Intel didn't mention how much they paid for digital textbook startup Kno when they announced the acquisition last week but inside sources are now saying that the digital textbook startup was picked up for a song. GigaOm reported earlier today that their sources told them that Kno sold effectively for pennies on the dollar:
Well placed sources who were in the know told us that the company sold for $15 million with some retention bonuses for the employees. Intel bought the company mostly for its hardware-related intellectual property and the employees. Intel also was one of the largest investors in the company — having pumped in $20 million via its Intel Capital arm.
Just to put that sale price into perspective, Kno had raised $73 million in venture capital since it was founded 4 years ago, and it picked up another $20 million in debt.
This deal was nothing less than a fire sale, and that does not bode well for the digital textbook market or other startups in this niche. Inkling, for example, just raised $20 million dollars this summer in order to compete in a market that murdered one of their competitors.
GigaOm notes that the death of Kno was a long drawn out affair. The startup almost managed to revive itself with a merger with Coursesmart, but that deal fell through because Coursesmart was reportedly even less healthy than Kno. That digital textbook distributor is supposedly being propped up by the publishers who own it; if that is true then it is news to me.
While I didn't technically predict the demise of Kno I have been writing about how the digital textbook is a worse value for students than paper textbooks. I wrote that close to 3 years ago and I am still correct today. To put it simply, students are avoiding digital textbooks because buying and then reselling paper textbooks offer a better value. And even when students did use digital textbooks, they tend not to use the flashier components.
I've also written that the ongoing trend of students buying fewer textbooks, which I have been tracking for a couple years now, was not a sign of a healthy market. That trend has shown up time after time.
With all that in mind I am not surprised that Kno failed. And given the general lack of growth in that market (only 7% of college students use digital textbooks) I would also bet that they will not be the last.