Risk-Free Publishing; Or, When Everyone Can Bankroll Books

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

Is it possible to publish books without financial risk?

In the case of the traditional publishing model, publishers often pay authors money in the form of an “advance on royalties.” They also invest in the creation of the book in the form of paying editors, book packagers and often others to bring it to market. If a book fails to sell, that publisher just loses that money.

Authors also take on a lot of risk when they publish — no matter how they do it. If an author goes with a traditional publisher and takes an advance, they still have to spend time and effort creating the book. The size of the advance, the amount of time and effort it takes and what they could be doing otherwise to generate income determines the size of the financial risk. If an author self-publishes, they take on the entire financial risk themselves, including opportunity cost (outlined above) plus what they will pay to bring that book to market.

Inkshares is a new San Francisco-based start-up that is trying to take the financial risk out of book publishing — or, at least shift some of it over to readers.

Here’s how Inkshares works:

— Books are uploaded on the Inkshares crowd-funding platform. These are books that have been previously selected by the Inkshares editorial team, books the company would acquire if it had a budget to do so.

inkshares book page

— The books are promoted through the crowd-funding platform and supporters can pledge money to have the book made, essentially pre-ordering a copy.

— When a minimum funding goal is met, the money is then used to create the book, hiring editors, etc.

inkshares editor

— For supplying the platform, access to editors and generating the market to raise money, Inkshares takes a 30% cut of book sales. The author gets the rest.

Inkshares has gotten a few books funded so far, including Big Fish author Daniel Wallace, who raised $5,000 for his new illustrated children’s book. That’s not enough to sustain any author or business. But a year from now, the start-up plans on having made $500,000 in revenues for itself and over $1.5 million for its authors.

So far, the San Francisco-based company has raised $315,000 from friends and family and is in the process of raising $1.5 million more. The company has so far taken investments from Ingram Ventures, Indicator Ventures, and some angels, including Nion McEvoy, CEO of Chronicle books. The company has four employees currently.

The model is different from traditional publishers, which take on more of the financial risk (in the form of advances and paying for editing, design, distribution, etc.) but also take more of the rewards. It’s also different from self-publishing, where authors take on all the financial risk but also get more of the rewards. And it’s different from crowd-funding publishing projects on sites like Kickstarter, because a funded project is then solely in the hands of the author, who must create, package and distribute the book. Inkshares crowd-funds the book and then takes care of the editing, packaging, etc.

The company says in its presentation to investors that it believes that in several years, the majority of profitable books will be published via crowd-funding.

Speaking with Inkshares chief legal officer Adam Gomolin last week, I was intrigued to find out that this new model isn’t the only way Inkshares intends on innovating. The company hopes to move to a form of “equity-based crowd-funding,” which isn’t currently legal in the U.S., although the 2012 Jumpstart Our Business Startups (JOBS) Act creates a provision for it.

Essentially, equity-based crowd-funding is when instead of getting a copy of the book or some reward when you crowd-fund something, as on Kickstarter, you can actually invest in the book or project and own a small piece of it, perhaps entitling you to royalty payments if the book does well or dividend payments if the Kickstarter company does well.

There are already European equity-based crowd-funding businesses and when the new rules from the JOBS Act get written, Gomolin hopes that Inkshares can also offer equity in books that readers want to fund.

To me, this idea is incredibly enticing. After all, how many people who go into publishing secretly wish they were an acquisition editor at a big publisher with a big budget to spend on promising new titles? With equity-based crowd-funding, you can be that acquisitions editor — with your own money, of course.

One thought on “Risk-Free Publishing; Or, When Everyone Can Bankroll Books

  1. martin morgan

    At Extraordinary Editions we try and remove some risk by offering our books to subscribers and listing their names in the front of the book, in the old fashioned way that books used to be funded, but that is because we make unfeasibly beautiful hand bound books. That said Unbound ( unbound.co.uk ) have been pursuing the route that Inkshares are proposing for some time now. They are worth checking out.

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