Instructure Announces New CEO After Completion of Thoma Bravo Acquisition

Author

Phil Hill
June 16, 2020

Today Instructure announced the selection of their new CEO.

Instructure today announced that Steve Daly has been named the company’s new chief executive officer, effective July 1. Daly joins as Instructure is moving into the next phase of growth following the recent transaction to become a privately held company, and is refocusing around its core mission of innovating in education technology.

The core mission mentioned above specifically refers to Instructure focusing on the Canvas side of the business – the academic markets of Higher Ed and K-12 – and reiterates the intention for Instructure to divest the corporate learning Bridge side of the business. 1

To recap the past two years:

  • In May 2018 Instructure hired Dan Goldsmith as president. Josh Coates, the company’s first investor and second CEO, remained as CEO and chairman of the board. Michael Feldstein called out that summer that the intention of that move was fairly obvious, grooming Goldsmith to replace Coates as CEO.

  • In October 2018 Instructure announced that Coates would step down as CEO, with Goldsmith replacing him, in January 2019. Also in January, Instructure started taking informal offers from “financial sponsors” (not named, but most likely private equity firms) and hired J.P. Morgan as its exclusive financial advisor to manage the process.

  • In November 2019 Instructure announced the formal solicitation of final bids from interested firms, leading to the selection by the board of Thoma Bravo’s offer.

  • In February 2020, after a soap opera of an M&A process, CEO Dan Goldsmith was forced to resign, replaced by . . . no one, an Office of the CEO with Bravo advisor Charles Goodman participating.

  • In March 2020, the Thoma Bravo acquisition was finalized, and Charles Goodman was named interim CEO during the formal search for a full-time CEO.

  • Today, in June 2020, the process was complete and Steve Daly was named Instructure’s CEO.

New CEO

The announcement continues:

Daly joins Instructure after 25 years of experience in software and technology, including 13 years as CEO of LANDESK/Ivanti, an IT management and security software company headquartered in Salt Lake City. In 2010, he led the sale of LANDESK to Thoma Bravo and then later to Clearlake Capital. During his tenure the company grew from $90M to $500M in annual revenue. Prior to LANDESK, Daly was senior vice president of corporate strategy at Avocent, which had acquired his startup, Soronti. He started his career and spent 10 years at Intel.

Although this is a few weeks before Daly starts the new job, he is not entirely new to Instructure. In an interview yesterday, Daly described that he was brought on by Thoma Bravo to sit on the board of directors in March when the acquisition was complete. Daly said that he had intended to retire, but while on the board changed his mind and “threw his hat in the ring” for the CEO search, largely due to his observation of Instructure’s culture and product, and due to the “cool opportunity” for the company. I believe the board quickly changed the search process into a vetting process of Daly.

Daly sees an important part of his role in helping the company deal with the different type of ownership. During the interview he described how VC-funded and public market companies are driven to have very large TAMs (total available markets), whereas private equity owned companies need to be focused and better and decision-making.

In an interview today, Goodman described the CEO search as likely taking three or four months. Ideally they would hire someone with direct EdTech experience, but the chosen executive must have software industry experience at a company with comparable scale and growth as Instructure. In addition, Goodman stressed the importance of finding someone who fits the Instructure culture and aligns with the broader higher education culture. Goodman said there would likely need to be compromises made to find the best candidate, not a perfect candidate.

This description appears to have been accurate, in terms of the timescale, the qualifications for the new CEO, and the likely need to compromise. Daly does not have EdTech experience but appears to meet all of the others.

Charles Goodman will continue at Instructure as the Chairman of the Board.

The Bravo Playbook

Daly described his role at LANDESK as following “the Bravo playbook” that I described in December.

Thoma Bravo is widely know for the “buy and build” acquisition strategy, where a platform company with solid customer base is purchased (often for high price), enabling subsequent acquisitions of smaller companies that have lower price multiples. This is not the same as buying company A and B and combining them; rather, this strategy is based on multiple acquisitions tied to the platform company.

For a deeper description of Thoma Bravo’s approach and a comparison to its other education acquisition (Fronline Education in the K-12 market), see this post. Daly confirmed this reading, emphasizing the point that the M&A strategy focuses on building products and services for the same customer set. In other words, Instructure plans to play a bigger role in the education markets it already serves.

For what it’s worth, Bravo owned LANDESK for more than six years, acquiring it in September 2010 and selling it to Clearlake Capital in January 2017. Upon Clearlake’s acquisition of LANDESK and combination with HEAT, the company was renamed Ivanti. Daly left Ivanti in January of this year. For those wanting to get more of a sense of Daly’s perspective as an executive, see this Febuary 2017 interview.

While Thoma Bravo’s playbook hides in plain site, I felt it was premature to press Daly, before he has even started the job, on some of the bigger Instructure questions. About product direction, its stance on learning analytics and data privacy, the recent layoffs, etc. Daly expects to begin the customary new-CEO listening tour, and we discussed the end of July as the most likely time for me to dig deeper into these questions.

New Phase

In my mind, Instructure is entering a new phase:

  • 2008 – 2015: VC-funded growth of Canvas and academic markets

  • 2015 – 2018: Publicly-traded company with both Canvas and Bridge sides of the business

  • 2019 – early 2020: New leadership team and long-running acquisition process

  • Mid 2020 – ??: Private equity owned company focusing on Canvas side of the business with new CEO

We’ll keep watching and update on what this new phase means for LMS and general EdTech markets.

Disclosure: Instructure is a subscriber to the MindWires LMS Market Analysis data service (as are many of their competitors), and we have a number of investment firms who are also subscribers to the service and pay for in-depth market data and research.

1 Disclosure: Instructure is a subscriber to the MindWires LMS Market Analysis data service (as are many of their competitors), and we have a number of investment firms who are also subscribers to the service and pay for in-depth market data and research.