considered to be candidates for initial public offerings and aspiring to reach $1-billion valuations, including Hootsuite Inc., Vision Critical, Cymax Group Inc. and BuildDirect.com Technologies Inc.

Now, a nine-year-old startup called Thinkific Labs Inc. has beat them to that mark.

On Tuesday, Thinkific, which provides a platform for entrepreneurs and businesses to create and run online courses, became one of the few B.C. tech companies to go public on the Toronto Stock Exchange since the late-2000s credit crisis - following Mogo Inc. in 2015 and BBTV Holdings Inc. last fall - and the first to top a $1-billion valuation in its debut.

Thinkific began trading shortly after announcing it had closed a $160-million offering led by BMO Capital Markets and CIBC Capital Markets in a well-received deal. The stock traded higher than its $13 issue price all day and closed at $15.60, up 20 per cent from its issue price and giving Thinkific a market value of $1.25-billion.

“We’re not focused on the share price today or next week [but] five years from now,” said chief executive officer and co-founder Greg Smith, whose 26 million multiple voting shares were valued at more than $400-million at day’s end. “At this point, I’m excited to put my head down and get back to work growing and building the business.”

Thinkific’s IPO is a big win for Vancouver’s Rhino Ventures, a B.C.-focused startup financier that invested nearly $25-million in Thinkific when it was private, and bought $25-million more of stock in the IPO. Rhino’s roughly $3-million investment in Thinkific from its first, $14-million fund was worth more than $180-million at the issue price, nearly 13 times the entire value of the fund. In total, Rhino holds 20.74-million shares.

“This puts us on the leaderboard in terms of the history of VC [venture capital] funds in Canada,” Rhino managing partner Fraser Hall said. “This is the realization of a real dream. It’s what I set out to do with the very first fund, to be someone that could celebrate a moment like this with founders.”

Thinkific is set to be joined this week on the TSX by Magnet Forensics, the first tech company from the innovation hotbed of Waterloo, Ont., to go public in 15 years. Both offerings drew strong investor demand during their pre-IPO marketing periods, despite recent choppiness for new Canadian issues.

Mr. Smith, a former lawyer who used to help companies go public, co-founded Thinkific in 2012. He and his brother Matt, now chief strategy officer, had built a product for Mr. Smith’s use to teach online courses for students taking the Law School Admission Test. After selling a few copies, he heard from people who wanted to use the technology to create, offer and charge for their own courses, prompting him to start the company. Thinkific offers a basic version of its product for free and charges $49 a month for more advanced features.

At one point in 2018, the founders considered selling, but “it made us sad because it meant cutting everything short,” Mr. Smith said. “We convinced ourselves we’re just touching the surface of this.”

Revenues reached US$6-million that year, and US$9.8-million in 2019. Growth accelerated after the pandemic began, more than doubling to US$21-million in 2020. Thinkific ended the year with 24,600 paying customers, up 126 per cent. Course creators taught 21 million students over Thinkific as they booked US$275-million in sales last year.

First-quarter revenue this year surpassed US$8.1-million, up about 150 per cent year over year. “There’s an element of it that feels like we got lucky, we got in at the right place, the right time,” Mr. Smith said. “COVID was certainly an accelerant; the opportunity facing knowledge entrepreneurs and course creators has been so massive.”

Thinkific expects revenue growth to ease back slightly to still high pre-pandemic levels as lockdown restrictions ease, judging by markets that have already returned to normal. The company is now on a hiring spree, nearing 300 employees with a goal of adding 200 more by year’s end. The company plans to invest in building out and expanding its product, and on marketing and sales. In the past, it has mostly relied on word-of-mouth recommendations, influencers and webinars to build awareness.

“The scale of the opportunity ahead of us us is massive,” chief operating officer and co-founder Miranda Lievers said. “Going public helps to elevate our brand and accelerates our ability to realize the opportunity ahead of us.”