HubEdu Departs San Diego’s Downtown Incubator After Bay Area Buyout
When San Diego’s downtown EvoNexus incubator held its official ribbon-cutting ceremony five months ago, Jonny Simkin was eager to brief me about SwoopThat, a Web startup he created with two friends in 2010 after graduating from Harvey Mudd College in Claremont, CA. He founded the website to offer textbooks substantially below the prices listed in campus bookstores, using a metasearch engine to aggregate online sources.
We finally met last week for coffee, but it was to talk more about the end of his startup than the beginning. Simkin was moving out of EvoNexus, and in the process of moving to Northern California after selling HubEdu, a new company he started to expand beyond SwoopThat’s narrow focus on textbooks to create a Web platform for all kinds of college retailing.
If there was one point that Simkin wanted to make clear, it’s that he’s scrapped SwoopThat and changed his views.
“As students we thought the college bookstore was the problem,” he says. “But we discovered they weren’t really the problem at all.” In the time they had spent disintermediating the campus bookstore, Simkin says they learned that most are operating on a profit margin of 3.7 percent or less. That’s thinner than a math major’s term paper for Intro to English Lit.
“The problem was that they don’t have the technology they need,” Simkin says. He saw that college and university bookstores needed to act more like e-commerce companies in online sourcing, comparison pricing, managing buybacks, and understanding purchasing behavior. “We wanted to combine the knowledge we gained with SwoopThat, but to apply those lessons to serve all the major constituencies in higher ed—students, faculty, administrators.”
Earlier this year, the startup and its four employees refocused their efforts to develop some new software tools that would made it easier for campus bookstores to source textbook orders, compare prices, and gain insights about student purchasing decisions, among other things.
“By forming a completely new company, we were better able to serve the college community while still meeting our goal of lowering prices for students,” he says. “The point we’re trying to get across is that HubEdu is not SwoopThat, and that we do care about schools and the higher ed community.”
It’s a more collaborative (and conciliatory) strategy than what you hear from most Internet startups out to disrupt their industries. And in a curious bit of coincidence, the company that acquired HubEdu also changed its identity earlier this year in a similar strategic pivot. San Mateo, CA-based BookRenter, which raised $40 million in a Series C financing round last year, formed a new company in February called Rafter to expand its mission with a more-encompassing technology platform for sourcing and managing course materials. Instead of undercutting the campus bookstore, the idea is to partner with colleges and universities—providing the kind of cloud-based technology that schools need to manage their supply chain, along with specialized software to fit other education-related needs.
“They also saw that they needed to serve schools and the higher ed community,” Simkin says, noting that the HubEdu and Rafter rebranding moves occurred within days of each other.
BookRenter has continued to operate as a division of Rafter. BookRenter has been growing fast, establishing partnerships for its online book rental services with 560 campus bookstores serving six million students. As my colleague Wade Roush reported last year, BookRenter also faces some stiff competition in Santa Clara, CA-based Chegg, which has a customer base about five times larger than BookRenter’s. Like Rafter, Chegg also has been expanding beyond a narrow focus on textbook rentals into more of a full-service technology platform for colleges and universities.
Chegg also has raised more cash—between $150 million and $195 million—from investors that include Kleiner Perkins Caufield & Byers, Insight Venture Partners, and Gabriel Venture Partners. In comparison, Rafter has raised at least $56 million from investors that include Storm Ventures, Adams Capital Management, and Norwest Venture Partners.
HubEdu deal was Rafter’s first strategic acquisition. Terms of the deal, which Simkin described as more of an asset sale, were not disclosed. One key asset—if not the key asset—that Rafter sought was pricing analytics technology the HubEdu had developed to help campus bookstore managers compete more effectively with online pricing.
The Web-based analytics, rebranded as Rafter’s “Price IQ,” enables a bookstore to compare the price of every title in its inventory with prices available to students from other sources. The free service is intended to help managers identify books that are priced below the online market and increase overall revenue by adjusting the price of those books.
As part of the transaction, three of HubEdu’s four employees, including Simkin, have moved to the Bay Area to join Rafter.
“It’s exciting to be the first graduate of EvoNexus,” Simkin says. “It’s sad to leave San Diego. I absolutely love it here and I definitely plan on coming back.” Although the Bay Area continues to attract some of San Diego’s more-promising tech startups, he says, “It’s good to know that San Diego companies can succeed and we can do good work.”
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