Online-textbook company Top Hat announced a US$130-million equity investment round on Thursday, more than doubling the amount it’s raised since launching in 2009. The funding, all from existing investor Georgian, follows a suite of acquisitions for the Toronto-based firm—and caps co-founder Mike Silagadze’s tenure as CEO. 

Silagadze is stepping down after 12 years at the helm. He will leave the CEO’s office in mid-March and remain at the company as a board member. 

“This is a huge vote of confidence by our existing investors who know the company best,” said Silagadze in an interview with The Logic. “That they’re willing to put this kind of money behind us, that they believe that we’ve got the right team, we’re in the right market and it’s the right time to be able to pull this off—that’s really humbling.” 

It surely takes humility to relinquish control of the company he co-founded in his University of Waterloo dorm room. What began as an idea—inspired by Silagadze’s own university experience—to create a digital storefront for textbooks has grown into a 500-person company, serving over three million students across 750 higher-education institutions in five different countries. The company now publishes digital versions of around 2,000 textbooks. It’s also built an online learning platform that lets teachers transpose their course material to a digital format. 

In many ways, the company has made good on the original vision for the firm, but Silagadze said Top Hat did not arrive here strictly by design. “I don’t know that we, even three years ago, had an inkling that we would be acquiring traditional publishers,” he said. “That was kind of a crazy idea that ended up working.” 

Top Hat acquired three publishing firms in the past year—B.C.-based Nelson Education, and U.S. firms Bluedoor and Fountainhead Press—and the company plans to carry out one or two more acquisitions this year, said Silagadze. Consolidating the sector is now core to its strategy, as it looks to grow its value by three to four times what it is today within the next five years. Getting there, he said, will take a leader with deeper experience scaling a tech firm than what the first-time CEO can offer. 

That’s where Joe Rohrlich comes in. The new chief executive joins the company from Austin, Tex.-based software firm Bazaarvoice, where, as chief revenue officer, he helped grow the company’s revenue tenfold. The private firm claims to generate “hundreds of millions of dollars” in annual revenue. “He’s aligned with what we’re trying to do at Top Hat,” said Silagadze, who handpicked Rohrlich based on his track record growing a company, as well as his values. “He’s fairly direct, a kind of no-bullshit-style leader. There was a good culture fit and chemistry in terms of being able to communicate openly and clearly.” 

Rohrlich will start his new role on March 15, and will continue working from Austin at least for the near term. 

Silagadze said finding a successor had been a consideration for him and the board once the company grew to a certain size and began considering going public. While the co-founder said there’s no imminent plan to IPO, “12 months from now, 18 months from now, if the markets stay as they are today, it’s a definite possibility.” Regardless of a go-public plan, Silagadze said the timing felt right for a new CEO, given the boost from the pandemic. 

COVID-19 has been a major catalyst for digital learning technologies, as classrooms rapidly shifted online. Venture capital investments in global edtech reached US$16 billion in 2020, nearly double 2018 levels, according to market-research firm HolonIQ. Top Hat’s revenues grew 40 per cent last year, said Silagadze. 

The company’s performance spurred Georgian to write its biggest cheque to date. “We’ve seen a massive shift in society in the last 12 months, and Top Hat is in a position to capitalize in higher ed,” said Margaret Wu, a lead investor at Georgian who was involved in the Top Hat deal. “Digital content and learning has become way more than a trend and is now an absolute must.” 

Georgian led Top Hat’s last investment, a US$55-million round that closed just before the pandemic. Those funds were meant to help launch the firm’s acquisition strategy. “A lot of proof points played out from that investment thesis last year,” said Wu. “It has demonstrated the effectiveness of the M&A strategy around acquiring traditional publishers. This new round is really a decision to double down on that momentum.” 

Wu said the investment is also part of Georgian’s broader strategy to funnel more funds into winning companies in its portfolio. “Directionally, we’re gaining conviction in backing our best companies for longer,” she said. Last February, Georgian raised Canada’s first venture fund of more than $1 billion. Wu declined to say whether the recent investment in Top Hat came from that pool.

Following Silagadze’s transition out of the CEO role, he will remain at Top Hat as a board member. “I’m not planning to go anywhere in the near term,” he said. “And in the immediate term, my focus is ensuring Joe has a smooth onboarding.” As for what the outgoing CEO has planned further down the road, he said he’s still figuring it out.