When Tia Saunders and Ahmed Haider were casting around for a start-up idea a couple of years ago, the two business students turned to what they knew – education.
“We wanted to get into education, because we were both interested in that area and we were looking to solve the problem of expensive textbooks,” says Saunders.
They initially explored the idea of digital textbooks on iPads, but after receiving little cooperation from publishers they turned to a much older medium, the physical book.Their site Zookal, a combination of book and retail – with a Z - rents textbooks to university students for less than the cost of buying them. For instance, a textbook that costs $100 new can be rented by a student for a semester for around $50.
“We thought what’s the biggest problem faced by students and it kept coming back to textbooks, so we thought there has to be a better way to do this,” says Haider.
The pair met when they did a marketing assignment together as part of their business degrees at the University of Technology Sydney. Both now work full-time on the site, after Saunders, 23, finished her degree, but Haider, 26, dropped out to concentrate on the business.
Once they’d come up with the idea the pair took on programmer Chris Zaharia as a co-founder. The site went live in March 2011 after the founders raised a bit over $50,000 from family and friends.
At the end of last year the business raised its first venture capital funding through alternative investment manager Artesian Capital Management.
“The limitation to the model is that you need to have a lot of capital to purchase the books,” says Haider. “That’s why we need to constantly raise money to serve the market and get further growth.”
“We can’t capitalise on every single student that comes to the site and requests a book. We have to do it within the means of the capital that we raise.”
Zookal is now in the midst of another round of capital raising, seeking a seven figure sum from investors in Australia and around the world.
The site pays its founders a wage and invests the rest of its revenue into buying more books to expand. “You want to really dominate the market and it takes a lot to do that and we want to keep our focus on that for now,” says Haider.
Selecting which books to buy is a key factor in the success or failure of the site: choose a book that there’s no demand for and its cost can’t be recouped.
The pair spend a lot of time pouring over university book lists and concentrate on books that they think won’t go out of date for a few years.
“It’s very hard to predict. Even books that we thought were a sure thing sometimes aren’t,” says Saunders.
They have since identified 33 different factors in a book before they decide to purchase it, such as the publishing history of the book and whether it’s used at multiple universities. They are in the midst of developing an algorithm that will use those factors to select textbooks.
The Zookal founders have received advice from Chegg, a similar site in the US, which demonstrates the potential of the market. It was founded more than decade ago and offers physical and digital books for sale or rent. The site claims to have 4.2 million titles available and has rented to students at more than 6300 college campuses. Three years ago it raised $US57 million from investors.
Zookal won’t disclose how many textbooks it rents, but says it gets about 20,000 hits per term from students exploring the sites. Even in the relatively short time is has been live, it’s seen other competitors come and go, and has sometimes bought books from other sites that have gone under.
In March Zookal moved into lecture notes. Students can upload and sell their notes to others in the same course, but that part of the site is still under development.
The pair ultimately plan to leverage off the user base of textbook renters to expand into other student services. “Our vision is always 'what does education look like 10 years from now?'” says Haider.