UPDATE 1-Desire2Learn raises $80 mln in venture funding

Tue Sep 4, 2012 7:21pm EDT

* Largest-ever venture capital investment in Canada software

* Tech firm plans to set the stage for growth

* Metrics "unbelievable," fund manager says

TORONTO, Sept 4 (Reuters) - Desire2Learn Inc, a Canadian technology company that develops online learning systems, said on Tuesday that it secured $80 million in venture funding to help strengthen its infrastructure and boost its prospects for growth.

The privately held company is based in Ontario's Kitchener-Waterloo area, near BlackBerry maker Research In Motion.

Desire2Learn said the backing comes from U.S. venture capital firm New Enterprise Associates and OMERS Ventures - the venture capital arm of Ontario Municipal Employees Retirement System, one of Canada's largest pension fund managers.

Desire2Learn Chief Executive John Baker said in an interview that the plan would allow the company to focus on research and development.

The company builds cloud-based learning systems that provide online learning platforms for a base of more than 700 clients, which include higher education institutes and universities, along with government and corporate sector customers.

The terms of the financing were not disclosed, but the deal gives the venture investors a minority interest, Baker said.

The $80 million capital raise is Desire2Learn's first round of financing, and it also marks the largest-ever venture capital investment in a Canadian software company, according to Thomson Reuters data.

"The company has been called on by many private equity and venture groups over the last seven years. We only really decided to go down this path three months ago," Baker said. "We ran a very, very tight process with a very small number of top tier firms."

RAPID GROWTH

Desire2Learn, which has a workforce of about 550, has added roughly 200 people in the past year alone.

Baker said the company had already approved plans to post another 170 jobs even before the financing deal was completed.

The company's rapid expansion comes at a crucial juncture for the area, which has been hurt by RIM's waning fortunes. The one-time Canadian tech behemoth has shed thousands of jobs in recent months as its aging line-up of BlackBerry devices has lost ground to more-advanced devices like Apple Inc's iPhone and a slew of others based on Google's Android software.

Howard Gwin, managing director of OMERS Ventures, sees Desire2Learn as the new shining light in the tech hub that has grown in and around the cities of Kitchener and Waterloo.

"The metrics on the company are unbelievable. It's rate of growth with being self-funded is phenomenal -- it is in the top 1 percentile range," said Gwin, adding that Desire2Learn has barely scraped the surface in terms of both domestic and global growth.

"We love that John has a long-term mindset around building a great global brand," said Gwin in an interview. "Our view is this company will become the category leader."

The funding from NEA and OMERS Ventures will allow the company to accelerate its growth plans as an independent entity, said Baker, adding that Desire2Learn has no plans at this time to go public or sell out.

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