Jeff Shelstad thought he had created a better way to publish textbooks. Just one problem: getting college kids to pay.

The Backstory

As an executive at textbook publisher Pearson Education, Jeff Shelstad saw an industry stuck in the past. High production costs drove up the prices of college textbooks. To preserve sales, publishers released new editions often, making it difficult for instructors to keep up. And instructors had limited flexibility to adapt texts for their courses: If the books omitted relevant content, instructors often had to assign supplementary texts, further inflating students' bills.

So in 2007, Shelstad and his Pearson colleague Eric Frank co-founded Flat World Knowledge in Irvington, New York. Shelstad sought to make textbooks affordable for students and customizable for teachers. He started by making all of its textbooks available digitally. Using the company's online platform, instructors could edit and remix the books' content, choose among versions, and move to new editions on their own schedules.

Flat World was well placed to address an emerging movement in higher education: open educational resources, or OER. Institutions had begun publishing instructional content that was free to use, adapt, and distribute. But the quality of many OER materials was untested. Flat World's textbooks, on the other hand, were peer reviewed, lending added credibility.

Flat World made basic editions of its textbooks available for free on its website and offered hard copies starting at $30, a fraction of the price of most college textbooks. It also sold downloadable mobile versions. The company raised $10 million in 2009. A year and a half later, Flat World's books had been adopted for more than 1,000 college courses nationwide.

The Problem

Shelstad, the company's CEO, had long suspected that offering textbooks online for free would be a gamble and that many students would simply rely on the free versions rather than pay for the physical books or the mobile versions. But a significant number of students, it turned out, preferred print copies of their textbooks--and were willing to pay for them. In Flat World's first two years, about 40 percent of the company's student customers opted for paid versions of its products.

By 2011, Flat World seemed poised for strong growth. By January of that year, the company had raised an additional $15 million from investors, including Bertelsmann Digital Media Investments and Bessemer Venture Partners, to fund the publication of new titles in additional subjects. Three months later, Random House invested $3 million.

But as the year progressed, Flat World's share of paying customers began to decline. More students were using digital textbooks than in past years, but few of them chose to purchase the downloadable e-books. Instead, most accessed the free versions online. Plus, as print copies of Flat World's textbooks began to enter the used-book market, students could buy them from resellers at a lower cost. By December, only about a quarter of students who accessed the company's textbooks were paying customers.

More students were using Flat World's textbooks, but the company's revenue per customer was dropping. Shelstad knew he had to entice more students to pay for the company's products. "We were going the wrong way," he says, "and we needed to fix it."

The Decision

Flat World began efforts to convert more students into paying customers. In July 2012, the company launched the online $20 Study Pass, which included highlighting and note taking, as well as a supplementary study guide. But by September, only 5 percent of students had purchased it.

Shelstad had an additional concern. Through an institutional licensing program, some students bought textbooks through their schools rather than via Flat World's website. The institutions paid Flat World a fee. Those schools were, in essence, "subsidizing those who chose free," he says. "I felt that making our books affordable across the board was more appropriate."

In other words, he had decided it was time to erect a paywall. That, however, could affect Flat World's relationship with schools that adopted the company's textbooks because of the free access. Further, a shift to a paywall could jeopardize Flat World's open-publishing license, preventing instructors from collaborating.

Ultimately, Shelstad decided that Flat World's business would never be sound unless all students paid. In November 2012, the company announced that it would end free access to online textbooks in January--a move it billed as "free to fair." At a minimum, students would have to purchase the Study Pass. They could also choose to upgrade to products like a $50 so-called VIP Pass to access Flat World's print and online textbooks.

The Aftermath

Some instructors were supportive. Even at $20 to $50, they reasoned, Flat World's textbooks remained much more affordable than those from other publishers.

But others felt blindsided by Flat World's announcement. Instructors who had used Flat World's textbooks specifically for open education initiatives worried about restricted collaboration. "If it's behind a paywall, it's no longer open--that's the bottom line," says Geoff Cain, director of distance education at the College of the Redwoods in Eureka, California. "It feels to a lot of people like a bait and switch."

Shelstad believes Flat World, whose textbooks are now used in around 3,800 courses, has garnered enough goodwill to remain on solid footing. The company has resolved that instructors will still be able to revise textbooks for their own use, though it's not clear yet whether they will be able to collaborate. The company is also looking to expand the licensing program.

The shift in direction triggered management changes. In December, the board named as CEO Christopher Etesse, previously a vice president at the educational technology company Blackboard. Shelstad will remain with the company, and he remains confident in Flat World's mission. "I think the changes are going to have a positive impact for institutions, for authors, as well as the bottom line," he says.

***

The Experts Say...

My Concern Is the Long Term

The key in open-source software is galvanizing a whole community to bear the cost of developing a product. But Flat World used a traditional approach to authorship, and it locked its content into its platform. I think in the short term, Flat World will get a bump in revenue. But my concern is that in the long term, it will be just another publisher. Every publisher is developing a platform to modify books now. And over the long term, the cost of books will drop, so that distinction will fade, too.

--Victor Vuchic
Program officer in education, William and Flora Hewlett Foundation

Consider All the Stakeholders

Even mission-based businesses still have to create business models that work. I suspect that setting up licensing deals with schools to provide textbooks at low cost will ultimately work well. Some critics of the company seem to be taking one stakeholder's point of view, that of the student or the school, but the company has to take into account all of its stakeholders: authors, investors, employees, suppliers, schools, and students. Any decision driven by only one or two of those groups won't be a good one.

--Steve Piersanti
President, Berrett-Koehler Publishers

Make Your Model Clear

The fact that something is initially offered for free doesn't mean it will always be free. The key is to make your business model clear to customers up front. Particularly in higher education, there are some people who don't embrace the nature of commercial enterprises, so some of the noise is not unusual. But if it is a small group of people complaining, then I don't think it should be a big concern.

--Steve Murray
Partner, Softbank Capital

You’re always told of how AngelList is so awesome for people looking for prospective investors and a host of other things. Of course, they never tell you what they’re doing to get investments, and nothing seems to be trickling down your way. Looking for money is a tough deal, especially when you’ve already spent a sizeable wad of cash to get your project moving.

The only way to really get attention is to make yourself more visible. One of those ways involves getting listed in Angel List’s Trending Startups newsletter, a newsletter emailed to thousands of potential investors around the globe. If you could get in Trending Startups, it probably won’t be long before you get a message from a suit with a little red wagon full of cash. But how do you get there?

Lifting The Curtain: Understanding How AL Works

First off, people starting out don’t really understand the mechanics of AngelList. They just create a profile to “be there” and hopefully run into someone. AngelList, much like Twitter, bases itself on followership. The more followers you have, the more people will be comfortable with writing you a check. Now we raise the problem of getting some followers. Your profile isn’t going to just attract followers out of the blue.

Having A Profile To Brag About Is Important

To start off, your profile needs to be filled out. The startup’s profile should be complete with a list of advisors and team members. If you don’t have advisors, you should get out in the sun more and actually interact with the world around you. Hand your business card out to people at trade shows. If you’re not ready to hustle, your startup won’t be much more than an idea with a couple of broke people behind it. Not only does the startup’s profile need to be complete, but you also need your team (and yourself) to fill out their personal profiles.

Get Social

After all that’s done, start following friends on AngelList through its social platform. This gathers interest, and some of them will also follow your startup. Once you’re done clicking and pointing your mouse everywhere, you’re going to need to start using that keyboard. Type up a nice, short status update bragging about accomplishments that your startup has made once in awhile.

Getting the picture already? All you have to do is hustle and find people to follow you. Look at other profiles of startups appearing on the “Trending” list and try to see what they’re doing that you’re not.

What To Do After You Get Some Cash

Oh, and when an investor actually shows interest and hauls some money your way, add that to your “previous investors” list. Startups that get good followings and funds often appear on AngelList’s Trending Startups list. The more visible you make yourself, the more likely you are to get moving. This sometimes involves getting your eyes out of the monitor and make things happen the old school way by attending trade shows. As you let more people know about what you’re doing, some of them will want to show some interest. Also don’t forget that people won’t be likely to share your page unless they’re told to!

Want to stay ahead of the curve? Here are some simple reminders for what it takes to be better than the rest.

You've probably heard by now that Dell has announced it will go private with CEO Michael Dell maintaining a majority interest with minority shareholders including Silver Lake Partners and Microsoft.

To better understand the news (and most importantly, what you can learn), you have to understand a bit about the company's history.

In the 1990s, businesses were buying PCs. Dell was competing with companies such as Compaq that sold PCs through retailers. But Dell sold directly to companies using its website. This meant that Dell did not have to include the cost of the retail channel in its prices, according to the Harvard Business School case, Matching Dell, that I used to teach. This was just one of the many advantages the company during this time, which enabled Dell to charge higher prices and make PCs at a lower than industry-average cost.

But the collapse of the dot-com bubble meant that companies stopped buying so many PCs. In the 2000s, the biggest PC consumers were individuals who wanted to see machines operating in retail stores before buying them.

While Dell is taking measures to move the company forward, it's a good reminder that start-ups need to keep a competitive edge. Here's how:

1. Maintain a healthy paranoia. If you want to keep your company growing, you must maintain a healthy paranoia. This means that you should maintain fear that forces outside your control could sink your company. It should not be that hard for you to stay scared--because all your employees, investors, and customers are depending on you to keep the company growing.

Sorry to say, maintaining that healthy paranoia must be something you must live with and show to your people every day. If you stay scared, you must share that fear with your staff and make sure that they are always on the lookout for ways to change the company so it can sustain its growth.

2. View your company from the customer’s perspective. One way to do that is to look at your company from the customer’s perspective. This means that you should pretend you are a customer and shop from your company and your competitors. Knowing what customers want when they buy your industry’s product, you should take careful note of whether your company is not winning the battle for value creation.

And if you are falling behind, change your company so it gets back in the lead. That means stripping out annoying processes that make the customer want to fire you. And if your product does not have the features that customers want or your price is too high--find a way to fix those problems.

3. Imagine that the board fired you and brought in a new CEO. If you have a strong board, it should be asking whether you are still the right person to run the company.

In 1984, Intel’s CEO, Andy Grove, was losing ground to Japanese memory chip makers. He thought about what a new CEO would do if the board fired him and put in someone new. The answer was to get out of the memory business and start making central processing units.

Rather than quit, Grove changed strategy - thus Intel got the benefit of new thinking without losing Grove’s managerial talent. And Intel went from nearly perishing to decades of CPU industry leadership.

4. Change everything to stay ahead of the pack. If the customer changes, your company must reinvent itself to keep up with the changing customer’s needs. You must be able to track how customers are changing and what competitors are offering those customers.

If you can give customers a new offering that puts your company ahead of the value curve, you will be able to sustain your leadership.

Through the NFL Emerging Business program, small businesses in New Orleans are getting a crack at the $430 million expected to come in from the Super Bowl.

The Super Bowl is expected to provide a $430 million boost to New Orleans' economy. Through the NFL's Emerging Business program, small businesses will have ample opportunity to get a piece of that revenue.

The NFL first launched its Emerging Business program, which targets women- and minority-owned businesses, in 1994. Each year, the league partners with the Super Bowl host committee--the organization based in the game's host city and charged with overseeing game-related events--in order to educate local companies on gaining access to business opportunities with NFL contractors.

This year's program, organized by the Greater New Orleans Sports Foundation, or GNOSF, included some 275 businesses in 30 industries.

New Orleans is no stranger to big sports events: it has previously hosted six Super Bowls. Through programs such as the NFL's, local sports organizations are making more efforts to involve small businesses. "We strongly encourage contractors to utilize local businesses," says Jeremy Boyce, the GNOSF's community relations director. The NCAA Men's Final Four was held in New Orleans last spring, and for that event, the foundation also organized a series of business workshops.

For some participants, receiving a contract for the Super Bowl has exposed them to business opportunities they otherwise would have overlooked. Jason Burns, the director of business development for QCS Logistics, provides courier, freight, and warehousing services. Founded in 1984, the company has primarily worked with medical and banking companies.

But after winning contracts for the Super Bowl and the NCAA Men's Final Four, the company is now considering expanding into events. "Without this program, we would have never had an entry point for introducing our services," Burns says.

Other business owners simply appreciate the opportunity for a bigger stage. Marie Hasney, the owner of Catering Connection Unlimited/Fleur de Lis New Orleans Cuisine, is gearing up for two major events on Sunday, including the VIP tailgate. Although Hasney's company is well established in corporate events, the Super Bowl is one of its largest bookings to date. "It's very exciting," she says, "though I'm being a nutcase about making everything perfect."

In addition to providing information on Super Bowl-related opportunities, the program includes a series of general business workshops in areas such as marketing, finance, and hiring. Those workshops ensure that all participants benefit from the program, even if they don't get contracts.

"Not everyone can get business from the Super Bowl," says Boyce. "But we can provide resources to help people improve their businesses in the long run."

For the many businesses that have fought to rebound in the years after Katrina devastated the city, those resources are certainly welcome. Many of the participants in the Emerging Business program are far from typical start-ups--they've been around for decades. But the hurricane effectively reset the clock, says Diane Lyons, the owner of Accent on Arrangements, which provides event and destination management services.

"After Katrina, every business is emerging all over again," she says. "We've been involved in Super Bowls before, but now is a glorious time."

The CEO of New Universal Entertainment Agency takes his cues from the industry greats, including Beverly Jackson and Marc Geiger.

As the CEO and founder of a music agency, my work time is split between servicing clients, building out agency properties, and scouring the world for the next great illuminator in music. With the digital revolution making music more ubiquitous than ever, it's a very exciting time to be in this business.

But when I first moved back to New York from Los Angeles and started New Universal Entertainment Agency, I had only one client--someone a friend had asked me to help out with. The artist was named Mims, and he had a single that was heating up. The song, "This Is Why I'm Hot" ended up going to No. 1, and before I knew it, the agency was off and running.

I love being close to the entrepreneurs and technology disrupters; it's the reason I initially started SoundCtrl. Learning from others helps me stay on top of trends, but more importantly, it helps me connect our clients, too.

To that end, here are the three pieces of advice that have meant the most to me throughout this journey:

1. It takes a village to raise a child.

I heard this when listening to my good friend Beverly Jackson do a speech at Social Media Week right after the Grammys last year. The Grammys had just been ranked the #1 most socially impactful event in the history of the medium. But she explained that it's never just one person makes this happen, and it really resonated with me.

No matter what work you do, it's never a one-person job. In our industry, no company or artist can break without support of the music ecosystem. Blogs. Press. Other artists. Entrepreneurs. Technology. It takes numerous hands on deck to develop talent, break and sustain their growth in this environment. It really is a team effort to raise a succesful brand in the music business these days--and in every other industry, too.

2. Add value, today, tomorrow, and always.

At a Pollstar conference, I heard legendary music agent Marc Geiger speak to a group of college kids and emphasize this particular piece of wisdom. He is not only the head of WME, but is also the founder of Lollapalooza, and regarded as one of the most knowledgeable music executives in the tech sector today.

Every waking and non-waking minute I want to be adding value to my clients' careers and overall lives. As long as I'm in the privileged position of representing other people's talent, I know that I need to be constantly thinking about how can I add value today. Then I try to apply that to everything I do in every aspect of life. Even when I go for a meeting or drinks with a new prospective partner, I'm always thinking about adding value to their situation and creating a winning proposition.

Adding value not only feels great, it keeps you in everyone's good graces.

3. Don't chase the paper, chase the dream.

This came from the movie "Notorious," from the scene in which Puff Daddy explains this to his newest protege, Biggie Smalls. Hearing this oft-repeated phrase helped me to realize, look, I work in a very fun and creative world. All day long I talk about, listen to and create opportunities for musicians. I enjoy eating drinking and sleeping this. I love what I do and the people I do it with.

But as an entrepreneur in any industry, you can't let money be the motivator. Sometimes I need to convince my clients that short money isn't the move. Stay focused on the long-term brand benefits instead, I tell them. Let's take less up-front and make this a better experience for the fans.

Money should be the byproduct of doing good work. Sure, I'm focused on doing the best deals possible for my clients, but that's not my passion--my passion is doing consistent and awe-inspiring work for them. Otherwise, where would I be today?

Jesse Kirshbaum is the CEO at New Universal Entertainment Agency. His agency specializes in procuring talent for concerts, tours and endorsement deals for his various clients all over the world. @JesseKay

Is other people's anger holding you back from being successful? A Harvard psychiatrist tells how to deal with rage at work.

Your boss, co-worker or client comes at you with a red face, raised voice, and dominating posture. What do you do?

There are few situations more stressful than dealing with rage at work, and with tight economic times stressing everyone out, such encounters are hardly rare. But thankfully, there are healthy ways to deal with other people's anger according to Dr. Joseph Shrand, an instructor of psychiatry at Harvard Medical School and the author of a forthcoming book entitled Outsmarting Anger: 7 Strategies for Defusing Our Most Dangerous Emotion.

By understanding the root causes of rage and hacking your own emotional response to anger, "you can use your brain to defuse that bomb," he told Inc.com in an interview, So how do you keep other people'e anger from standing in the way of your success?

Your problem may be someone else's anger, but that doesn't mean you shouldn't start with yourself. What exactly is anger and where does it come from? The first step to learning to deal with this sometimes terrifying emotion is answering these questions, according to Dr. Shrand.

"When is the last time you got angry at someone treating you with respect?" he asks.

Think about it. The answer is never. Whether it's because someone stole your parking space or took credit for your awesome idea, anger is always a response to feeling disrespected. You get angry because you don't like what someone has done and what it says about their respect for you—and you want to show them.

"When you feel angry," says Dr. Shrand, "you have probably felt disrespected and without value, so you want something to change. Anger is an emotion designed to change the behavior of somebody else." And it's no wonder these feelings are so intense. They have a long—and bloody—evolutionary history. Being disrespected or unvalued once meant possible exclusion from the group.

"Human beings just want to be valued by other human beings, and the reason has evolutionary premium. A couple of million years ago we were never the biggest, fastest, or strongest animal. We were always at risk of being lunch. Then we began forming these small social groups and our survival potential increased dramatically," he says. Being threatened with expulsion from the group still stirs up this early existential terror of facing a hungry lion all alone, even if these days it's just over the guy who always steals your sandwich.

Great, now you know the roots of anger, how does that help you deal with rage at work? By turning that insight on your angry colleague, Dr. Shrand says, you can use empathy to defuse the situation.

"If somebody approaches you with anger, your initial response will be to get angry in return, to retreat, or to try to become invisible and hope the danger passes," he says. But we've evolved a fourth option since our hunter-gatherer days.

"You can step back and wonder, why are they so angry? What is happened in their world that they want something to change?' Do they think that they are being threatened by someone? Are they are suspicious that somebody is trying to take something from them? Are they envious?" he asks.

The goal of these questions is to move your response from the ancient urge to scream back or flee that originates in the brain's primitive limbic system, to a response that utilizes an area of the brain called the pre-frontal cortex, which is a relatively new addition to our cognitive machinery that is responsible for planning and decision-making.

What does that look like in practice? If your own anger in response is manageable (Dr. Shrand says anywhere below a five on your own 1-10 scale of rage), "use empathy to approach [your angry co-worker] and engage them. Empathy is saying, "I'm interested in who you are. Relax. I'm not a threat to you. I'm here to help you because I see you as valuable member of this team." If you're too emotional yourself to do that in the moment, come back and do it once you've calmed down.

Maybe your response to this advice goes something like this: When my colleague is acting like an angry jerk, it's my responsibility to soothe them? Doesn't that make me a bit of a sucker?

While there are certainly toxic people who you should simply refuse to do business with, learning to respond to occasional anger from otherwise valued team members has huge practical benefits, according to Dr. Shrand.

"The initial reaction is, I am at risk of being exploited if I do this, my resources are going to be diminished. But that's not really true," he says. "If I use my pre-frontal cortex to treat someone with respect by engaging empathy, communicating with them, it's going to calm their brain, and then we all have a chance to actually do something. Remember it's not my anger that's getting in the way of my success, it's your anger, so by modulating your anger we can all be more successful."

Responding emotionally or running away may have an immediate emotional pay-off but, "there may be actually a better long-term outcome with greater success and more stability in your business if you don't succumb to this immediate kneejerk reaction," Dr. Shrand says. "If we can get another person to begin feeling valuable, it will bind them to us. Now you have a group of people who have a shared goal, who want to please each other and be successful. How could that not be better in business?"

Interested in learning more? Dr. Shrand's new book lays out his seven-step process for dealing with anger in detail.

Want to read even more about entrepreneurship? Our friends at Founder Weekly deliver a weekly roundup of content that’s sure to interest anyone with an entrepreneurial bent. Check it out!

A quick reader’s guide: Producing Open Source Software by Karl Fogel

Numerous startups depend on open source software for their success. In some cases, that can the leader of the open source project has founded a related company. In others, it can mean that a company has released some of its code under an open source license. In either scenario, a developer may find himself needing to run an open source project while his hands are full with other work. That makes Producing Open Source Software an invaluable book.

It covers just about every potential issue that could pop up during an open source project, from choosing a name for a project to choosing communication tools to how to actually manage a whole bunch of independently-minded developers. This is a book that covers the technical aspects of open source projects, but it also includes a lot of information on management and other topics that can get lost in the shuffle when you’ve started up a new, super-cool project.

I wouldn’t actually recommend downloading a copy of Fogel’s book today (unless you’re prepared to read it twice): he’s currently running a Kickstarter campaign to produce a second edition. Rather, consider backing the campaign. The second edition of Producing Open Source Software will also be available for free online, but hard copies will also be made available.

Development: Eyeball
Sitepoint has launched an experimental service to find broken CSS on websites, which may extend to HTML and JavaScript. It’s as simple as sending a tweet. You can read up on the launch on Sitepoint.

Funding: Move your startup to Austin for free at SXSW
If you’ve been considering a change of venue for your startup, Capital Factory in Austin may have an offer for you. As part of the SXSWi festivities this year, Capital Factory is holding a pitch event where the winner will receive a relocation package worth more than $50,000 (including 6 months worth of ramen noodles).There are a lot of arguments for taking a startup out of Silicon Valley and Capital Factory may be offering an easy route to do so.

Operations: Do investors care that we have other businesses?
This question was posted to Answers On Startups and has sparked an interesting discussion. Many entrepreneurs may find themselves in a similar position, where they’ve gotten projects to the point where there’s minimal work required, so they move on to the next big thing. But how public should such entrepreneurs make that information?

Marketing: The science of virality — marketing lessons from internet cats
There’s no doubt that cats rule the internet. But how have those furry felines managed to dominate it so thoroughly? This article covers Jonah Berger’s research into what makes an idea viral. He’s analyzed New York Times emailing behaviors and the results may surprise you. Your go to topics may not be as viral as you expect.

Beyond Tech: Mark Cuban’s awesome justification for endowing a chair to ‘eliminate stupid patents’
Mark Cuban has endowed a chair at the Electronic Frontier Foundation, which will be known as “The Mark Cuban Chair to Eliminate Stupid Patents.” Cuban, who is known for his investments, is fed up with the the stupid patents the companies he has invested in have had to fight or pay out to patent trolls over.

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