What a year it’s been for Desire2Learn, the juggernaut eLearning company that began the school year with a bang Tuesday on news it has raised $80 million in venture capital.
In January, when I last sat down with D2L founder and CEO John Baker, he had 375 employees and plans to add 200 by year’s end. As of this week, he’s already surpassed 560 and is now looking to top 700 before the year is out.
After 13 years of bootstrapping, the $80-million round from New Enterprise Associates (NEA) Inc. and OMERS Ventures is the first outside investment D2L has accepted, and the largest VC round to date for Canada’s software sector.
I caught up with Baker, 35, on the day after the big announcement to ask him why he finally opened the door to investment, and what it means for the company he founded as a third-year University of Waterloo student.
Q – When we last chatted earlier this year, you said you weren’t opposed to outside investment, but that D2L simply didn’t need it. What changed?
A – I think one of the nice things about what we’ve done in the last eight months is crystallizing our view of what is actually happening on the education landscape, and we took the time to develop a clear understanding of what trends are occurring and what we need to do as a company to really go out and execute on our vision.
For me, it became very clear that the education market – in North America, and increasingly the case globally – is ready for a big change and a big transformation.
I am seeing a shift from traditional classroom to online, and increasingly blended learning, where educators are leveraging the same type of technology that we have built for the online experience to complement what is happening in the classroom. It is also clear that there has never been more demand for education than there is today.
We are seeing the traditional textbook move to digital; you’re going from a one-size-fits-all education model to a very personalized one; one that fits each individual. So, that means we have to provide data, analytics and understanding, and build predictive models, and make sure each student is successful, even as the number of students in each program continues to grow.
So, for me, we looked at our understanding of the market and said, ‘This is a big undertaking, and we need to do this on a global scale’, and I felt more confident in the team that we’ve built that we could actually go out and execute now and with better traction.
It gave me the confidence to say, ‘Okay, if we’re going to go and do this, let’s make sure we feel confident in making the right moves.’
That was the main reason why we decided to take this path.
For me, this really came together at our users’ conference in July. I still really wasn’t quite sure up until that point that this was the path that we wanted to take, but seeing all of our clients come together, and getting a chance to talk with so many of them, it crystallized for me that the time was now for us to go out and accelerate the growth.
Q – How did you arrive at $80 million, and what have you had to give up in return for it?
A – It’s a small minority stake.
We feel like what we’re giving up is going to be offset by the value that gets created from tapping into a whole new network of expertise, advice and a larger network of opportunity.
We were very fortunate to be at a stage to be able to set the terms for how we do this.
I’m also very fortunate to have a great team at Desire2Learn and I’m so proud of what they have built that helped us reach this milestone. Plus this investment will help us attract and retain our top talent.
I couldn’t be happier with NEA and OMERS; these are great partners and I think they’re going to help us tremendously as we move forward.
So, I really don’t think we’ve given up much to get a lot in return.
Q – What specifically will this money enable you to do that you couldn’t have done last week?
A – It gives us the confidence to execute on the plan that we have for the future. And it gives us the opportunity to really invest in the spots that we need to, to achieve the vision that we have as an organization.
R&D, service and support, investment in infrastructure, raising the bar in terms of client experience, attracting talent and giving us the ability to retain the top talent that we have in the company – all of these things, we now have the ability to do with more confidence.
Q – If you had to guess, when will Desire2Learn be a billion-dollar company?
A – This is one of those trick questions that helps try to figure out valuation, isn’t it?
We have never been focused on ‘when will we be a billion-dollar company.’ We’ve never had that as a priority; it’s always been about focusing on the user experience, our clients and making sure that they’re achieving their vision and their goals.
That said, we’re certainly focused on achieving a lot of growth, creating more engaging and inspiring learning experiences, and making sure that we’re reaching tens of millions more learners in the years ahead.
Those to me are better metrics.
It’s never been about the money. I know that sounds crazy to say, but…
This is very much about transforming the way the world learns, and this is about building an enduring company. It’s not been a focus on a certain financial metric.
Q – You’re on track to basically double your staff in one year. How do you manage all that growth while maintaining the culture and the momentum; while preserving all the things that are really important that got you to this point?
A – We use this great technology called the Learning Environment from Desire2Learn. I’m not actually joking, either. Leveraging our own technology to support onboarding and talent development is a big investment we have been making.
For example, our CFO, Brandon, and I delivered the message around this funding through our Capture technology to all of our staff over the weekend.
It’s important to keep that small-company feel, the culture, what we believe in, the values that we have, and make sure that continues to propagate through the organization.
I’ve been impressed with the people who come into the company, whether they’re coming in from other organizations in town or from elsewhere in the world, and how quick they are to figure out what our culture is; what’s important and what’s not important, and how much they love adapting to what we’ve built here at the company.
Developing our culture is something we spent a lot of time on in the early days, making sure that our culture was guarded. Our first HR hire was employee #12. Now, at that time, Sue was also a project manager, an account manager and the HR manager, but HR has always been a very, very big part of what we do, in terms of talent development and onboarding, and we do our best to make sure that the culture remains strong.
This effort goes to all parts of the organization. I still meet with our co-op students at the beginning when they first arrive, throughout the term and at the end of the term before they leave.
We try to treat people as part of the D2L family, always.
And yes, the technology is great to create an open community within the company, so you can literally ask me or anybody any question you want, and get an answer.
‘Who does what’ is another forum, just to help people navigate through the organization.
Having a space where people can go and ask anybody any question, and be completely transparent about what the answers are, is empowering. I think it gives people the confidence that their voice is being heard, and that the company is responding.
Another big change we have made to help with the growth is something Dennis Kavelman brought into the organization, and something that usually doesn’t get introduced into an organization until you’re much, much bigger than we are today: the sales and operations planning process.
It’s a new management framework that we’re using to really drive a lot of transparency and clarity between all the different teams in the organization, and it’s great to see the engagement, empowerment and communication flowing rapidly around the company.
Learning how the culture can adapt to new practices is something we’ve always been open to, but I’m impressed with how quickly it’s had an impact on the ability of our organization to adapt and respond faster.
It’s just another reason why we feel confident that we can grow now, instead of struggling to put in place internal systems.
We feel very good about where we’re situated as an organization, and we are ready to accelerate the growth and make the investments to help our clients succeed in this rapidly changing environment.
Q – What role has Communitech played in getting Desire2Learn to this point?
A – That’s a great question.
It’s interesting; when we were two people in the company, I presented at Communitech. This was a year into building the company, and it was just a quick little five-minute PowerPoint that highlighted how we wanted to change the world.
And, instead of getting laughed off the stage – which was a thought that actually flowed through my head – people in the community came up; they were very supportive; we even won clients from those who watched the presentation.
It was at that moment that we realized that there was this incredible network within the community that could really help us achieve our dream.
Until I was involved in Communitech, I really had no idea how strong this community was, other than my experience at the University of Waterloo, which was incredible.
The local universities were the reason I started the company here, and I feel Communitech was a big part of why we thrived in this community. The advice that I’ve gotten over the years from Communitech and its members has been invaluable in building the business that we have today.
I give a lot of credit for our success to the community that we live in, the local universities and college, and to groups like Communitech, without question.
Q – Anything else you’d like to say?
A – We have a lot to do, and it’s great to see how energized our entire company is right now with this news. For our team, it’s been a pretty major milestone, and you wouldn’t believe how excited our people are about building for the future.
It’s energized our organization beyond what I expected.
We have exciting journey ahead as we work hard to help transform the way the world learns. We feel like we’re just getting warmed up.
