May 26, 2022

Spotify has paved the way for a new consumer music listening model: Pay a monthly fee to stream whatever you want without owning physical or digital versions. Now a startup called Perlego, which has applied the concept to academic textbooks, has raised $50 million to expand its business after its platform grew due to COVID-19. The London-based startup currently has 400,000 paying customers who get unlimited access to about 850,000 titles – textbooks, fiction and other literature – that are assigned to students as courses at universities and other higher education institutions. The startup claims to be making Catalog, Perlego, the world’s largest online textbook subscription service.

Mediahuis Ventures, the venture arm of European media conglomerate Mediahuis, led the round with Raine Ventures, the venture arm of the Raine Group (the investment bank overseeing the sale of Chelsea Football Club) and Evli Growth Partners. This Series B round also featured angel investors such as Kahoot’s two co-founders, Jamie Brooker and Johann Brand, through their We Are Human foundation; As well as support for “strategic” publishers.

Perlego does not disclose which of its long list of current partners may be the strategist. Perlego (Latin for “I read”) is partnered with 5,000 educational publishers including Cengage, Routledge, Cambridge University Press, Elsevier and Harvard University Press.

image credit: perlego (Opens in a new window)

Gauthier van Mulderen and Matthew Davies founded the company in 2017 when, as recent university graduates, they were inspired to create a platform to solve a serious financial problem faced by students: textbooks are too expensive. ,

“It was a pain for me,” Van Mulderen said, recalling how he used to pay £200-300 for a book just to “read a certain chapter and never read it again.” It was no different than how you want to hear some songs, not the entire artist’s album. “So I thought the subscription model would definitely work here.”

The high cost of textbooks is well known to many college students. A survey by the US Public Interest Research Group found that by 2020, about 65% of students said they didn’t buy textbooks because of the high price, even though they knew it could affect their performance in the curriculum. Van Mulderen also cited a statistic (but didn’t give me the source) that about 23% of students skip classes because of the cost of the books needed to study them.

“The educational content market has lagged behind other types of content that are being successfully digitized and new consumption models are being introduced to users. We believe that the introduction of an online subscription model in this category is inevitable, and the Perlego platform and business model will lead the way in learning. region in this digital transformation,” Elizabeth Brillman, Venture Partner at Rhine Ventures, said in a statement. “We are thrilled to be working with Gauthier and the entire Perlego team on this journey.”

At first, he says, publishers were a little slow, but not indifferent, in contacting the startup to see what might happen to the relationship. As Van Mulderen described it, although publishers had fairly tight control over book publishing for the predicted market – the education market – from his point of view, there were some significant cracks in the situation.

“The big problem for publishers is that they put too much emphasis on textbooks to compensate for piracy,” he said. (And he didn’t add that, but obviously the more limited edition and exclusive nature of the titles also come into play.) But he said it hurt him more. Not Illegal, but just as destructive, is what publishers have sought to combat: the used book market. These two forces have been standing face to face for some time now. Perlego claims it has intercepted 2.1 million internet searches for “free” illegal textbooks by 2021.

“A model like ours not only prevents piracy but also reduces the need for used books,” he added.

Instead, the business model is based around the idea of ​​making book subscription not free, but at least significantly more accessible to students or even institutions that offer their students access to the service as part of the service. Would like to partner with Perlego. grant access. His proposal. them. The company currently has a free two-week trial before users pay monthly (£12 in the UK; $18 in the US) or yearly (which equates to £8; $12 per month). But it doesn’t have Spotify-style freemium as it’s still thinking about what it might look like.

“Personally, I am against advertising,” he said. “We want to create a clean space without ads. We don’t like to advertise in a cycle. He said one possible idea could be to create books instead, some of which are free to use and others require a paid subscription. For publishers, it operates on a revenue-sharing model in which 65% of subscription revenue is shared among publishers on a rotational basis, with additional commissions paid based on the consumption of the work and the value of the book. Over time, he says, he’s also considering how they can partner with publishers to sell real paper books that people want to keep for a lifetime.

Like other companies that have built a business around e-books, Perlego not only touts the benefits of low prices, but emphasizes the benefits of a digital interface for other reasons: Van Mulderen says books are becoming part of a “private digital library.” “, which is more dynamic (and easier to carry around) than the analog version, and where (from a technical point of view) this library becomes a platform of its kind: you have the ability to store your own notes, and so that people can share notes with each other with a friend, and add documents and media types other than Perlego books to these libraries.

“Our vision is to be a searchable ecosystem for all your course materials, including videos or PDFs,” he said. “We believe it can also be a place for instructors to complete and review your work assignments, making it easy for everyone.” And it’s not just about learning how digital platforms can be used to change the textbook industry. Chegg also created an online textbook rental/purchase portal; Open Library and LibreText are two more; But none of them are as comprehensive as Perlego in terms of catalog and functionality – anyway.

The model is gaining momentum as all three sides of the Perlego market continue to grow, especially in the past two years as online learning swept the world in the wake of the Covid-19 pandemic. It is currently associated with 6,000 educational institutions for teaching and taking courses in 172 countries. About 40% of the institutions he works with are located in the US. In 2021, Perlego’s subscriber base has increased by 450%, and publishers are also thrilled: the book list has grown by 166% in the last year and by more than 500,000 since 2019, when it is only 300,000 titles.

“Perlego is reimagining college students by helping them access course resources and help publishers go online and unlock new revenue opportunities. We have seen business growth since our initial investment and are delighted to double our business commitment with our Series B. Ensuring that free information is available to the public is at the core of what we do. Mediahuis is excited to expand its mission to higher education.” This is stated in a statement by MediaHuis COO Paul Verwilt.

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