Why Authors Are Start-ups and Publishers Are Venture Capitalists — Now More Than Ever

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

We don’t think of the publishing industry as having much in-common with bustling Silicon Valley and the the way technology start-ups are funded and nurtured, but there are in fact some remarkable similarities and the reason for this, as so often in publishing, is Amazon.

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What has Amazon done to make publishing look more like the technology industry? It introduced Kindle Direct Publishing (KDP) and dramatically lowered the barriers for authors to find a readership. Self-publishing has gone from “vanity” publishing to a respectable business strategy that has produced success stories such Hugh Howey’s Wool and, of course, some more erotic fare.

It has become much easier to write a book and get it “published.” Or in other words the cost have come down dramatically. In the technology industry, we see something similar. Cloud computing has dramatically reduced the cost of getting started. Open source software and easy access to once advanced functions such as credit card billing, testing and other functions have brought the cost of starting-up in technology down significantly from millions to maybe a few thousands to tens of thousands. Incidentally Amazon Web Services (AWS) is one of the major players here as well, though it was more a follower than a key enabler in this case.

So, dramatic reductions in cost have lead to explosions in tech start-ups, as well as in “published” authors. Where you once needed venture capital funding or the support of a publisher to get launched or achieve distribution in national book stores, you can now reach the market by boot-strapping your enterprise (financing from savings or family, fools and friends).

The flip-side of the coin is that threshold for getting funding has gone up significantly, because there are so many others competing with you as result (it’s become cheaper after all). Where you once need a good business plan and maybe a proof of concept or prototype to get funding as a technology company, you now need a finished product and consumer traction to attract venture capital funding. There are exceptions, mostly when the founding team has an exceptional pedigree (i.e. been key players in earlier immensely successful start-ups). In such cases you see multimillion funding rounds for nothing more than idea (think Color). Lower cost to getting started has increased the number of those who start and as a result the hurdles of getting funded have gone up.

We see the same in publishing. The flood of new aspiring author has swelled the slush pile and advances are getting rarer and smaller. Increasingly publishers, like venture capitalists, want to see some traction first or evidence of an “author platform”. This has lead to the “digital first” business model. Publish your work as an ebook and once there is proof of sufficient readership and traction, a publisher might throw marketing muscle behind it and bring the book out in print, too.

Of course, there are exceptions, like when first-time authors get major advances. It’s the same with technology start-ups. There are still those who stand out, sometimes for no other reason that the sector they operate in has become popular due to a recent mega-success. Just like venture capitalists herd like sheep to find the next Skype, Spotify or Instagram, publishers lemming-like seek the next Harry Potter, Fifty Shades of Grey or The Da Vinci Code.

There is one more notable similarity and that is the role of the referrer. To  get a VC meeting you need to be referred by a person that the VC trusts. Such a person could be a successful entrepreneur or angel investor. Basically VCs rely on others to pre-filter start-ups for them. In publishing you need an agent to get in front of publishers. Agents are the folks who filter.However, as the funding requirements have come down, angels have turned into super angels and now occupy the role early-stage VCs once did. The same is happening in publishing, too, where agents are becoming publishers. And just like we have accelerators and micro VCs in technology, there are  now “writing academies” and micro-publishers. Well, the latter have been always around. That’s nothing new, really, except that micro-publishers are now more likely to specialize, just like micro VCs do. Focus is the name of the game in the current environment unless you are one of the very biggest players.

There are some underlying reasons why these two industries are becoming even more similar:

(1)    They are both about risk, uncertainty and and “black swans”. In other words, success is not evenly distributed. Some companies or books are mega-successful, while many, many others are just middling successes or flops. In other words, the distribution is not linear, but exponential. The block-busters are not ten times more successful, but millions of times more successful than everything else.

(2)    There are the examples of those who have succeeded that inspire everybody else in both industries

(3)    the cost of launching is now relatively low and the talent pool abundant in both publishing and technology

(4)    It takes a lot of passion to be an author or tech start-up founder

(5)    Payoffs are very unequally distributed and thus pursuing a career as entrepreneur or author is more like playing the lottery (skill matters, but luck matters more)

There is one notable difference though:

Start-ups form clusters. There are huge benefits to being in a  location where there are lots of other start-ups. In the U.S. your chances of success are much, much higher in Silicon Valley than anywhere else, though New York City, Austin, Seattle and others may offer fertile ground, too. In Europe you better be in London, Berlin or Israel or life is a lot tougher. When it comes to writing though, it really does not matter where you are located. In many other ways book publishing is already a much more global industry than the technology industry and rapidly becoming even more globalized, but that’s a story for another day.

Learn more about the future of the book publishing industry at DBW 2014. Register today!

6 thoughts on “Why Authors Are Start-ups and Publishers Are Venture Capitalists — Now More Than Ever

  1. Pingback: Faber Factory Why Authors Are Start-ups and Publishers Are Venture Capitalists — Now More Than Ever - Faber Factory

  2. Nina Amir

    Great piece! I’ve been preaching this message to authors for some time now. When they seek traditional publishing contracts, they are asking or a venture capital partner. That means they must prove they are good business partners. After all, publishing is the business of selling books; therefore, they must come to the table with a marketable product as well as the skills to sell that product–a book. If they decide to self-publish, they must become savvy business people. They must determine if the product they want to bring to market is viable before they invest their own money in that product and start their own publishing company–a start-up venture.

    My new book, The Author Training Manual (Writer’s Digest Books, Feb. 2014), discusses how both types of aspiring authors can approach their books from a business perspective by first developing a business plan. This helps them create a marketable product–a book that sells to readers and to publishers.

    Thanks so much for your article. I’ll be sharing it.

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