Valore Acquires Boundless: The Netflix of Education Publishing?

A deal at the intersection of e-commerce and education technology is shining a light on some big trends in the publishing world. Those trends could help determine what higher-ed tools will look like years down the road.

Valore, a Boston tech company formerly known as SimpleTuition, has acquired online-education startup Boundless for an undisclosed sum. The combined company has 61 employees—11 have joined from Boundless—and is on pace to make about $100 million in revenues this year, says Valore CEO and co-founder Kevin Walker.

A brief history is in order: Walker, a veteran of the student-loan industry, co-founded SimpleTuition back in 2005. The startup built a site to help students comparison-shop for college loans and financial-aid packages. That business did well for a while but “got punched by the credit crisis,” Walker says, and then rebounded to profitability. Still, the company wanted to go bigger with its main strength: marketing products to students.

SimpleTuition broke into the textbook arena in 2012 via its acquisition of San Diego-based ValoreBooks, an online marketplace for buying, selling, and renting textbooks. That business grew fast, doing $80 million in gross sales last year. To reflect its new focus, the company changed its name to Valore this year, and that brings us to the new acquisition.

Kevin Walker

Kevin Walker

Walker saw that book “retailers are looking for new ways to source textbook content,” he says. And although digital materials are still only a small fraction of the college textbook market (less than 10 percent), most everyone thinks that’s where the industry is headed. “We want to drive that and not follow,” Walker says.

Which is where Boundless comes in. The company makes open, online content for college courses, targeted at both students and professors. Originally pegged as free alternatives to textbooks, the Boundless materials have evolved to become more modular, interactive, and customizable by instructors. But the startup is still early in the market.

The merging of the two companies makes sense because of their respective strengths, says Boundless co-founder and CEO Ariel Diaz. “Our culture is, the future is digital and we want to build amazing products. Their culture is, let’s take inefficiencies out of the textbook market. It’s the same goal but we’re coming at it from different sides,” he says.

Ariel Diaz

Ariel Diaz

Boundless was founded in 2011 and quickly raised the ire of big textbook publishers. In 2013, the company settled a lawsuit filed by Pearson Education, Cengage Learning, and Macmillan Higher Education that alleged the startup’s free online materials infringed on copyrights. Boundless raised just under $10 million from investors including Venrock, NextView Ventures, Kepha Partners, and Founder Collective.

Meanwhile, Valore has raised about $27 million in funding from VCs including Atlas Venture, Flybridge Capital Partners, and North Hill Ventures. Walker says no new money was raised to finance the Boundless acquisition, but he declined to give any details about the terms of the deal. (As a side note, Walker and Diaz were originally introduced by their mutual investor Eric Hjerpe at Kepha Partners, who worked with SimpleTuition when he was with Atlas.)

What’s most interesting is that Valore’s relationships with bookstores, students, and colleges now puts it in position to make real inroads in digital publishing. “We can serve the student, we can serve Amazon, and every type of entity in the ecosystem in between,” Walker says.

One can’t help but think a big education publisher or retailer may swoop in and take Valore off the table if it gets much further. Not that traditional publishers are standing still, of course. They’ve been busy trying to reinvent themselves as software companies—and they have plenty of money and manpower to do it.

Take McGraw-Hill Education. Like many of its peers, the company has been trying to better understand the needs of teachers and students, says chief digital officer Stephen Laster. That has led McGraw-Hill to “take a Lego view” of its products and create “modularity around content,” he says, so that its digital materials are easier for teachers to customize.

Laster, who was previously CIO at Harvard Business School and a faculty member at Babson College, notes that McGraw-Hill is in a good position because it doesn’t have internally competing software platforms. “We’re focused on interoperability and standards,” he says. Ultimately, this could help give teachers “time to re-imagine what they teach.”

That’s a theme that rings true to Walker, as well. Far beyond e-books, he says, the real goal is “when digital is treated as an opportunity to rethink the content and fully leverage the power of tablets.” He’s talking about creating components of lesson materials and multimedia that can be mixed and matched to present concepts and assess students’ progress in learning. Valore’s role could be to provide a “marketplace for educational content in general, and use the Boundless platform to put it together and present it to students,” he says.

Ten years from now, the landscape undoubtedly will be very different—but it’s not at all clear what digital content in education will look like. “Some upstarts will be the ones who drive the form of the new model,” Walker says. “The big publishers will have less concentration of the market in their hands but will still be important players.” So far, he adds, “They’ve done a lot to innovate, but mostly around supplemental content, not core textbooks.”

Diaz, who will serve as Valore’s chief digital officer, makes an interesting (if hopeful) analogy to digital video. “Think about Netflix,” he says. “They had streaming way back in 2007. But they didn’t kill DVDs until 2011. Their growth was driven by both complementary products.” Then Netflix eventually created its own content—TV series like “House of Cards” and “Orange Is the New Black.” The idea being that physical and digital textbooks might follow a similar path—though the education ecosystem is arguably slower to change.

“We’re like where Netflix was in 2008,” Diaz says.

Gregory T. Huang is Xconomy's Editor in chief. E-mail him at gthuang [at] xconomy.com. Follow @gthuang

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