Washington entrepreneurs Ted Leonsis and Steve Case have made another major investment with their $450 million Revolution Growth fund, acquiring a big stake in Echo360, a Dulles-based software maker that converts college classroom lectures into a digital format that students can watch on their computers and mobile devices.
Echo360, located near the former AOL campus where Case and Leonsis first made their fortunes, has contracts with more than 400 colleges and universities across 30 countries, ranging from Georgetown University and George Washington University in the District to schools in Australia and Saudi Arabia.
The software company plans to use the cash from Revolution to quickly grow in the highly competitive market for education companies, several of which — Blackboard, Rosetta Stone and The Washington Post Co.’s Kaplan — are located in the Washington region.
Echo360 commands 54 percent of its niche market, but is in only 10 percent of universities and colleges in the United States. The Revolution money is intended to fuel an expansion from 5,000 classrooms to 30,000 by 2017.
“Our goal is to reach 50 percent of U.S. students in five years,” said Echo360 chief executive Fred Singer. “It’s a race . . . to be ubiquitous.”
Echo360 creates software that works off already installed video and sound equipment to record classroom instruction. The applications allow students to see a missed class, receive special instruction, review classes repeatedly or “flip” a class, in which a teacher pre-tapes the lesson for review prior to the class. The pre-taping allows students to see the instruction and then gather in the classroom to discuss it. Instructors also can include notes and additional videos in the presentations.
Echo360, which is four years old and has revenues of about $15 million, makes money by licensing its software to universities at an average cost of $15 per student per year. Annual contracts range from $20,000 to $200,000 for a large school.
Analysts said there likely is an opportunity in the sector for pioneering companies, who can achieve first-mover status and differentiate themselves from competitors.
“It would seemingly be a good-sized market opportunity,” said Jerry Herman, managing director for education and eLearning equity research at Stifel Nicolaus.
Denis F. Cioffi, who teaches project management at George Washington University, said he is comfortable using Echo360’s technology for his campus class and for his distance-learning students.
“In the old days, I would have to go in and turn the cameras on and point them and make sure the sound was working,” said Cioffi, who has been recording classes on various platforms for about 14 years. “I don’t need to worry about it working. I can teach my campus class, knowing the recording will work automatically and know that I will interact with the distance-learning students a couple of days later, after they have seen the class.”
The investment in Echo360, which closed last week and will be announced Thursday, is the third company that Revolution has financed since December and reflects its goal of funding high-growth companies that could disrupt traditional industries.
The Revolution Fund in January made a $25 million investment in Vienna-based FedBid, which provides online auctions for government purchasing.
Revolution is now the largest shareholder in Echo360. Singer was an AOL lieutenant under Case and Leonsis during the Internet company’s heyday. Revolution partner Donn Davis will join Echo360’s board, and other Revolution representatives are expected to follow.
“It’s a perfect fit for us,” Case said in an e-mail. It’s “a local company, with a proven product ready for mass adoption, using an innovative technology to transform a critical sector: higher education.”