SM: Apex is venture funded, correct?
CV: It is. The company has a long history of financing. It was initially started by Paul Allen and his firm. There were other small investors who came in as well. Prior to my joining the company, Warburg Pinucs invested. Immediately prior to my joining Warburg Pincus acquired the majority of the shares from existing investors. They were the primary shareholder when I joined. We have done a couple of rounds of financing since then. Warburg Pincus was an active participant in the first of those. The most recent financing we did was a little over three years ago when we brought in MK Capital, which is our most active investor today.
SM: In 2002 you came on board. What did you do at that point?
CV: I was brought on with a charter of coming up with a strategy for growth. We were also confronted with the fact that the existing revenue stream was beginning to decline. That decline was happening aggressively because the company had been dependent on state-level contracts. That is not sustained beyond a couple of years.
In parallel, we set out to do three distinct things. One was to build a direct sales force. Even with the existing products, we could start selling directly to schools and districts. Until then the majority of our purchase came from schools but the majority of funding came from state-level contracts.
We also developed a strategy for our progression with content and course development. In parallel with that we evaluated our technology. We started new course development. As you might expect, when you join a company that is looking to put a new strategy in place it takes some time to understand the issues and implement that new strategy. I joined in late 2002 and in the beginning of 2004 we began development of new content with the intent to build out a complete high school digital curriculum. We wanted to meet all high school graduation requirements.
SM: That is a major effort.
CV: It was. We undertook that effort and introduced our first general studies courses in the fall of 2004. In parallel, we made a technology strategy decision that we would continue to build on the proprietary online learning platform that Apex had in place. We first stabilized and then enhanced our learning management system (LMS). We made that decision due to the lack of existing LMS that met the needs of secondary education. The majority of online learning platforms had been developed for post-secondary education. The needs of users are different at the K-12 level.
We completed the vast majority of courses to meet the needs of high schools in terms of our course catalogue in the fall of 2008. We have continued to evolve our learning management system. Interestingly, along the way the audience we have served has changed significantly. Apex learning started doing distance learning exclusively with Advanced Placement courses for gifted students.
When we set out for our general studies, our initial target was virtual schools, and we intended to continue to serve college-bound high school students. When we introduced our general studies course to market, we found great interest from brick-and-mortar schools to serve their at-risk performing students. That was quite different from what we had expected given who we had developed the courses for.