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.
3 thoughts on “Where investors can make a difference for publishing startups”
I believe you intended to use “co-opt” in your pentultmate paragraph rather than “co-op”. Having negotiated with Amazon on the latter, I can see how it would muscle its way into the sentence.
Thank you – you’re exactly right. I’ve made the change to fix the post.
Thank you for the article. In my short experience in the space, many publishers are staring frozen at Amazon, waiting to be run over. Discussion about innovation often end up with “Amazon is already doing this,” but they have no competitive strategy. However, as it always happen, when Amazon focuses on winning the broad market, it leaves behind, underserviced niche or vertical markets. They might not be as big, but they are loyal markets. Enough for startups to grow on.