Looks like investors don’t think Chegg has the textbook rental market locked up. BookRenter, a company largely seen as the number two to Chegg, just announced that it has raised $40 million in a third round of funding.
Chief executive Mehdi Maghsoodnia told me last year that BookRenter isn’t just copying the competition. The San Mateo, Calif. startup keeps costs down by not buying and warehousing the books itself, and instead connecting renters with partner companies. Perhaps more importantly, BookRenter focuses on building its presence on college campuses by creating partnerships with campus bookstores.
Maghsoodnia reemphasized that second point yesterday, saying that textbook rentals aren’t an industry where companies can win by building a standalone website and appealing directly to consumers. Chegg may be going strong now, but he predicted, “in a year, they’re going to be in a world of hurt” because bookstores are becoming more competitive. BookRenter says that it has partnered with more than 560 campus bookstores which serve more than six million students.
To push forward with that goal, BookRenter also just announced a partnership with the National Association of College Stores, which will start offering three new BookRenter services to its member stores, including the RapidReturn feature that allows students to drop off their rentals at the store rather than shipping them at the post office. An NACS study found that customers of stores partnering with BookRenter were 21 percent more likely to rent from their college store and 10 percent more likely to shop there for items other than textbooks.
I also asked Maghsoodnia about the e-books — after all, Chegg’s founder is now running tablet textbook company Kno. Maghsoodnia replied that BookRenter plans to add e-book options soon, but that the demand isn’t exactly overwhelming. As evidence that students don’t want to spend a lot of money in a textbook-reading device, he pointed out that Kno is reportedly selling off its hardware business to focus exclusively on software.
The round brings BookRenter’s total funding to $56 million, which is less than the extremely well-funded Chegg, but still seems like an impressive amount of capital. Adams Capital Management, Comerica Bank, Focus Ventures, Lighthouse Capital Partners, Norwest Venture Partners, and Storm Ventures (most of them existing investors) provided the new funding.
[image via Flickr/Wohnai]