I've been lucky to have a
ringside seat over the last 8 years to watch as the education industry
evolves right in front of my eyes. First at my old firm Sterling Partners
which sprouted blockbuster companies like Sylvan and Laureate Education
and where I was exposed to a consistent dose of young, innovative
education companies over several years. In recent years I've been
fortunate to spend a fair amount of time both formally and informally
interacting with some of the largest education publishers in the world right here in NY. One of them is in fact an investor in our fund. What I've learned over
the years as a VC is that finding a compelling early stage company to back in
the education industry is challeging. The venture industry's collective investment track record across the sector over the last 20-30 years confirms this to be true. To be a successful investor in the education sector it's necessary to attack a large, preferably unregulated segment of the market with a highly disruptive solution and with an A team of domain experts that understands the education industry inside and out (rookies need not apply).
Which brings me to the $8 billion college textbook market.
Much has been written over the last year about the imminent demise of the $40 billion print newspaper industry at the hands of digital media. At Greenhill SAVP we believe the newspaper industry is just the tip of the iceberg and that conditions are in place right now for disruptive and rapid acceleration of other print content to all web-based or web/print hybrid content solutions. College textbooks are near the top of the list. Let me explain why.
Unlike the newspaper industry which is highly fragmented, the college textbook industry is an oligopoly where the major publishers utilize their size and pricing power to effectively control the market. The average new business &
economics college textbook today costs $150 and many have surpassed $200 during the past year. In an age of seemingly readily available and cheap digital content, textbooks prices are actually rising. For a 4 year public college student, the estimated average cost of textbooks and related
materials as a percentage of tuition and fees is 26% and for a 2 year community
college student, the percentage is about 76% (U.S. Department of
Education). As the recession has deepened, enrollments in colleges rise, university budgets are being cut, and everyone is being asked to do more with
less. In response many institutions of higher learning have been forced to raise tuition and
fees to keep the lights on while students who are already struggling financially
are asked to shoulder an even higher financial burden.
The current situation is not sustainable, particulary in today's economic and political climate. A perfect storm is brewing that's created the ideal conditions to disrupt the college textbook market and rewrite all the rules. That's why we're thrilled to announce the latest addition to the Greenhill SAVP portfolio - Nyack, NY based Flat World Knowledge.
Flat World Knowledge is the world's first publisher of open source textbooks. Their highly disruptive business model and technology platform is breaking all the rules and doing nothing less than reinventing the textbook publishing industry. Flat World publishes premier textbooks written by leading experts that are as good or better than those offered by major publishers. All students can access their online texts for free or purchase affordable alternatives from paperback editions, audio chapters, Kindle versions, .mp3 study guides, mobile flashcards and web quizzes. In other words, students can consume educational content anywhere, anytime, anyhow and in anyway.
Additionally, Flat World openly licenses their books and provide an easy-to-use platform so faculty can modify the book and deliver a customized version to their students. The platform also provides a rich learning environment for students through the ability to collaborate around the textbooks where students can actually create, share and sell study resources to one another.
We're excited to be an investor in Flat World Knowledge along with our good friends and colleagues over at Valhalla Partners and High Peaks Venture Partners. In particular, I'd like to thank Hooks Johnston from Valhalla for first introducing me to Flat World Knowledge. We look forward to working with Jeff Shelstad, Eric Frank, Brad Felix and the rest of the the Flat World team (our A team of domain experts) over the coming years to help revolutionize an industry in desperate need of change.