Publishing startups can die on the vine looking for enough funding to prove out a good idea. Investors can help these startups in three ways:
- Identifying promising solutions and funding them through proof of concept
- Funding or coordinating compatible startups in different parts of the publishing stack
- Offering startups an exit strategy that doesn’t rely on Amazon
To the third point: Amazon’s dominant role extends to publishing innovation. The retailer has acquired a range of publishing startups over the last several years. Growth in market demand for online book purchases, including eBooks, has only strengthened its hand.
Investments in companies like Shelfari, mobiPocket, Stanza, CreateSpace, Audible and GoodReads have given Amazon control over every part of the publishing value chain. In technical terms, they own the publishing stack.
If you are a startup that competes against Amazon, even in a single area like social reading, you’re potentially competing against all of the other value-chain components Amazon can put in play.
Much of the debate about Amazon has focused on its impact on terms of sale and margins for publishers. In the mid-term, the greater concern may well be Amazon’s impact on innovation, with the risk that it uses its increasingly monolithic position to exclude or co-opt promising new entrants.
In the next two posts, I’ll provide additional detail on what promising solutions look like and how investors can know what makes for a compatible startup. Funding in these areas can help open up the publishing stack, reduce its reliance on a dominant online retailer and improve what publishers can offer readers.