1.
Venture Funding
in the
Book Publishing
Industr y
Thad McIlroy
thefutureofpublishing.com
Vancouver & San Francisco
January 11, 2014

2.
A Brief Overview

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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

3.
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).

4.
In Perspective: The Largest (‘12)
Penguin Random House
HarperCollins
Macmillan
Simon & Schuster
Hachette
Total
$3,660,000,000
$1,200,000,000
$ 825,402,500
$ 800,000,000
$ 572,250,000
$7,057,650,000
= 50% of trade sales; 25.3% of total books sales

5.
What’s in the Numbers?

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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”

6.
Ignore the Exceptions?
These aren’t likely to repeat

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Kobo sold to Rakuten for $315m
Goodreads sold to Amazon for $150m
Microsoft invests $600m in Barnes &
Noble NOOK

7.
Books vs. Mags vs. Newspapers

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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

8.
In Perspective: VC Dollars

9.
Hot Start-up Industries
No book publishers here.
February, 2013

10.
Another View

11.
We Want to Believe in “Media”

12.
“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.

13.
No M&A Activity (via JEGI)

14.
Judging Investment Value

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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)

15.
Condemning an Investment

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Mature and declining market
Fragmented market
Not significantly profitable
Difficult to access internationally
At risk of structural fragmentation (no
more bookstores)
Dominated by Amazon

16.
The Proof is in the Pudding

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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 payouts, but most are failing even to get
second-round funding.
Just one IPO (Chegg) – not promising

17.
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.”

18.
Yes there are acquisitions
...but they aren’t startups

19.
VCs aren’t Watching Publishing

20.
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

21.
AngelList: The Forgotten

22.
AngelList:
Can’t We all Just Sound the Same?
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“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”

23.
Gust: Never Visited

24.
Collaborating with Startups
Source: Dosdoce.com

25.
Conclusion I
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
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

26.
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

27.
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

28.
The Metadata Handbook:
A Book Publisher’s Guide to Creating &
Distributing Metadata for Print and Ebooks
Renee Register, DataCurate
Thad McIlroy, The Future of Publishing
Available both in print and ebook formats
Published December 2012
themetadatahandbook.c
om

29.
For further information
Thad McIlroy
thad@thefutureofpublishing.com
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.