Forbes

When Mohsen Shahini came home to his Waterloo apartment one day in March 2009, he found a small company working out of his living room. Roommate Mike Silagadze had suddenly quit his job as a researcher at a local analytics company and set up operations, interns and all, for Top Hat Monocle, a company that creates interactive instructional software for college professors and students. Luckily it wasn’t hard to convince Mohsen to join the company as a co-founder.

Today, Top Hat Monocle is used by 65,000 college students at 150 universities across North America, including Harvard and Johns Hopkins. This morning, the 32-person Toronto-based company announced that it’s raised $8 million in venture funding from Emergence Capital and iNovia Capital. Top Hat previously raised $1.5 million in angel funding in July 2011.

The company offers software that helps professors harness students’ phones for classroom lessons and activities, instead of Twitter and Temple Runner. At its simplest, professors use the software to present slideshows and handouts on students’ phones and laptops. Instructors can create more interactive digital activities, like polls, quizzes, and open-ended question and answer exercises. (It’s also a pretty painless way to gauge attendance.) Versions of the software work for feature phones up through iOS and Android devices.

“We have quite a bit of data that shows that Top Hat increases grades and course satisfaction,” says Silagadze.

Top Hat makes money by offering the service to professors for free while charging students a subscription fee of $20 per semester for unlimited courses. Though Silagadze says the company currently brings in less than $10 million in annual revenue (quick back of the envelope math: $20 x 65,000 students = $1.3 million), he expects to break through that number within the next year or two. Already profitable, Top Hat is aiming for 200,000 students this year and multiples of that in the coming years.

Professors, who create and control content behind the scenes, can automatically share their creations or keep them private within a limited network. The company is currently exploring revenue streams related to a content market, where instructors sell ‘course packs’ to each other with Top Hat taking a cut.

“We’ve got all of these professors authoring content,” says Andrew D’Souza, Top Hat’s chief revenue officer. “We can easily distribute that and charge for it. For professors it’s a lot less of an effort than authoring a textbook.”

Silagadze says that the funding will be used to scale out the sales team and further enhance the product, especially its network aspects.