After years of turning down various venture capitalists, Kitchener, Ont.-based Desire2Learn Inc. has tapped two prominent funds for an $80-million investment that will allow the rapidly growing e-learning company to push deeper into global markets and expand further into the corporate market.
The funding round comes from OMERS Ventures, the venture capital arm of the $55-billion pension giant, and New Enterprise Associates, a U.S.-based VC firm with about $11-billion in committed capital that has funded more than 650 companies.
"This is the first outside funding we've ever done and for us, we've been very cautious about that, trying to make sure we're building an enduring company," says John Baker, Desire2Learn's president and CEO. "We've seen too many companies come and go. And we wanted to make sure we built a relationship with two partners that believed in our vision for transforming learning."
Located in the technology cluster of Kitchener-Waterloo, Desire2Learn has grown incredibly fast as its e-learning platform is adopted within large organizations like the Ontario Ministry of Education and the New York City Department of Education, as well as universities across Canada and in Singapore and China.
The firm has sprawled throughout a repurposed Kitchener tannery, neighbouring Google Inc.'s local office. Mr. Baker is likely going to need the additional 22,000 square feet he has committed to leasing there – the company added 233 employees this year alone to a total of around 560. The company is also scheduled to open a 15,000-square-foot office in Toronto within the next three months. Howard Gwin, a managing director at OMERS Ventures with a history in both growing and established tech companies, says Desire2Learn will benefit from a broader network of U.S. and Canadian contacts from the two VC funds, as well as from OMERS Venture's experience with enterprise software companies.
Desire2Learn is going up against massive competitors, such as Blackboard Inc., which swallowed rivals and other industry players for years before being bought by Providence Equity Partners for about $1.64-billion, as well as the assumption of about $136-million in debt. But Mr. Gwin says Desire2Learn, as with other visionary entrepreneurial firms, has approached the market with a principle – to change learning – and built a profitable company around it.
"John, to his credit, has been getting pinged by everyone in venture for several years now," Mr. Gwin says. "He talks about changing the way learning is done, and building a great company and great products back from that – not talking about disrupting a market. It's really unique that he's gotten to this size and this scope without taking any outside money."
As for the $80-million financing, a sizable round in Canadian technology, Mr. Baker says they will spend it on research and development, in terms of building a richer portfolio for the company's nascent push into corporate software, but also to bolster the company's global sales and marketing offices in Singapore, London and Australia.
Mr. Baker, who says there are no plans "at this stage" for an initial public offering, adds that he chose to partner with NEA and OMERS Ventures because of their "commitment to ongoing growth" as education shifts increasingly from bricks and mortar institutions and textbooks to online learning and digital materials.
"We're at a really nice intersection of all that," Mr. Baker says. "There's never been more demand for high quality education in our history."