Pluralsight IPO follows in Dropbox’s footsteps with first-day pop

The tech IPO drought may finally be over–for a certain kind of tech company.

Utah-based startup Pluralsight made its public debut this morning, raising $310.5 million at a valuation of nearly $2 billion. The company originally set a price range of $10-$12 per share, later increased that to $12-$14 per share, and then (May 27, 2018) announced $15 per share pricing. The stock opened on the Nasdaq at $20 per share, a pop of 34%.

Two months prior, fellow enterprise technology startup Dropbox saw its shares increase 36% on day one, also trading on the Nasdaq. The stock is now worth over $30 per share, giving Dropbox a valuation of $12.2 billion. Similarly, in April, DocuSign jumped 31% and Zuora nearly 43%.

Of the recent enterprise IPOs, Pluralsight and Dropbox operate the most similar business models, leveraging B2C customers to generate interest on the part of more lucrative B2B customers.

“When we were out on the road, the investors recognized that immediately,” says Pluralsight cofounder and CEO Aaron Skonnard. “We have this awesome B2C consumer base, we’re helping individuals learn these skills. They take us into their business, and that’s a key part of our go-to-market. And that’s exactly what they heard from Dropbox.”

In the end, the offering was more than 20 times oversubscribed.

The central difference between Pluralsight and other enterprise tech companies is the importance of Pluralsight’s outward facing talent. The company offers customers access to a library of technology courses, covering topics including front-end web development, data science, and security. Each course is taught by a contracted industry expert, who is paid according to the course’s popularity. (Some instructors have earned upwards of $1 million.)

The runway is “huge”

Yet Skonnard chooses to distance Pluralsight from “education” or “edtech” labels, and investors have endorsed that distinction.

“This is ongoing professional skills enablement. It’s more like we’re embedded in their product problems, we’re part of that supply chain to deliver the innovation for the company,” he says. “That’s also why we also don’t compete with the bootcamps or the MOOCs, because they’re bringing people into the [tech] industry. Our customer is more the CTO and the CIO.”

By focusing on existing employees of large companies, Pluralsight has avoided the fate of education startups like Dev Bootcamp and Iron Yard, both of which shut down last year. MOOCs, in turn, have become useful classroom tools, but only mildly successful businesses. 2U, which operates online graduate programs and recently teamed up with WeWork, is one of the industry’s few bright spots.

Pluralsight’s business, in contrast, does not hinge on a high-stakes, binary outcome like a hiring decision. Instead, the company promises to increase employees’ technology skills over time, and give senior managers tools to evaluate their teams’ strengths and weaknesses. Skonnard cites, by way of example, Pluralsight’s relationship with Barclays. A 19-year-old coder at the London-based bank, self-taught via Pluralsight, caught the eye of executives when he developed a Siri-driven mobile app. The bank signed a contract for 1,500 licenses, upped the count to 7,800 licenses the following year, and now pays subscription fees to cover 15,000 licenses. Among Barclays’s technology teams, “We’re about 50% penetrated,” he says.

Now he’ll have to repeat that success at dozens more companies. Pluralsight has a presence in roughly two-thirds of Fortune 500 companies, but is only 5% penetrated in those accounts. The runway, Skonnard says, is “huge.”

Pluralsight was founded in 2004. After initially bootstrapping the company, Skonnard raised $27.5 million in Series A funding in 2013, and $135 million in Series B funding the year after. Former U.S. Secretary of Education Arne Duncan sits on the company’s board.