BookRenter's advantage over Chegg, B&N

CEO Mehdi Maghsoodnia on why BookRenter will dominate the online college textbook rental market

The online textbook rental market is growing at a rapid rate of 300 percent annually. It's no wonder both startups and incumbents are competing to be the leader in this very nascent industry. Recently, I spoke with Mehdi Maghsoodnia, CEO of BookRenter, a startup that just raised $10 million in venture funding earlier this month from Norwest Venture Partners and Storm Ventures.

According to Mehdi, the textbook market is some $7 billion to $10 million, including two- and four-year colleges and graduate schools. The total online rental market is under $200 million, and the majority of that is online, he said, adding that he believes BookRenter has 25% to 30% of the online college textbook rental market.

See my interview: Chegg estimated to be making $130 million annually.

How big does the online college textbook market become before all of these students start reading on e-books? I asked.

Mehdi believes that given the demand for rentals (the book rental business is growing at 300% annual), about a third of the college textbook market - or some $3 billion - will be reflected in online book rentals a few years from now.

BookRenter is using some of the recently raised funds to invest in the digital delivery of textbooks, according to Mehdi, even though he believes it'll take another decade before digital textbook sales grow faster than rental sales. Mehdi said digital textbooks sales is growing at 20% annually.

What is BookRenter's competitive advantage over Chegg, which has raised north of $100 million and Barnes & Noble? I asked. The business models, said Mehdi. BookRenter is a platform for rental, focusing solely on the software, and partnering for the front-end and backend. BookRenter provides private label solutions for book stores on the customer acquisition side. Currently, BookRenter has 100 instituations covering nearly two million students that have signed up with BookRenter to create their own online rental stores. On the delivery side, BookRenter has partnered with major book distribution companies, like Amazon, Follett and Nebraska Book Company.

As for whether BookRenter would consider warehousing books, like Chegg does. Mehdi said that the capital invested in warehouses would be depreciating rapidly, particularly in a world where books will be going digital.