Top Hat Raises $55 Million to Take on Big Textbook Publishers


Top Hat Raises $55 Million to Take on Big Textbook Publishers

By Wade Tyler Millward     Feb 4, 2020

Top Hat Raises $55 Million to Take on Big Textbook Publishers

Mike Silagadze isn’t shy about his desire to take market share from the largest college textbook publishers through his classroom software company Top Hat. He believes his company’s brand of digital textbooks beats anything Pearson, McGraw-Hill and their ilk can provide.

To aid in that effort, the CEO of Top Hat has been forging alliances with smaller publishers, publishers whom Silagadze says haven’t turned their print content digital because of financial and logistical costs.

So far, Silagadze has inked deals with Fountainhead Press and Bluedoor Publishing to convert all the publishers’ content into digital materials over the next three years. And to help Top Hat accelerate more of those partnerships, the Toronto-based company has raised $55 million in a Series D round, led by Georgian Partners and iNovia Capital.

Union Square Ventures, Emergence Capital and Leaders Fund also provided equity funding while BMO Technology and Innovation Banking Group provided debt financing. The company has raised $105 million to date.

What Top Hat brings in technology, publishers like those two provide low-cost textbooks that will help Top Hat’s platform add more content for professors and students. “It’s a challenging transition to build a learning platform,” says Silagadze, 36. “Top Hat has that platform.”

Betting on Digital

Founded in 2009, Top Hat claims that 2.7 million students access its digital course materials, including those at 750 of the top 1,000 higher education institutions in North America. Among the universities that use Top Hat are Ohio State University, University of Florida and Vanderbilt University.

The company has 400 employees, and the new funding round will go toward hiring sales and marketing staff to help the company pursue more partnerships with smaller publishers. These textbooks sell for around $50, compared to a big publisher’s offerings that can cost hundreds of dollars, says Silagadze.

Fountainhead is one of the two publishers Top Hat has an exclusive partnership where only Top Hat can host their digital content—the company also works with other publishers that don't exclusively use Top Hat.

Fountainhead was founded in 2002 and is based in Southlake, Texas. The publisher sells books in subjects that include English, psychology, Spanish and professional development. The other, Bluedoor, sells strictly science books, with subjects that include anatomy, physiology and chemistry plus books for career-focused courses for jobs like veterinary technician. Bluedoor was founded in 2005 and is based in Minneapolis.

This video from BVT Publishing shows how textbooks turned digital by Top Hat appear.

Despite the emergence of digital courseware offerings from publishers and startups alike, printed materials remain a stubborn reality in American colleges. Print-only titles accounted for 45 percent of U.S. higher education courseware in 2015, down from 50 percent the year before, according to a 2018 report from Macquarie, an investment bank and financial services company. Digital-only textbooks accounted for 29 percent, while digital-and-print bundles accounted for 26 percent.

Silagadze believes younger faculty members and future generations of college students will help drive institutions to adopt digital materials instead of print. “What sets us apart from a legacy player is we don’t have the albatross of print,” he says. “We start from a digital-first standpoint.”

Top Hat has challenged tangible goods for a long time now. Its first offering was a digital version of clickers to measure student responses in the classroom. In 2017, the company launched a marketplace for e-textbooks, working with authors and offering openly licensed content from the likes of OpenStax as well.

This video from Top Hat shows how college faculty can use the platform to create a chemistry response question.

Last year, the company ceased sales of individual assessment tools to instead offer a bundle of its products. Students pay $48 for one year of Top Hat’s products. Interactive textbooks on Top Hat cost an average of $35.

In 2019, Top Hat also introduced six packages of content and instructional activities curated to introductory course subjects for psychology, public speaking, anatomy and physiology, economics, macroeconomics and microeconomics. Massachusetts Institute of Technology and University of California, Los Angeles, are among the schools that use Top Hat’s introductory courses. “We want to provide everything a professor needs for a course and for their students,” Silagadze says.

The Top Hat publisher partnership includes revenue sharing for the company and publishers, but Silagadze hopes the new content on his platform also leads to more prepared courses that combine all of Top Hat’s tools.

Though the company has seen some growth overseas, in the U.K. and Australia in particular, the focus is growing business in North America, Silagadze says.

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