Rafter, a new edtech company formed from the rebranding of popular textbook rental service (and Chegg competitor) BookRenter, announced its first-ever strategic acquisition this morning. The lucky acquiree? HubEdu: A young, San Diego-based startup that provides universities with a suite of analytics, tracking and price comparison tools to help them increase their revenue and make course materials (and higher education as a whole) more affordable for students.
For those unfamiliar, the newly-formed Rafter offers a cloud-based platform that enables schools and administrators to improve the affordability, effectiveness, and accessibility of course material. Through BookRenter, Rafter lays claim to a network that spans across 500+ campuses and serves millions of students nationwide. Though it’s less than four months from launch, HubEdu’s exit to Rafter gives it access to a much larger audience than it would have been able to reach on its own. Plus, being still in the early stages, the acquisition affords its technology the opportunity to evolve at scale from the get-go.
In turn, as Rafter has turned from BookRenter’s singular focus on textbooks to providing a broader, cloud-based platform that helps students reduce the supplementary costs of education, HubEdu’s comparison tools (that will show how textbooks at the campus store price relative to those on Amazon, for example) give schools the chance to win the battle for price, selection and service for their students.
The hope is that, by giving students better service and more competitive prices on course materials, schools can continue to reverse the decade-long trend of declining market share and lure students away from those pesky online merchants and predatory distributors that have been steadily eating away at their profit margins.
As for some quick context: Founded in 2006, BookRenter was one of the first online textbook rental services for college students. Since then, the startup has gone on to partner with over 500 campuses, reaching more than 6 million students nationwide, and has raised over $56 million in venture funding along the way.
While the platform continues to grow, BookRenter ran into some formidable competition in the textbook rental space, mainly in the form of Chegg, which is itself one of the most well-funded companies in education. (Nearly $200 million.) This, along with identifying a much bigger market opportunity led to BookRenter rebranding as Rafter in February, and consequently broadening its scope from textbooks to course materials of all shapes and sizes.
Since then, Rafter has been selling its cloud-based platform to teachers and administrators in the hopes of providing them with a better way to manage and control course materials — at every level, from discovery and adoption to pricing, both for physical and digital content. The big picture idea was to help solve the difficulties schools and teachers have in sourcing course material — a process which can be more than a little complicated — and archaic.
Naturally, for most teachers, discovering new course content traditionally happens by word of mouth, for example. Not to mention the difficulties schools and teachers find in gaining access to the rights of course materials and ensuring fulfillment, etc.
Rafter is on a mission to bring all of these old school processes online, while partnering with universities to manage discovery, supply and distribution of textbooks, education software, and everything in between.
Meanwhile, the San Diego-based HubEdu had been following a similar trajectory. The startup itself was born out of a site called SwoopThat.com, which was initially a platform that allowed consumers to buy course books. Realizing they were just scratching the surface, the founders came to the decision that if they really wanted to make any significant imprint, HubEdu would have to pursue a more holistic approach.
They turned their attention to helping schools transform their campus stores into the heart of the whole retail ecosystem. By putting stores at the center of all purchases on campus, whether online or off, HubEdu believed that schools could begin to see incremental increase in revenue. So, they developed a price comparison tool that could be integrated into student purchasing, ensuring that schools would be able to capture, monetize, and understand all the transactions taking place on campus.
For students, course materials end up being the second highest expense behind tuition. By offering schools access to inventory analytics, tracking systems, as well as insight into purchasing behavior, they can begin to act more like retail or eCommerce companies and, as a result, are able to begin reducing costs. Which, after all, is really all that a cash-strapped college student wants. Well, that and a competent guidance counselor.
Rafter CEO Mehdi Magsoodnia tells us that he sees the acquisition in the context of a promising trend that’s emerged in education of late. Namely, that there’s been a steady rise in the number of edtech startups raising venture capital. And he’s far from being alone in noticing — the VC community invested over $400 million in edtech companies in 2011. That may not seem mind-blowing by itself, but considering venture capital investment in education was under $100 million as recently as 2007, one starts to get a sense of how big this up-tick is (and will likely continue to be).
However, as the Rafter CEO points out, many of these VC-backed startups are now beginning to look for exits with larger players that can help bring them distribution and generate demand for their products. Of course, typically that’s been limited to the big, old-school players like Pearson and Blackboard.
With $50M+ under its belt and the promise of facing a much larger market, Rafter is definitely looking to represent the new, cloud-based version of the Pearsons and Blackboards of the world. That’s probably giving it a little too much credit, but it is true that major tech markets tend not to thrive without a healthy number of resident, large companies that can provide the little guys with profitable exits.
As far as that goes, Rafter’s acquisition of HubEdu is a clear (first) step in this direction, and it would be very surprising if we didn’t see the company make at least a few more acquisitions over the next year. Stay tuned.