“The timing seemed right”: How OpenLearning’s IPO led to record cashflow and ongoing growth

To say edtech startup OpenLearning has had a successful start to the year would be something of an understatement.

Having raised $8 million in an oversubscribed IPO offering, and listed on the ASX in December, the business has since reported 77% year-on-year revenue growth, and record incoming cashflow.

Founded in 2013 by Adam Brimo and David Collien, OpenLearning offers a social approach to remote learning, with a focus on higher education.

The listing follows an $8.5 million Series A raise in June 2018, which at the time bought the startup’s total funding to $13.7 million.

But, rather than continuing down the equity funding route, Brimo tells SmartCompany he saw an opportunity in going public.

The team started the process in mid-2019, he says, and listed in December.

And OpenLearning’s first investor revenue report, released at the end of January, revealed a very promising picture.

In the last quarter of 2019, the company’s Q4, it recorded a 77% year-on-year increase in annual recurring revenue.

Gross margin also increased from 4% in Q4 2018 to 57% in Q4 2019.

During 2019, the startup recorded record cash receipts of $2.24 million. It also reported $7.74 million of cash in the bank.

But, none of this came as a surprise to Brimo. It follows a transition to a Software-as-a-Service model, something he foresaw would drive a significant increase in revenues.

And that growth is expected to continue, he says.

“As we’re making that transition, we were hoping revenue will grow and that more customers and more institutions will sign up to the new model.”

“The timing seemed right”

OpenLearning’s growth story is something of a departure from standard scale-up news. In Silicon Valley, there’s an ongoing trend of huge late-stage rounds seeing startups boast enormous valuations. Of course, it was this kind of bloat that led to the spectacular collapse of WeWork’s IPO.

Brimo didn’t fancy any such shenanigans. While he did consider additional venture or equity funding, for OpenLearning, the IPO felt like the most sensible route.

“One of the things we looked at was what type of investors and what type of capital we would get, and what would be the additional benefit of that, beyond the capital,” he explains.

“Some companies decide it’s best to stay private for a very long time and raise many rounds of funding at a higher and higher valuation,” he adds.

“For us, we felt that the listing gives us a lot of additional benefits.”

The OpenLearning team on IPO day. Source: supplied.

Taking the leap

Firstly, the IPO was intended to build brand awareness, both in higher education and in the business and finance industries, he says.

The plan was to reach new customers, and deepen relationships with existing ones, he explains.

“We felt that they would appreciate the level of corporate governance required from a public company … It would give them a lot of confidence in the business,” he says.

Being listed requires a lengthy due diligence process, he notes. Getting approval from regulators and the ASX itself isn’t exactly a walk in the park.

“Going through that process, and then being listed, gives people a lot more confidence in the corporate governance and the company itself,” Brimo says.

Similarly, the co-founder wanted to attract new directors to OpenLearning. Again, being a listed company gives the startup a bit more gravitas.

“You can attract really high-quality directors,” he says.

And so they have.

Brimo and Collien have wooed the likes of David Buckingham, former chief of education company Navitas, and Beverly Oliver, former deputy vice-chancellor of Deakin University.

Of course, the IPO was also an avenue to secure funding. OpenLearning is on an expansion path in Australia and Southeast Asia.

And, there’s a certain buzz around edtech at the moment, which the founders were able to take advantage of.

“There’s a lot of interest in the market around education technology, particularly because of the changing nature of work and the future of work,” he says.

Global by accident

Over the next 12 months, OpenLearning will focus on executing its post-IPO plans: onboarding new customers, offering more ‘life skills’ courses,  and targeting skills gaps in the financial and business industries.

Last week, the business announced it was partnering with Western Sydney University to develop professional development courses for the financial services sector.

“We’ve been expanding our sales and marketing team to increase the number of institutions we work with, and increase the depth of usage of the platform,” Brimo says.

But, the founder has no current plans to expand the startup’s footprint, geographically.

OpenLearning has a strong on-the-ground presence in Australia and Malaysia, he notes. But it’s also able to work with clients in other regions.

Particularly, the team is often fielding requests from the rest of Southeast Asia, and from the US.

“We’re focused on our existing markets … but we see a lot of inbound interest,” Brimo says.

“We have on-the-ground presence in two countries, where we’re very deep in the market, and then we have the ability to service other customers around the world if they’re interested in the platform.”

Look before you list

When it came to deciding when it was the right time to go public, Brimo admits a few things came together to make it the right decision for him.

He advises other founders to carefully consider all the options — whether that’s seeking venture capital, listing on the ASX or listing overseas.

“It’s important to look at the pros and cons of each option, and think about it not just as raising capital,” he advises.

“What other benefits can you get, depending on which option you choose?

“Then the company and the founder can make a decision,” he adds.

And if a founder does choose to go down the IPO route, Brimo says while there was a lot of work involved, it was a relatively straightforward — albeit time-consuming — exercise.

Because so many companies go through it, there’s a clear and well-structured process to follow, he notes.

Of course, it helps if you work with a law firm and lead manager who has done it a few times before.

But getting all the documents ready, going through the audits and due diligence takes time.

“You have to be ready to dedicate three to six months of time, to make sure it gets done properly and it gets done on time,” Brimo says.

“Once you get going, you want to keep the momentum going and make sure you get listed in a reasonable amount of time.”

And now it’s done, does this founder of a newly ASX-listed company get to put his feet up? Alas, no such luck.

“Now it’s back to focusing on the business,” he says.

“And I’m quite happy about that.”

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