“I’d buy a book for £250, only read two chapters out of that book, and never use it again. It’s such an old-fashioned model.”
Gauthier Van Malderen, co-founder and CEO of Perlego, studied economics at university and knows all too well about the pain of buying hefty textbooks that can run into hundreds of pounds each. Despite the obvious frustration among students in universities, prices haven’t come down.
“Textbook prices have increased by 847% since 1982 or three times the rate of inflation,” said Van Malderen.
“In the UK, on average, a student spends £439 on books. Of course if you were to look in the different verticals of education, someone studying journalism might have to read 10-15 books but it is a cheaper basket size. However if you’re studying accounting you might need two or three books but those books cost £300 a piece. It really depends.”
Perlego is an edtech startup, founded by Van Malderen and Matthew Davis and based in London, that’s trying to address the chasm between pricey textbooks and the frugal budgets of college students.
It has taken its cues from Spotify, which may sound like a worn-out comparison. Yet, it’s a valid one, in the sense that Perlego connects students with e-book versions of their course material on a freemium subscription model.
Much like Spotify signing deals with record labels, Perlego has partnered up with a number of major publishers to bring their content to the platform, including Palgrave Macmillan and Wiley, with a deal with Elsevier in the works.
“The way we work is very similar to Spotify. We work with our partners, supply is the core aspect of our business, you need the quality textbooks from the biggest publishers. To do that, you need to bring them in on your model.”
Computer science and psychology are the platform’s most popular syllabuses for users currently. At the moment, Perlego only offers materials in English but it is considering adding German and Spanish language content where possible.
Perlego’s model has three main parts. The first is a B2C subscription service that brings the books directly to the students via the platform with royalties paid to the publishers. “We pay 65% back on a weighted average factor model,” said Van Malderen.
“If the student reads only your specific book, you’ll receive the full royalty for that student. However if the student reads three books, it will be divided up between the publishers.”
Secondly there’s data collection. Perlego offers publishers a view of the data behind the students accessing their content. The dashboard allows publishers to monitor books viewed, active readers, number of pages read, royalty statements, and market share compared to competitors.
“The really powerful thing here is we can see trends on what subjects are more popular and who’s reading what and as a result publishers can re-invest into their respective content based on what they think would be most lucrative for them in the long run.”
Finally, there’s the professor affiliate program which provides free access to professors. “A big thing in this industry is publishers send inspection copies to professors,” said Van Malderen. Unfortunately this means a lot of books can go unused or go to waste.
“Publishers spend a lot of time trying to get those books in front of professors. We’ve said to professors, you get free access to the platform and let’s say you study economics, we pre-populate all the economics books. For the publishers it’s great because it puts all the content straight away in front of the professors at zero cost.”
Perlego recently announced a seed funding round of £500,000 from angel investors including Redbus founder Simon Franks and new London seed fund Henosis Capital. It plans to invest the money into the product and bulking up its library of content. Since launching, it has assembled a respectable roster of publishers but this has taken some time.
“It was really, really hard. We got quite a few rejections at the beginning,” explained Van Malderen.
“We started with much smaller publishers, very niche, and we built up gradually from that and as soon as we got the two or three big brands, Palgrave and Wiley, we found it easier to bring publishers on board.”
Van Malderen doesn’t want to stop with textbooks though. The startup plans to launch a new section called “Publications” that will offer access to reports and white papers from think tanks, consultancies, and central banks.
Perlego’s user base is primarily European so far. It has about 2,400 students currently signed up, according to the CEO, but he declined to disclose how many of these are premium users that are paying £11.99 a month. “Roughly we’re converting about 5% right now,” he added.
Europe remains its primary focus right now as publishers over here were more open to the idea of an e-book platform compared to their counterparts in the US. This was largely due to the fact that textbooks are even more expensive stateside. The market is lucrative, acknowledged Van Malderen, but European departments were more willing to take a chance.
“Based on that, we can have a conversation in the next two to three years about growing across different territories.”