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Venture Funding in the Book Publishing Industry
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Transcript of Venture Funding in the Book Publishing Industry
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Venture Fundingin the
Book Publishing Industry
Thad McIlroythefutureofpublishing.comVancouver & San Francisco
January 11, 2014
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A Brief Overview Book publishing is not a major industry Book publishing is not growing nor is it
significantly profitable Physical book retailing is under threat,
and that threatens the balance A single dominant company (Amazon) is
calling most of the shots
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In Perspective
Here’s is the smallest member of the 2013 Fortune 500.
Nash-Finch is in the food distribution business and has sales of nearly $5 billion per year.
RR Donnelley, the largest U.S. printer, had 2012 sales of $10.2 billion (10% market share).
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In Perspective: The Largest (‘12)
Penguin Random House $3,660,000,000
HarperCollins $1,200,000,000
Macmillan $ 825,402,500
Simon & Schuster $ 800,000,000
Hachette $ 572,250,000
Total $7,057,650,000
= 50% of trade sales; 25.3% of total books sales
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What’s in the Numbers?
Over 600 startups About 7% of those startups have
recorded investments The average investment is $70,000k +/- Remove the half-dozen over $10m and
the average investment is $35,000k +/- 2.5% startups have “cashed out”
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Ignore the Exceptions?These aren’t likely to repeat
Kobo sold to Rakuten for $315m Goodreads sold to Amazon for $150m Microsoft invests $600m in Barnes &
Noble NOOK
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Books vs. Mags vs. Newspapers Several of the startups cross the space between
books & periodicals. The blurring of the boundaries is encouraged by the likes of Kindle singles – in some cases long magazine articles repackaged.
While newspapers are issuing ebooks in a flurry, there’s no real industry crossover
The big difference is that the names of periodicals are the brand; for books the author is the brand
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In Perspective: VC Dollars
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Hot Start-up Industries
February, 2013No book publishers here.
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Another View
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We Want to Believe in “Media”
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“Media and Entertainment” Defined
“Creators of products or providers of services designed to inform or entertain consumers including movies, music, consumer electronics such as TVs/stereos/games, sports facilities and events, recreational products or services. Online providers of consumer content are also included in this category (medical, news, education, legal)”
No book publishers here.
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No M&A Activity (via JEGI)
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Judging Investment Value Existing industry, in a period of growth (such as
new homes) New industry, expanding rapidly (home medical
devices) Existing industry with new opportunities (Apple
with tablets and smartphones) Transformative technology addresses an unmet
need (Uber for catching cabs at tough times in big cities)
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Condemning an Investment
Mature and declining market Fragmented market Not significantly profitable Difficult to access internationally At risk of structural fragmentation (no
more bookstores) Dominated by Amazon
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The Proof is in the Pudding All media markets have a “sex appeal”
that attracts investment Yet book publishing has attracted less
than $350 million in the past five years Three companies have had strong pay-
outs, but most are failing even to get second-round funding.
Just one IPO (Chegg) – not promising
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What About Those IPOs?
Forget it. According to the authors of the 2014 Tech IPO Pipeline Report:
“There are no publishers on our lists. The closest thing would be VICE media, but they're primarily online.”
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Yes there are acquisitions...but they aren’t startups
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VCs aren’t Watching Publishing
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Mark Coker on Flattening Sales
“A fast-growing market causes players to misinterpret their success... It’s when things slow down that your business model is tested. The market is slowing. A normal cyclical shakeout is coming.”
— December 30, 2013
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AngelList: The Forgotten
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AngelList:Can’t We all Just Sound the Same?
“Making ebooks easy” “Building the future of ebook reading” “iTunes for ebooks” “A reading revolution” “Reinventing non-fiction book publishing” “A community within every ebook”
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Gust: Never Visited
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Collaborating with Startups
Source: Dosdoce.com
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Conclusion I
I don’t have a happy face to splash on the challenge of attracting venture dollars to the book publishing industry: I don’t believe that it will happen in any systematic fashion
The one way that book publishing often overlaps newspapers: it’s an excellent way for the wealthy to indulge their egos
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Conclusion II
I think the investment confusion arose because many thought that an industry in the throes of digitization should be an industry worth tossing VC dollars at
Just because publishing is going digital doesn’t mean that there’s a new road to publishing riches. It’s the same tough slog
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My Background
• 8 years in bookselling & publishing
• 15 years in the U.S. studying the intersection of technology & print publishing @ Seybold
• 10 years at The Future of Publishing.com
• Co-author The Metadata Handbook
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The Metadata Handbook:A Book Publisher’s Guide to Creating & Distributing Metadata for Print and Ebooks
Renee Register, DataCurateThad McIlroy, The Future of Publishing
Available both in print and ebook formats
Published December 2012
themetadatahandbook.com
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For further information
Thad McIlroy
Publishing rights for this document: This license allows for redistribution, commercial and non-commercial, as long as it is passed along unchanged and in whole, with credit to Thad McIlroy at The Future of Publishing.