Top Hat has raised $72 million CAD ($55 million USD) in a Series D funding round to help the company accelerate its goal of disrupting the traditional print textbook market.
The newfound capital, which closed over the past few weeks, comes in the form of equity and debt financing. Existing investors Georgian Partners and Inovia Capital co-led the equity portion of the round. Top Hat’s Series D attracted new capital from other existing investors as well, with Series C investors Union Square Ventures, Emergence Capital, and Leaders Fund, all re-upping their commitments.
“The ultimate success is to have Top Hat in every classroom in the world.”
While Top Hat chose not to disclose the equity to debt ratio, Mike Silagadze, founder and CEO of Top Hat implied to BetaKit that the amounts were about equal. According to the Globe and Mail, the round consists of $20 million USD in equity and $35 million USD in debt financing. BMO’s Technology and Innovation Banking Group provided the debt.
Founded in 2009, Top Hat has developed an “active learning platform” for higher education. It competes with traditional textbook publishers such as Pearson and Wiley, and offers digital, interactive textbooks and course materials for professors and students at postsecondary institutions.
According to Silagadze, Top Hat’s end-to-end teaching platform has users in every large university in North America. The company stated in a press release that it has 2.7 million students who are enrolled in courses using Top Hat at 750 institutions, similar numbers to what the company shared when it announced its Series C in 2017, when it served 750 institutions and 2 million users.
The company’s main user base is focused in the United States, which is home to more than 4,000 higher education institutions. The platform is used at a number of well-known schools, including New Jersey’s Rutgers University, The Ohio State University, and Vanderbilt University.
While traditional textbooks and physical course materials have remained popular in North American postsecondary institutions, digital offerings have been on the rise for the past two decades. Top Hat is accompanied in the market not only by traditional publishers, like Pearson offering e-textbooks, but similar technology companies like Boston-based Cengage and Kitchener’s D2L, which has raised $165 million to date and has been operating in the education space since 1999 offering K-12, higher education, and corporate learning programs.
Top Hat’s products are developed specifically for postsecondary professors to use in their classrooms. Silagadze explained the company’s four main offerings, engaging classroom activities, textbooks, assignments, and tests, as a way to replace legacy paper course materials with digital, interactive tools.
Shawn Abbott, partner at Inovia Capital, called Top Hat a “visionary leader” in the space, commending the company for bringing together students and educators.
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Top Hat’s goal is to disrupt an industry that still relies heavily on expensive, printed textbooks and course materials, Silagadze explained. “The ultimate success is to have Top Hat in every classroom in the world,” the CEO told BetaKit.
Top Hat approaches this by focusing its sale efforts directly on faculty and departments, rather than the large postsecondary institutions. And while it sees publishers as competition, Top Hat also wants to work with publishers to “drive transformation” in the textbook publishing industry.
The $72 million Series brings Top Hat’s total funding to date more than $137 million CAD. The close of the round comes almost three years after Top Hat’s Series C. While Silagadze noted that Top Hat generates “a good amount of revenue,” he explained that one reason the Toronto-based company decided to raise financing was to help accelerate its ability to work with publishers.
Top Hat plans to use the funding to increase the number of partnerships it has with publishers. The company has recently entered into two such partnerships, inking deals to become the exclusive partner for postsecondary publishers Fountainhead Press and Bluedoor Publishing. Silagadze noted that Top Hat has also been in talks with other publishers as well.
“We want to work with as many publishers as we can to be able to move their customers over from this print and legacy world to digital,” said Silagadze. “The primary goal of the round is focusing on these exclusive digital partnerships and helping convert as much print revenue to digital as possible and helping more folks do that.”
Top Hat has been working with Fountainhead Press for over the past year, but the newly announced partnership will see Top Hat become the exclusive digital platform for both publishers, with plans to convert mass amounts of customers over to digital.
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“[There is a] demise of the print publishing universe where their revenues are declining by double digits every year and they’re really struggling,” Silagadze said. “Top Hat really is the solution to that, to help all publishers level the playing field and to have that interactive digital platform to deliver their courses.”
Top Hat also plans to use its new capital to enhance the technology behind its platform, expand its offerings, and grow its sales and marketing operations by 30 percent in order to help it reach more customers more quickly.
With users that also span the United Kingdom and Australia, Top Hat has built out from its home-base of Toronto. Over the past year, Top Hat has grown to more than 400 employees, with the majority based in the city.
“Top Hat continues to deliver outstanding growth based on very strong adoption of the only tech-first teaching platform for higher education,” said Justin LaFayette, managing partner, Georgian Partners. “By amplifying its content strategy through publisher partnerships and supporting professors to create their own customizable digital course materials, Top Hat will continue to lead and transform the market to better support professors and students.”
Image source Top Hat via Glassdoor