Chegg.com: Netflix for textbook rentals
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Chegg.com: Netflix for textbook rentals
Santa Clara (California): With school tuition and books bills skyrocketing, parents and students are looking under every eggshell to find savings. Came for the rescue is Chegg.com, which rents textbooks to students across U.S. The company is named after the proverbial chicken and egg question, which for graduating college students is best exemplified by: "I need experience to get a job, but I need a job to get experience." Aayush Phumbhra, Co-Founder of Chegg.com said that he and Co-Founder Osman Rashid took over a company, CheggPost, which was started more than six years ago at Iowa State University as a classified marketplace, sort of a 'craigslist for college students', selling everything from dorm furniture to textbooks. Phumbhra, who graduated from ISU and later worked at BearingPoint consulting firm in Chicago, said that while the site managed to get a following on a few campuses, he and Rashid decided to concentrate on textbooks, the most popular item, and try to become the Netflix for textbook rentals. A third Co-Founder dropped out and they went ahead. "After tuition, textbooks are the pain point in school. Our plan was to (show) students how to save money on textbooks, how to make textbooks more affordable. You can save a lot of money and you don't have to worry about selling the book back to bookstores," said Phumbhra. Recently, Rashid told The New York Times that getting funding for the company in 2007, when venture capital firms were focused mainly on social networking, was a formidable task to say the least. People thought we were crazy. The company began renting books before it owned any, so that when an order was received, the 8-12 workers and part-timers would have to scour the web to find inexpensive books and ship them fast. Bootstrapping the company, the founders used Rashid's American Express card to purchase and rent books, which triggered red flags at the credit card company. When the amount balance ballooned, American Express threatened to close the account, but the founders not only managed to keep the account open, but got other cards issued so they could spread out orders. Despite the chaos, hopes were high. "Everyone is passionate about the company," said Phumbhra, who attended HA College of Commerce in Ahmedabad. His Co-founder is a Pakistani American who was born in London. Phumbhra described the differences in real price of a book and rents by citing one biology textbook that sells for about $180 and rents at Chegg for $56. Another textbook costing $210 can be rented for $75. Round-trip shipping, via UPS, adds about $4. Prepaid shipping labels make the process 'student-friendly'. Chegg has developed proprietary technology to manage pricing and sourcing and also logistics from a leased warehouse about two miles from the UPS shipping facility in Louisville, Kentucky. The company received two early rounds of seed funding, but after revenue exploded was able to raise $25 million last December from VC firms including Kleiner Perkins Caufield and Byers. They also hired Jim Safka, a former Chief Executive at Match.com and Ask.com, to head operations. Revenue in 2008 was more than $10 million and the company topped that in January alone. Currently, the company has about 100 full time employees and another 300 part-timers. They are expanding to about 6,400 campuses nationwide. Renting instead of buying saves on trees, a fact that pleases the environmentally-friendly Phumbhra. Chegg plants a tree for every book rented, sold or bought. The company announced on October that it has planted over one million trees in 2009 in a partnership with the American Forests' Global ReLeaf program. Since 2007, when the partnership with American Forests began, Chegg has planted more than 3,000 acres of forests. "On average, a student will use one tree's worth of paper in textbooks each year, so it's been important for Chegg to give back to the environment by planting trees through American Forests," said Phumbhra.

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