Bertelsmann Digital Media Investments and Bessemer Venture Partners Invest $15 Million in Flat World Knowledge
(Press Release) IRVINGTON, NY—Flat World Knowledge, the largest publisher of free and open college textbooks for students worldwide, today announced it has secured $15 million in Series B funding led by Bertelsmann Digital Media Investments (BDMI), a wholly owned subsidiary of Bertelsmann AG, a leading international media company, and Bessemer Venture Partners, a top global investment firm. Also joining the round are returning investors Valhalla Partners, GSA Venture Partners (formerly Greenhill SAVP), High Peaks Venture Partners, and several angel investors.
"Flat World Knowledge has the potential to significantly transform the $8 billion college textbook publishing industry," said Keith Titan, a principal at BDMI, who will be joining the company's board. "Among the players in this space, Flat World is uniquely positioned to fully capitalize on the Internet with an open textbook model that dramatically lowers costs for students and provides professors with greater control over the content, which is written by top academic authors. Flat World represents a compelling and innovative model for the future of publishing in higher education."
Flat World is a commercial pioneer within the growing open content movement to make educational materials freely available online and accessible to everyone. Under its open textbook model, students can read peer-reviewed textbooks in their entirety online for free or purchase print and digital versions. The company generates revenue through the sale of print books, e-books for devices like the iPad and Kindle, audio books, PDF downloads and interactive study aids.
"This company is laser-focused on the fastest-growing sector of the higher education market—community and state colleges—where the financial pain of overpriced textbooks is greatest," said Christopher Gabrieli, a partner at Bessemer Venture Partners, who will also join the company's board. "Expanding economic and educational opportunities for students has never been more important. Flat World has stepped up to the challenge with expertise, creativity, and a bold approach that removes a major barrier to student success."
With students spending an average of $1,137 in 2010-11 for textbooks and supplies, according to The College Board, professors, administrators and policy-makers are looking to educational entrepreneurs like Flat World Knowledge for innovative ways to solve the textbook affordability crisis.
"We're bringing textbook publishing into the 21st century," said Jeff Shelstad, Flat World Knowledge CEO and co-founder. "With our new partners, we are accelerating our growth to meet the tremendous demand for world-class educational content that's free of the constraints of conventional textbooks."
To date, more than 1,600 professors at over 900 colleges have adopted Flat World texts, ranging from Cornell University to Columbus State Community College to California State University. Demand is also growing internationally. Students in 44 countries, including India, the United Kingdom, Australia and China are among the 100,000 who will use Flat World Knowledge books this 2010-11 academic year.
The new funding will help the rapid expansion of Flat World's catalog beyond business and economics to include books for the 125 highest-enrolled courses on college campuses. The company recently published titles for three of the largest general education courses: introductory sociology, introductory psychology and college success, which have a combined enrollment of more than four million students annually. Over the next few months, the company will also publish new textbooks for English composition, algebra, chemistry and American government, among others.
Open Model Redefines the Textbook In contrast to traditional publishing's "all rights reserved" copyright license, Flat World publishes under a Creative Commons open license, which eliminates many of the restrictions for how a textbook can be used and distributed. Students can read open textbooks online for free for as long as they like. Professors can reorder and edit content, and add new material and interactive media. Armed with an open license and Flat World's sophisticated online editing platform, faculty are free to create the "perfect book" for their course.
For authors, the open publishing model represents greater income potential in the long-term, since new unit sales aren't cannibalized by used books, textbook rentals, gray market editions and online piracy sites. More than 100 top academic authors have signed with Flat World, such as Steve Barkan, professor and chair of the department of sociology at the University of Maine, and author of five market-leading textbooks.
"A major reason I decided to write an open textbook is that increasingly my students couldn't afford to buy their books," said Barkan, who recently published Sociology: Understanding and Changing the Social World with Flat World. "From an author's perspective, there's an incredibly high-quality review and development process that's been a real plus. And I stand to be well-compensated. It's win-win for everybody."
Textbook Licensing Addresses Cost at the Institutional Level As enrollments continue to soar and education budgets shrink, colleges are seeking new and more aggressive ways to lower student costs and improve completion rates. Flat World recently launched an institutional textbook licensing model to help colleges achieve these goals. The company has several agreements in place, including one with Virginia State University, which embraced this licensing model as a way to reverse its high drop-out rate among business school students, most of whom are on financial aid and can't afford to buy expensive textbooks that can cost as much as $200 each.
Akin to the way colleges purchase software licenses, institutions buy per-student, per-course seat licenses for digital access to textbooks, and charge students a small fee as part of tuition. Unlike other licensing models, Flat World gives students unlimited access to the digital files, along with print options, and the ability to transfer the content from device to device.
"Our students have always had the ability and intellect," said Dr. Mirta Martin, dean of VSU's Reginald F. Lewis School of Business. "Now with open textbooks, they finally have the resources."
About Flat World Knowledge
Flat World Knowledge is the largest publisher of free and open college textbooks for students worldwide. Committed to making higher education more affordable and accessible, the company provides students with free online access to complete, peer-reviewed textbooks, with options to purchase affordable print and digital formats, including e-books, audio books, PDF downloads and interactive study aids.
Flat World's open license and online editing platform enable professors to modify the content and create the "perfect book" for their course. To date, more than 1600 professors at over 900 colleges in 44 countries have used Flat World open textbooks.
Backed by top venture capital firms, Flat World Knowledge was named one of the information industry's "30 to Watch" in 2011 by Outsell, Inc. To learn more, visit www.flatworldknowledge.com; follow us on Facebook at http://www.facebook.com/flatworldknowledge and on Twitter at http://twitter.com/flat_world.
About Bertelsmann Digital Media Investments (BDMI)
Bertelsmann Digital Media Investments (BDMI) is a strategic venture investor focused on innovative digital media technologies, products and distribution channels across the globe. BDMI is a wholly owned subsidiary of Bertelsmann AG, a leading international media company with over $22 billion in revenues and over 100,000 employees across more than 50 countries. For more information, visit: www.bdmifund.com.
Bertelsmann AG is an international media company encompassing television (RTL Group), book publishing (Random House), magazine publishing (Gruner + Jahr), media services (Arvato), and media clubs (Direct Group) in more than 50 countries. Bertelsmann's claim is to inspire people around the world with first-class media and communications offerings—entertainment, information and services—and occupy leading positions in its respective markets. The foundation of Bertelsmann's success is a corporate culture based on partnership, entrepreneurial spirit, creativity, and corporate responsibility. The company strives to bring creative new ideas to market and create value. For more information, visit: www.bertelsmann.com.
About Bessemer Venture Partners
Bessemer Venture Partners is a global investment group with offices in Silicon Valley, Cambridge, Mass., New York, Mumbai and Herzliya, Israel. One of the oldest venture-capital practices in the United States, Bessemer has partnered as an active, hands-on investor in Ciena, LinkedIn, Postini, Shriram EPC, Skype, Staples, VeriSign and Yelp. More than 100 Bessemer-funded companies have gone public on exchanges in the U.S., the U.K., India and Canada. To learn more, visit www.bvp.com; follow the firm on Facebook at www.facebook.com/bessemervp and on Twitter at http://twitter.com/bessemervp.
About Valhalla Partners
Valhalla Partners is a trusted partner and advisor to technology entrepreneurs in their quest to build world-class companies. Based in Vienna, Virginia, the firm's management team has made more than 120 investments over the past twenty years and produced almost $1 billion of investment proceeds. Valhalla prefers investments where the mission of the company is to innovate, challenge and fundamentally change the dynamics of new and existing markets. Investments by Valhalla's team include Advertising.com, CareerBuilder.com, JumpTap, LeftHand Networks, Progress Software, RealOps, Register.com, Riverbed Technologies, SafeNet, SEPATON, ServiceBench, Trilogy, and webMethods. Valhalla Partners brings the full power and network of its experienced team to every investment it makes, helping companies grow faster and smarter regardless of size or maturity. For more information, go to http://www.valhallapartners.com.
About GSA Venture Partners
With over $100 million under management, GSA Venture Partners makes early stage venture investments in technology-enabled services and business information services companies. Prior fund manager investments include Medidata Solutions (NASDAQ: MDSO), LivePerson (NASDAQ: LPSN), OpenWave (NASDAQ: OPWV), YellowJacket (acquired by the Intercontinental Exchange) (NYSE: ICE), UGO Networks (acquired by Hearst Corporation), and KnowledgeStorm (acquired by TechTarget) (NASDAQ: TTGT). For more information about GSA Venture Partners, please visit www.gsavp.com.
About High Peaks Venture Partners
High Peaks Venture Partners is a venture capital firm focused on investments in market leading, seed and early stage technology companies. Founded in 2004, High Peaks began investing its second fund in 2010. With offices in New York City and Upstate New York, the firm focuses on investments in the web services, digital media, software, and medical technology markets. High Peaks is one of 18 affiliates of Village Ventures, a collaborative, nationwide network of seed and early-stage venture capital funds. For more information, please visit http://www.hpvp.com.