The college textbook industry is due for an update. New textbooks can cost students hundreds of dollars apiece. Older, cheaper editions often become outdated. Online options have historically been limited and costly as well. This market isn’t an issue just for students though. It can be problematic for educational institutions and publishers as well. Educational institutions can see large chunks of their student body missing out on the most up-to-date materials. This may lead to subpar grades which, in turn, affect school rankings. For publishers, every student who does not buy a new book is revenue missed.

One company looking to address these problems is ecoText. Instead of forcing students to pay hefty prices for new physical books or for short-term subscriptions that can be costly, ecoText has another solution. It offers low-priced subscriptions that give readers access to textbooks and interactive features. Already, with its Beta test underway, management claims the platform has access to over 50,000 titles that are Open Source in nature. Feedback the firm received from its 450 testers have led it to add various features to the platform. These include, but are not limited to, the ability to take notes, to bookmark content, to highlight, and to perform keyword searches of the material.

When the full version of the app launches in Fall of 2020, it will still have the free content it has today. But it will also include premium titles from publishers, plus the aforementioned features, all for a fee. The company does want to sell the service directly to students. But it also wants to strike up partnerships with educational institutions such as colleges, high schools, and libraries. These organizations can buy subscription packages for their users. In return, they will have access to valuable user data. Management refers to these arrangements as strategic partnerships and deals.

Pricing details have not been provided by management, but any amount that is charged will go toward helping out publishers as well. After all, it will be through its paid subscriptions that the firm compensates publishers for access to their library of content. A specific breakdown of cost and reimbursement is something that will only be seen down the road.

Since its inception, ecoText has not succeeded in generating any revenue. After all, it is still in its testing phase. In 2018, the firm did generate a net loss of $1,438, while in 2019 this loss grew to $6,046. The operating cash outflows in 2018 matched its net loss, while 2019’s operating cash outflows totaled $4,546. Even if the firm’s monetized platform is launched later this year, investors should not expect any chance at material revenue until at least 2021.

Pinpointing precisely what market ecoText operates in is a bit more challenging that you might think. One option is to look more broadly at the eLearning industry. This space, according to one source, is worth around $214.4 billion today. Current forecasts call for annualized growth of 8%, with the industry hitting $315 billion by 2025. Another source pegs the market opportunity at $316 billion. With 8% growth per annum there, the industry should reach a size of $342.8 billion by 2026.

A more niche piece of the market to look at is the eBook industry. One source pegs this market at $16.4 billion. With an annualized growth rate of 4.2%, the space is expected to reach a size of $19.3 billion by 2024. With over 1 billion people globally accessing eBooks, the user penetration in the space should grow from 14.2% this year to 16.5% by 2024. Although the eBook market is global in nature, the US does currently have the largest share, accounting for nearly $6.4 billion in revenue this year. That works out to a market share of 39%.

Yet another source looked solely at the global digital education publishing market. That source pegs the space at around $10.4 billion and assigns it an annualized growth rate of 9.7%. If that holds true, then by 2026, the end of the forecast period, the industry should reach a size of $17.9 billion. That’s similar to the eBook market.

Regardless of the industry’s size today, a lot of changes are bound to happen. With 19.75 million college students estimated as enrolled in the US alone this year, and average spending per student on class materials each semester totaling $484, there’s a lot of opportunity for displacement. Instead of paying the average $90 per new textbook or $58 per used one, and instead of relying on renting textbooks, students can cut their expenses by subscribing to a service like the one that ecoText is deploying. With 44% of college students already renting their textbooks, it’s likely that a large portion of them, for the right price, might transition over to a subscription-based service.  

In order to keep moving forward with their product, the management team at ecoText is trying to raise capital through an offering of its common shares. These units are priced at $0.30 apiece, but in order to participate in the transaction investors must allocate at least $99 to the business. In all, management’s goal is to raise $255,000, but the firm will close a round with as little as $10,000. As of this writing, the business has received commitments totaling $23,513 with a pre-money valuation on the transaction of $2.64 million.

ecoText has a sizable team, but at its core are its three founders: Joel Nkounkou, Dylan Wheeler, and Evan Shaw. Nkounkou currently serves as the company’s CEO. Previously, he served as a Software Engineer at Profit Tools. Before that, he was a Product Engineer at Intel, and prior to his time there he co-founded O2 & You, an air quality awareness startup. The other co-founder, Wheeler, works as the company’s CTO. He previously founded and ran (as its CEO), Triumph Software. And before that, he was a Software Developer at York IE. The last individual is Evan Shaw, ecoText’s Chief Product Officer. At this time, he also works as a Software Engineer at Snapchat. Previously, he had the same position at MoneyGuidePro, and before that he was a Web Developer at MoveHacker.  

Based on a review of the data surrounding ecoText, our team has rated the company a Deal To Watch. There is a paradigm shift occurring in the space that could leave them a beneficiary. Management’s progress to a Beta version of the app and their goal of launching a monetized version of it publicly in the fall of this year is also a positive sign. Given their stage of development, their valuation also appears reasonable.

While the company does make for an interesting prospect for investors to consider, there are some downsides. Naturally, the absence of revenue is an issue that must be resolved. Only once they launch their monetized platform will the company truly validate its offering. Add in uncertainty over the firm’s future pricing compared to what publishers will demand from them, and there is considerable risk here.