Instructure Acquires MasteryConnect for $42.5 Million to Expand K-12 Footprint
Instructure, the publicly traded company best known for its learning management systems (LMS) Canvas and Bridge, has agreed to acquire a fellow Salt Lake City-based education technology company, MasteryConnect, for $42.5 million.
Of that figure, about $12.3 million will be paid in Instructure common stock, according to a U.S. Securities and Exchange Commission filing. The deal is expected to close by next Tuesday.
This deal will mark Instructure’s third acquisition (after Practice and Portfolium), and its first that focuses on the K-12 market. With the addition of MasteryConnect’s formative assessment tools, Instructure aims to capitalize on what it sees as a “shift occurring at the state level as they replace high-stakes, end-of-year testing with innovative assessment models,” according to a prepared statement.
Specifically, the bet is that formative assessments, which can be delivered in classrooms regularly throughout the school year, offer educators a better, timelier understanding of what students know (or don’t) than an end-of-year final test. There are plenty of dollars behind that idea. Emerging Strategy, a market research firm, estimates that the U.S. K-12 market for classroom assessment tools is expected to reach $1.7 billion by 2020.
“We’re seeing the writing on the wall” for summative, end-of-year assessments, says Mitch Benson, senior vice president of product at Instructure, in an interview. He believes “folks are more interested in assessments that happen regularly in the classroom and which are more predictive of student outcomes.”
Founded in 2009, MasteryConnect offers a platform where teachers can plan lessons, create and deliver assessments, and track how students perform against academic standards. These tools offer real-time data that educators can use to inform their instruction. The company claims users in more than 14,000 U.S. school districts, including Charlotte-Mecklenburg Schools in North Carolina and Oklahoma City Public Schools.
Located just a dozen miles from one another, the two companies have been product integration partners since 2016. Already Canvas users can deliver MasteryConnect formative assessments via the Canvas LMS, and results can be automatically fed into the Canvas gradebook.
Under Instructure, MasteryConnect will remain available and sold as a standalone offering. Further product integrations between the two companies are on the roadmap.
With the addition of MasteryConnect, Instructure aims to expand its presence in the K-12 sector, where it claims users in schools in all 50 states. Benson declined to break down its customer numbers across different markets, only saying that across K-12, higher-ed and corporate institutions, Instructure claims more than 4,000 customers.
A 2018 analysis by e-Literate, which regularly publishes LMS market data, suggests that Canvas is the second most popular LMS among K-12 schools where there is schoolwide adoption.
The acquisition marks a turnaround for MasteryConnect, which weathered a rough patch just several years ago. In early 2016, its team swelled to 140 employees as it tried to expand into new markets, including a standalone video-based professional development platform. But those efforts did not pay off. Later that year, the company downsized its headcount and raised a down round of $4.5 million in Series C funding. (That sum paled in comparison to its previous Series B fundraise, which totaled more than $20 million.) In total, MasteryConnect has raised just north of $34 million in venture capital.
Mick Hewitt, who co-founded MasteryConnect and served as its first CEO, reassumed that role in 2016 to refocus the company around its core offerings and steer it to profitability. He did not disclose its financials at the time of the acquisition, only saying that “we were at the right place as to where the board wanted us to be on the track to profitability.” He added: “There was a substantial turnaround that put us in a good spot financially for this [deal] to happen.”
As a result of the pending transaction, Hewitt, along with 46 other employees from MasteryConnect, will be joining Instructure, giving it a headcount of more than 1,200 employees. Hewitt’s new title will be general manager of MasteryConnect.
“We believe that with this acquisition we can be the market leader in assessments in edtech, bringing data to teachers in the classroom and moving away from the archaic end-of-year summative testing,” said Hewitt.