More than a dozen small colleges that have been relying on a Silicon Valley company called Rafter as the sole supplier of textbooks and other course materials are now scrambling to find an alternative after learning this week that Rafter’s investors had pulled the plug on the company and shut it down on Friday.
“We’re in crisis-management mode,” said Jason Pierce, interim vice president for academic affairs at North Carolina’s Mars Hill University, which had been using Rafter since the fall of 2015.
Rafter, founded in 2006 as a textbook-rental company, had attracted tens of millions of dollars in venture-capital backing and, as recently as Thursday night, maintained a website featuring glowing testimonials and video endorsements from several of its college customers.
But as of Friday all of that had disappeared. Instead the site shows only a statement that reads in part, “In the end, we did not have the time or resources needed to complete what we started.” Company executives did not immediately respond to The Chronicle’s request for an interview.
The company’s sudden closure does more than leave a lot of institutions in the lurch. In the changing higher-education economy, with more and more colleges turning to start-ups and other outside vendors to manage services tied more directly to their academic activities, it points up the potential risks of becoming overly dependent on organizations whose financial interests — and financial challenges — might diverge from the colleges’ needs.
“As we negotiate with our next vendor, I will be asking some different questions,” said David W. Olive, president of Bluefield College. The Virginia institution had just signed a three-year contract with Rafter and began working with it this fall. “We heard from a number of students how much they appreciated the simplicity of the process,” said Mr. Olive. And “the faculty have just been elated” because it meant all students would have the course materials from the start.
Rafter, through a service it called Rafter 360, relied on a business model that made the college its customer. After contracting with the institution, it would deliver all required books and materials for every course so that students would have them by the first day of classes.
The cost was a flat per-student fee — reportedly in the range of $600 to $800 a year — that the college would collect from all students either as part of their tuition or as part of an extra student fee. (Separately the company also provided book-management services to some college bookstores.) As Rafter pitched it, “colleges can differentiate themselves as student advocates and technology innovators.”
‘We’re Hustling’
Many Rafter 360 customers were colleges where a large proportion of the enrollment is low-income and first-generation college students. At some of those institutions, students had objected to the flat-fee pricing. Noah Yantis, who as a freshman at Illinois College helped organize a protest in the spring of 2015 against bringing Rafter to his campus, said he was glad to hear the company had shut down.
“A lot of us were really frustrated when it came out,” he said, adding that he knew of 10 to 15 students who had left the college in part because they couldn’t afford a mandatory book fee of $310 per semester. Using websites like Chegg and Amazon, he said, he can typically buy or rent all of his required books for as little as $85 a term, and he can keep what he bought when the semester is over. With Rafter, he noted, you have to return the books.
But college leaders said using Rafter assured that all students had the materials they needed.
Before the Rafter contract, said Mr. Pierce, of Mars Hill, students would often delay buying books because they couldn’t afford them. The Rafter arrangement “kept students from being a month and a half behind their more well-off classmates,” he said. Mars Hill contracted with Rafter for a “student-success purpose,” he said. And “it was working.”
Bluefield chose Rafter for the same reason. Mr. Olive said he was also attracted by its affordability, but “now maybe in hindsight the price point wasn’t where it needed to be for them to be successful.”
While Rafter’s statement did not indicate why it was closing, several of its college customers said they had heard the company had been looking to be acquired in a friendly transaction — apparently, without success. Mr. Olive said he had been told that after that, “their investors were unwilling to submit any more capital to the endeavor.”
Rafter has told the colleges that any online resources it provided to students would remain available through the end of the current semester. Rafter had said it would pay to ship physical books back to the company at the end of the term, but it is unclear whether the company will still cover those costs or whether it will fall to the colleges.
Several colleges that contracted with Rafter are now in discussions on finding a replacement. Mr. Pierce said some have also been talking to the Council of Independent Colleges about creating their own consortium to replicate the services that Rafter was providing.
Time is of the essence. Before they knew Rafter was closing, colleges were already finalizing their spring-term book lists with the company. “Our deadline for next semester was last Friday. That’s why we’re hustling,” said Mr. Olive.
What are the stages of grief? Scrambling madly? Is that one of them?
The same is true at Mars Hill. “What are the stages of grief? Scrambling madly? Is that one of them?” said Mr. Pierce.
The circumstances do highlight the hazards of excessive dependence on outside vendors, said Mr. Pierce, but as he sees it, that comes with the territory these days. “Small institutions are subject to the whims of large corporations in the publishing industry already,” he said. “Any one of them could go away tomorrow.”
As for Rafter, he said he’s generally skeptical of for-profit companies in higher education, but he trusted the Rafter executives. “I believe that they believed in the mission of small institutions,” he said. “Honestly, we’d do it again.”
Goldie Blumenstyk writes about the intersection of business and higher education. Check out www.goldieblumenstyk.com for information on her new book about the higher-education crisis; follow her on Twitter @GoldieStandard; or email her at goldie@chronicle.com.
Join the conversation about this article on the Re:Learning Facebook page.
