Investors can offer (and obtain) significant value by identifying promising solutions and funding them through at least proof of concept. Of course, “promising solutions” come in lots of shapes and sizes, but in assessing opportunities I use four criteria:
- Growing the market
- Favoring consumer solutions
- Altering the business model, and
- Checking for scalability
Does the idea grow the market?
There is an opportunity to grow the size of the pie for reading. A piece I recently wrote for Book Business named three ways a publishing solution can grow a market: offering access, promoting components and providing content as a part of workflow.
Is the idea consumer-facing (a B2C offer)?
A simple reality: there are thousands of publishers and billions of readers. Digital technologies afford startups opportunities to reach and engage consumers in ways that the traditional publishing supply chains do not. Ideas that serve readers are also likely to grow the market, a double win.
If it’s not a consumer offer, does it fundamentally change the publishing business model in some way?
There are good opportunities to sell better publishing solutions, but the market for me-too applications is limited, perhaps even shrinking. To succeed, publishers need to create more agile, more valued content that can be monetized in a variety of ways. Solutions that are more efficient have some appeal, but in many cases incumbents can deliver some of that value without changing suppliers.
And if it’s a content play, will its content platform scale?
Traditional publishing workflows are typically built for a single purpose, making them difficult to adapt and scale. I’ve written about six warning signs that a publishing workflow can’t scale. Solutions that address one or more of these challenges have some appeal; ideas that can replace legacy workflows with scalable platforms go to the head of the line.
Growing the market, favoring consumer solutions, altering the business model and looking for scalability: these are filters any investor can use to identify promising solutions in the publishing startup space.