Perlego raises $50M, aims to build ‘Spotify for textbooks’
The London online startup Perlego has picked up $50 million to expand its business after seeing its platform boom through Covid-19.
The company currently has 400,000 paying subscribers who get all-you-can-read access to some 850,000 titles — textbooks, fiction, and other literature that students are assigned as coursework at universities and other higher-learning institutions; the startup says that this catalog makes Perlego the largest online textbook subscription service in the world.
The companies that led the round were Mediahuis Ventures (the V.C. arm of European media group Mediahuis), Raine Ventures, the V.C. arm of Raine Group (the investment bank overseeing the sale of Chelsea FC), and Evli Growth Partners.
Through their, We Are Human fund and backing from ” strategic ” publishers, this round also had angel investors, such as the co-founders of Kahoot, Jamie Brooker, and Johan Brand, We Are Human fund and backing from “strategic” publishers.
It is known that Perlego (Latin for “I read”) works with 5,000 education publishers, including Cengage, Routledge, Cambridge University Press, Elsevier, and Harvard University Press.
The company was founded by Gauthier Van Malderen and Matthew Davis in 2017 after they were inspired to build a platform to address what they felt was an acute financial issue for students: the very high cost of textbooks.
Van Malderen said, recalling how he would typically pay £200-£300 for a single book only to “read one assigned chapter and then never use it again.” “This was a pain point of mine,” it was not unlike how you might want to hear a few songs but not an entire album by a recording artist. “So I thought, surely a subscription model would work here.”.
The student suffers from the high cost of textbooks; in a survey from the Public Interest Research Group in the U.S. appears that in 2020 some 65% of college students reported that they held off from buying school textbooks because of the prices, despite knowing that it would likely impact how well they did in the courses.
Some 23% of students drop classes because of the cost of the books required to take them, according to Van Malderen.
Elizabeth Brillman, a V.C. partner at Raine Ventures, said, “The market for educational content has lagged other types of content, which have successfully digitized and offered new models of consumption to users. We believe that adoption of an online subscription model in this category is inevitable and that Perlego’s platform and business model will lead the education industry in this digital shift,” resume “We are excited to partner with Gauthier and the entire Perlego team in this journey.”.
Van Malderen indicated that publishers were a little slower but not uninterested in engaging with the startup to see what might come of the relationship. While publishers have had a pretty firm grip on publishing books for a predictable market space — those in education — the situation had some significant cracks in it from their perspective.
He said, “A big issue for publishers is that they price textbooks high in part to offset piracy,” he added what hurts them more is not illegal but equally disruptive, and something publishers were keen to combat: the second-hand book market. Those two forces have been on a collision course for some time. Perlego claims that in 2021, it intercepted 2.1 million searches online for “free” pirated textbooks.
resume “A model like ours not only prevents piracy, but it reduces the need for second-hand books.”
The business model is now built around making the book subscription not accessible but at least considerably more affordable for students or even institutions that might want to partner with Perlego to give their students access to the service as part of their offering them.
Before users have to either pay monthly (£12 in the U.K.; $18 in the U.S.) or annually (which works out to £8; $12 per month), the company currently has a two-week free trial, But it does not have a freemium tier a la Spotify.
Van Malderen said, “I am against ads,” “We want to create a clean space without the stress of advertising. We are not keen to have advertising in the loop.” He resumes that potentially one idea might be to create tiers of books instead, where some are free to use, and others require premium subscriptions. As for the publishers work on a revenue share model, where 65% of its subscription revenues are in turn distributed to publishers it works with, with an additional commission paid based on consumption of work and the value of the book.
Malderen continued that over time, they are also considering how they might work with publishers to sell actual hard copies of books that people might like to own for life.
Perlego isn’t just extolling the virtues of lower pricing, as with other companies that have built businesses around e-books, but also highlights (pun intended) the advantages of the digital interface for different reasons.
Van Malderen says that the books become part of a “private digital library” that is more dynamic (and easier to carry around) than the analog version, and where (in tech terms) that library becomes a kind of platform in itself: you can save your annotations, and for people to share annotations, as well as add other documents, and different types of media, beyond Perlego books to those libraries.
Modern resumes, “Our vision is to be an ecosystem to find all your course material, including videos or PDFs,” explaining, “We believe that could also be a place for instructors to carry out your work assignments and grading, too, streamlining for everyone.”.
Chegg has also built out a rental/purchasing portal for online textbooks; Open Library and Libre Texts are two others, but none of these areas are extensive in terms of catalogs and functionality as Perlego — not yet, at least.
In the last two years, the model seems to be finding some impressive traction, with the three sides of Perlego’s marketplace all growing at a time when online learning has taken hold of the world in the wake of the Covid-19 pandemic. It linked up with 6,000 institutions to fulfill class and course syllabi across 172 countries.
40% of the students that use Perlego are in the U.S.; in 2021, Perlego saw 450% subscriber growth, and publishers have also warmed to it: its book catalog had gone up 166% in the last year and has grown by more than 500,000 since 2019 when it was at a mere 300,000 titles.
Paul Verwilt, COO at Mediahuis, said in a statement, “Perlego is changing the equation for university students, helping them access course resources, while also enabling publishers to move online and harness new revenue opportunities. Since our first investment, we’ve watched the company soar and are excited to double down on our commitment to the company in their Series B. Making independent information accessible to society is at the heart of doing. Mediahuis is pleased to extend its mission further into higher education.”.