The college textbook market has functioned as a near-perfect monopoly. Consider: How often does someone have the authority to order consumers to purchase a product with a limited number of vendors? University professors have just that power, requiring students to purchase particular books for their courses. The often obscure titles must typically be purchased from the college bookstore, which obtains them through special order. With limited competition, at best, prices for new textbooks can easily climb to $100, and have tripled since the mid-1980s (see BusinessWeek.com, 7/12/06, "Textbook Costs Stir Concern").
Now a group of small Web sites is trying to provide students with a cheaper alternative for textbooks and other school supplies, such as computers. The largest of the sites, Chegg.com, has just received $2.2 million in funding, BusinessWeek.com has learned. The company, based in Santa Clara, Calif., raised the money from Gabriel Venture Partners and angel investor Mike Maples. Maples also participated in an earlier angel round.
Chegg allows students to buy and sell used textbooks and other school-related goods and services for free. It's a huge market, generating $11 billion in revenue and $3 billion in profit a year, according to Rick Bolander, a Gabriel co-founder and a member of the Chegg board. "If we can take just 5% of that market, we'll be very happy," he says.
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