The Instructure deck from November 2016 is a data-heavy presentation designed for a post-IPO or late-stage audience, focusing heavily on financial transparency and market expansion. The company effectively uses its 'Canvas' brand heritage in Higher Education to justify its move into K-12 and the corporate sector via 'Bridge.' Key strengths include the granular reporting of deferred revenue ($52M in 2015) and backlog ($152M in 2015), which provide the 'enhanced visibility' investors crave in volatile markets. While the deck lacks a traditional 'problem' slide, it compensates with a robust grow…
Key takeaways
- The company reported a significant backlog of $152M as of December 31, 2015, representing future non-cancellable amounts to be invoiced (Slide 16).
- Revenue growth remained strong, reaching $30.1M in Q3 2016, though year-over-year growth rates slowed from 71% in Q4 2014 to 44% in Q3 2016 (Slide 25).
- The growth strategy relied on a sequential market entry: Higher Ed in 2011, K-12 in 2012, International in 2014, and Corporate (Bridge) in 2015 (Slide 10).
- Gross margins showed steady improvement, climbing from 67% in Q3 2014 to 72% by Q3 2016 (Slide 25).
- Instructure identified a combined market opportunity of $14.2 billion by 2018 across learning, performance, and workforce management (Slide 7).
- The business model emphasizes high lifetime value, claiming net revenue retention greater than 100% (Slide 22).
- Operating expenses remained high relative to revenue, though they dropped from 120% of revenue in Q3 2014 to 104% in Q3 2016 (Slide 25).
- Free cash flow was highly cyclical, swinging from a $21.3M burn in Q1 2016 to a $20.1M positive flow in Q3 2016 (Slide 28).
Slide-by-Slide Analysis
Slide 1: Title Slide
The deck opens with a minimalist title slide featuring the company name, INSTRUCTURE , centered over a vibrant, multi-colored overlapping circle pattern. There is no tagline or mission statement present on this slide.
Slide 4: Product Overview Video
This slide is a placeholder for a PRODUCT OVERVIEW VIDEO . In a live presentation, this serves as the transition from the high-level brand to the functional reality of the software. For a static deck, it represents a missed opportunity to summarize the value proposition for readers who cannot play the media.
Slide 7: Substantial Market Opportunity
Instructure defines its Total Addressable Market (TAM) through two primary segments. The Learning Management market is projected to grow from $5.1 Billion in 2016 to $7.8 Billion in 2018. The second segment, encompassing Performance Management, Workforce Management, Recruiting, and Compensation Management , is valued at $5.5 Billion in 2016, growing to $6.4 Billion by 2018. The slide cites IDC and MarketsandMarkets as sources.
Slide 10: Growth Strategy
This slide uses a stepped bar chart to show how the company has expanded its revenue streams by entering new markets. The timeline shows Canvas Higher Ed launching in 2011, followed by Canvas K-12 in 2012, Canvas International in 2014, and the corporate-focused Bridge product in 2015. This visualizes the 'Expanded TAM' mentioned in the header.
Slide 13: Innovative Management
The team slide features eight executives, including Josh Coates (CEO) and Steve Kaminsky (CFO) . Notably, the headshots are playful and non-traditional (e.g., the CEO is wearing goggles and holding a blowtorch). The slide lists impressive former employers for the team, including EMC, Mozy, Microsoft, VMware, and GE .
Slide 16: Enhanced Visibility Into Future Periods
This is a critical financial slide showing two bar charts. Deferred Revenue grew from $19M in 2013 to $52M in 2015. Backlog , defined as future non-cancellable amounts to be invoiced, grew from $73M to $152M in the same period. This slide is designed to prove the predictability of the SaaS model.
Slide 19: High Customer Lifetime Value
A conceptual graph illustrates the SaaS business model. It shows Customer Acquisition Costs (CAC) as an initial negative contribution, followed by a Breakeven point and a long-term Revenue line. The slide highlights the three stages of the customer journey: Acquire, Retain, and Renew .
Slide 22: Investment Highlights
This slide summarizes the bull case for Instructure with six icons. Key points include Rapid and Widespread Customer Adoption , a Native, Cloud-Based Platform , and Net Revenue Retention Greater than 100% . It also reiterates the Solid Revenue Growth and Multi-Year Contracts mentioned in earlier slides.
Slide 25: Non GAAP Income Statement
This slide provides a detailed quarterly breakdown from Q3 2014 to Q3 2016. Revenue increased from $12.4M to $30.1M . While Gross Margin improved to 72% , the company remained unprofitable, reporting a Net Loss of $9.5M in Q3 2016. However, as a percentage of revenue, the net loss improved from (53%) to (32%) over the two-year period.
Slide 28: Free Cash Flow Reconciliation
The final slide shown tracks Free Cash Flow . It highlights the extreme seasonality of the business; for example, Q1 2016 saw a negative $21.3M flow, while Q3 2016 was positive $20.1M . This is typical for EdTech companies that collect large annual payments at the start of the school year.
What Works Well
Revenue Predictability: By breaking out both deferred revenue and backlog (Slide 16), Instructure gives investors a clear view of 'locked-in' future growth, which is the most important metric for a scaling SaaS company. · Strategic Roadmap: Slide 10 clearly explains how the company moved from a niche (Higher Ed) to a platform (K-12, International, Corporate). It justifies the R&D spend by showing the resulting TAM expansion. · Financial Transparency: The inclusion of a full Non-GAAP income statement (Slide 25) with nine quarters of data is rare in pitch decks and demonstrates a high level of maturity and readiness for institutional scrutiny. · Humanizing the Brand: The management slide (Slide 13) uses humor to stand out. In a sea of corporate headshots, the 'mad scientist' and 'Mickey Mouse' themes suggest a unique company culture without sacrificing the credibility of the listed resumes.
What Is Missing
Problem/Solution Narrative: The deck assumes the audience already understands why legacy Learning Management Systems (LMS) are failing. There is no slide dedicated to the specific pain points of students, teachers, or corporate HR managers. · Competitive Landscape: There is no mention of Blackboard, Moodle, or D2L. For an investor, understanding how Instructure wins against these incumbents is vital, especially in the K-12 and Higher Ed sectors where displacement is the primary growth driver. · Unit Economics Specifics: While Slide 19 shows a conceptual LTV/CAC graph, it does not provide the actual dollar figures for CAC or the average contract value (ACV). Investors are left to guess the actual efficiency of the sales and marketing spend. · The 'Ask': As this appears to be an investor update or a late-stage roadshow deck, there is no specific funding request or 'use of proceeds' slide included in this selection.
Founder Takeaways
Sell the Backlog: If your business uses multi-year contracts, do not just report trailing revenue. Report your backlog. It is the strongest evidence you have of future stability. · Show the 'Staircase' of Growth: Use the format of Slide 10 to show how your product evolves. Don't just say you will expand; show the chronological sequence of how you have already successfully entered adjacent markets. · Embrace Seasonality: If your cash flow is lumpy due to industry cycles (like education or retail), be upfront about it. Slide 28 shows that being 'cash flow negative' in one quarter is acceptable if the annual cycle proves the model works. · Balance Margins and Growth: Instructure shows that you don't need to be profitable to be a 'solid' investment, provided your gross margins are high (70%+) and your losses are shrinking as a percentage of revenue (Slide 25).
Frequently asked questions
- What is the primary product mentioned in the deck?
- The deck focuses on the Canvas platform, which serves Higher Education, K-12, and International markets. It also introduces Bridge, a product aimed at the corporate sector for performance and workforce management. Slide 10 explicitly shows how these products were rolled out chronologically to expand the company's Total Addressable Market (TAM).
- How does Instructure demonstrate financial health despite operating losses?
- Instructure uses 'visibility' metrics. On Slide 16, they show deferred revenue growing from $19M to $52M and backlog growing from $73M to $152M over a three-year period. This suggests that even while reporting quarterly net losses, the company has a massive, contracted pipeline of future revenue that de-risks the investment.
- What is the significance of the 'Bridge' product in their strategy?
- Bridge represents Instructure's move into the corporate talent management space. Slide 7 identifies this as a $6.4 billion opportunity by 2018, covering performance management, recruiting, and compensation. This diversification allowed Instructure to move beyond the saturated academic LMS market into higher-margin corporate environments.
- How does the company portray its management team?
- The management slide (Slide 13) is unconventional, featuring executives in humorous, costumed, or messy poses (e.g., the CEO with a blowtorch, the CFO in a colorful apron). This approach humanizes the leadership while still listing serious credentials from companies like EMC, Mozy, Microsoft, and VMware.
- What are the key unit economics highlighted?
- The deck emphasizes a high Customer Lifetime Value (LTV) model. Slide 19 illustrates a standard SaaS breakeven curve where cumulative contribution eventually far exceeds acquisition costs. This is supported by the claim on Slide 22 that Net Revenue Retention is greater than 100%, meaning existing customers spend more over time.
