Zookal

Notable achievement: Getting good advice from a global competitor.

Zookal was formed when five university friends pulled together some start-up funding from their parents and bought 300 textbooks in time for the start of first semester in 2011. They planned to rent the books to students and focused on their classmates in the business faculty at the University of Technology, Sydney.

In second semester, Zookal doubled its collection of books, using cash earned in the first half of the year but word had spread among its customers’ social circles and it started getting inquiries from students at other universities and interstate. “We realised that we were going to need a significant investment if we were to progress,” co-chief executive Tia Saunders says.

Saunders and her co-CEO Ahmed Haider had been talking to angel investors and the offers and terms they received suggested a company valuation of about $1.2 million.

In September 2011, they went to the United States and met the founders of Chegg, another student-founded company that had been renting textbooks since 2007 (and had revenue of $200 million in 2011).

Chegg founder Aayush Phumbhra took kindly to Saunders and Haider. “We went back to Australia and Chegg commenced a due diligence process,” Haider says.

An investment offer from Chegg was attractive but would take too long to meet Zookal’s needs. Instead the two CEOs finalised an undisclosed funding round with the local office of venture capital fund Artesian Capital Management, which had expressed interest previously. The investment values Zookal at $5 million, they say.

Meeting Chegg didn’t just pump up their valuation, it also taught the young entrepreneurs to think big. “When I said we needed $4 million to go nationwide,” Haider says, “Chegg’s CEO Dan Rosensweig said, ‘Think bigger, think Asia – where could you get to if we gave you $25 million?’ This was almost the opposite of what we’d been told by local investors.”

Jessica Gardner

BRW

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