Exclusive: Simplilearn to raise $40 mn this year for acquisitions, expansion

Online certification course provider Simplilearn is planning to raise $30-40 million in Series D funding in the first half of this year, its founder and CEO Krishna Kumar told Techcircle.

Simplilearn Solutions Pvt Ltd, which has so far raised $28 million from venture capital firms, last raised equity funding in April 2015. It had then received $15 million in a Series C round led by Mayfield, with existing investors Kalaari Capital and Helion Ventures also participating. Besides, it raised $3 million in debt funding last year.

The company needs substantial fund infusion to accelerate towards its ambitious goal of achieving $100-million annual revenue, or $8-million monthly revenue, in the next 18 months. That would entail acquisitions, marketing spend and expansion, both geographically as well as in terms of categories.

"It should be at least $30-40 million. We would look for growth capital investors such as private equity (PE) firms, as most of our existing backers are early-stage investors," said Kumar.

Simplilearn, which acquired US-based digital marketing training firm Market Motive in mid-2015, has since built an enterprise business wherein it offers courses to employees of big corporations.

Kumar began Simplilearn as a blog during his break after selling the IT services firm he co-founded with three others. He experimented with online training wherein he shared his project management experience. Kumar ended up giving free training through video and blog posts to 3,000 people, which paved the way for Simplilearn's launch in 2010.

Till about a year ago, Simplilearn's sole focus was on individuals directly enrolling for various certification courses on its platform. It offers 400 courses that help IT, management, marketing and sales professionals update their skill-set. After the Market Motive acquisition, the company started focussing on winning businesses from enterprise clients, and Kumar claims it now has a strong line-up of clients including Fortune 500 companies in the US and big IT companies in India.

"Enterprise business now accounts for about 30% of our revenue and going forward it would be the bigger revenue stream," he said. "One of the big IT companies in India has made it mandatory for its recruits to attend our course in the eighth semester of their engineering course. The job offer will be withdrawn if they fail to produce the certificate," he said.

Financials Simplilearn's revenue for the year ended March 31, 2016 grew 43% to Rs 132 crore from Rs 92 crore in the previous year while losses widened to Rs 45 crore from Rs 29 crore. "We used to grow much faster in the previous years but last year we took a hit as we had done away with offline classes, which used to contribute around Rs 60 crore," Kumar said. "It is normal when you do a business transition. That has improved our gross margins from 40% to 70%.".

Though the company is yet to turn a profit, Kumar says it has almost broken even and will turn profitable in the current quarter. Its expenditure, especially in terms of remuneration of senior hires, has gone up substantially as it seeks to expand business in the US. The company hired Ray Rike, a former senior executive in GE and Netscape as president of the US business, and Mark Moran, former head of marketing at Ebates as chief marketing officer.

In the second half of last year, Simplilearn raised $3 million in venture debt from Innoven. Kumar feels every startup should raise debt funding as servicing debt strengthens the business fundamentals. However, debt funding alone is not enough for a company to pursue its revenue goals, he adds.

Kumar estimates that revenue will grow by about 50% to $30 million in the current financial year. However, to scale up to $100 million, it will have to do one more acquisition that will help it expand either categories or geographies. Simplilearn, which currently offers courses in categories such as digital marketing, big data, project management, cloud, data science and cyber security, is looking at adding new courses like digital selling and artificial intelligence.

Its enterprise business is largely concentrated in India and the US. Kumar is looking at companies that can give Simplilearn headway in markets such as the UK and Australia as well.

"If we get there, we will be third ed-tech company or so to reach $100 million in the professional education space," he says. According to market estimates, Simplilearn's competitors LinkedIn-owned Lynda.com and Pluralsight have annual revenue of around $250 million and $160 million, respectively.