Why Rafter Failed, and What It Means for Edtech

Why Rafter Failed, and What It Means for Edtech

Rafter ranked among the most substantially-backed education companies in recent memory, having raised more than $86 million dollars since it started a decade ago. Then last week, the company, which helped colleges save students money on textbooks, abruptly shut down. While its customers scramble to find alternatives, observers wonder what can be learned from Rafter’s demise.

The company set out to solve what is clearly a problem at colleges. The sticker price for textbooks has risen dramatically over time—one estimate based on Bureau of Labor Statistics data put textbook prices as 1,041 percent higher in 2015 than in 1977, far greater than inflation, or the price of recreational books. That figure is a bit misleading because it doesn’t take into account new options like rentals, lower-cost digital options and temporary digital rentals. But those rising prices also seem to have led more students to skip buying textbooks altogether, which professors worry can put them at a disadvantage academically.

“Because textbook prices are high, or perceived to be high, more students who are cash-strapped tend to opt out, or imagine they can suffer through without,” says Richard Garrett, chief research officer at Eduventures.

Enter Rafter, which developed a service it called an “all-inclusive materials solution.” Colleges entered contracts with Rafter, which then brokered deals for print and digital textbooks. Colleges added a flat fee for students to cover the costs, and all enrolled students got their books through the service without having to go out and buy them on their own. The idea was that it would not only save students money (by negotiating better rates in bulk than they could get on their own), but it would also make sure no student was left without required materials.

More than a dozen colleges, mostly smaller ones, were using the service. But that wasn’t enough scale for the company to make it, Garrett says.

The model meant a “complicated buying decision” for colleges, Garrett notes. “The challenge I think is trying to persuade an institution as a whole to buy into a single-source model of providing the texts, when every professor is used to handling their own—it was a perceived threat to faculty independence,” he says. “It was only small private institutions that could get their arms around a decision like this and really see a benefit of seeing the price going down.”

Not all students liked the model, since some felt they could get better deals on their own, and Rafter required students to return the books at the end of each course. At one college students even staged a protest against a plan to adopt the service.

Another challenge for Rafter was finding the right point person at colleges to consider the model, says Bradley C. Wheeler, vice president for information technology at Indiana University. “Who is that single voice at a university that is actually thinking about the student experience with digital course materials,” he asks, noting that it falls through cracks between the campus bookstore, academic affairs, technology services and other college functions.

But the bigger challenge for the company may have been that as technology evolved, there was less of a need for a company to serve as a go-between for publishers and colleges. At Indiana, for instance, the university set up a similar arrangement on its own, which it calls the eText initiative. The program provides only digital copies rather than printed texts, but students are allowed to print from the digital copies, Wheeler says. “We had a long dance with the publishers to get to some reasonable terms,” he says, but he estimates that the program has saved students $15 million since it was rolled out campus-wide in 2011.

Meanwhile, a consortium of colleges that was co-founded by Wheeler called Unizin is working with publishers to help other colleges start similar programs, without having to work through for-profit companies.

Wheeler, who is also a professor at Indiana University’s business school, says the issue is a classic case of deciding when to outsource something and when to run a service in house. Colleges are weighing those decisions more and more these days, even with academic services.

Officials for Rafter could not be reached for comment.

The Rafter incident was particularly frustrating for officials at Avila University, which just signed up with the service eight months ago and was given only two days notice that the company was ceasing operations, according to Paul Toler, vice president of finance at Avila. “I’m disappointed at the short amount of notice we were given,” he adds. He and his colleagues are now facing a “pretty crazy” time crunch as they try to replace the service.

Still, he says he believes in the model, and that he wouldn’t rule out working with other startups in the future. Next time, though, he says he’ll try to do more to “do business in such a way that the chances of, and the effect of, a failure of a partner on our campus is minimized.”

Garrett doesn’t think that the Rafter shutdown is part of any larger downward trend for education-technology companies. “There’s inevitably going to be casualties, and winners and losers,” he says, “and people running out of money.”

GET THE LATEST HIGHER ED NEWS.Be the first to know, with our weekly newsletter.