George S. May Business Blog

Chegg.com rakes in $57 million for textbook rental site

Recession? Slouching economy? I bet Chegg.com would tell you differently.

“Chegg.com, an online textbook-rental company, said it has raised $57 million in venture capital, in a sign that venture investing may be reviving.

The amount of funding that the Santa Clara, Calif., company raised is unusual given the slowdown in venture-capital investments that has taken place this year amid the recession. In the third quarter, venture capitalists — who invest in young companies with the aim of profiting later when those start-ups get sold or go public — put just $5.1 billion to work, down nearly 38% from a year earlier, according to research firm VentureSource.

Lately, however, several fast-growing companies have raised large sums from venture capitalists. Earlier this week, RockYou, which creates and distributes content on social networks and also operates an ad network, announced that it had raised $50 million in new venture funding. Other start-ups that have also recently raised double digit-millions of dollars sums include online real-estate company Redfin.

Chegg.com’s new $57 million round was led by Insight Venture Partners. Previous investors include Kleiner Perkins Caufield & Byers, Foundation Capital and others.

In addition to the $57 million in new venture funding, Chegg.com said it also secured a $25 million credit facility from its syndicate of venture partners, as well as recently securing a $30 million debt facility from venture debt providers Pinnacle Ventures and TriplePoint Capital.

Including this new round of venture capital and venture debt, Chegg.com has raised more than $160 million since its founding in 2005, said chief executive Osman Rashid. Under Chegg.com’s business model, consumers pay a fee to rent a textbook for a certain period. Rashid declined to detail the company’s financials, but noted the firm has hundreds of thousands of customers. Chegg.com has rented more than 1.5 million textbooks this year.

Deven Parekh, a managing director at Insight Venture Partners, said his firm decided to invest in Chegg.com because buying textbooks is a costly “problem that anyone who has been to college understands. What Chegg does is solve that.” (source)

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