In 2017, I reported to IBPA Independent magazine readers about the work I had been doing tracking book publishing startups, including many that are classified as self-publishing startups. I’ve continued to track these companies and have just published a new edition of my study. This time, I’ve captured the stories of over 1,300 companies, up from 900 the last time I checked in with you. There are some fascinating new ones. Many of the earlier organizations have gone on to raise new investment or to have been sold or merged. And, sadly, a number have failed.
Taken together, my report, “Book Publishing Startups in the United States 2022: Industry Insights, Analysis, and Investment Opportunities,” gives readers an overview of the English-language book publishing startup scene in the United States (and around the world) as of December 2022.
We’re surrounded by high-profile startups, and it’s difficult not to feel the allure. I marvel at the spirit of many of these entrepreneurs. I certainly see the attraction; the public is constantly reminded of the innovative energy of the startup culture. Of course the publishing community joined the startup party, attracting imaginative adventurers to our well-established industry.
Some of the startups are one-person efforts, with a lonely dream of remaking how books are made, discovered, or sold. Others are multimillion-dollar companies with hundreds of employees. Many of the startups fail rapidly, while others have been bought for hundreds of millions of dollars.
At the center of my work is a live database of these 1,300 companies, hosted online by Publishers Weekly at publishersweekly.com/startups. Readers of the report can access the database and perform a range of finds and sorts to drill down on the data and extract insights far beyond what I’ve included in the report.
What is a startup? Startups tend to see themselves as a new type of business, with new approaches to existing challenges. The definition can be loose. An essential aspect of startups is technology that can scale, rather than just hands-on services. I’ve used 2007 as the nominal date for inclusion in the report, the year both the Kindle and the iPhone were introduced.
Self-Publishing, Independent Publishing, and Hybrid Publishing
I think that self-publishing is better categorized as “independent publishing,” but I’ve stayed with the more familiar term for the report. I see self-publishing roots in the tireless evangelizing of Dan Poynter (his Self-Publishing Manual was published back in 1979; I met him first in the early 1980s). But the industry really didn’t blossom until the Kindle brought e-books to the masses.
There’s no official data, and we each have our own estimates, but self-published book sales can surely be counted in the billions of dollars, not just the hundreds of millions. (Amazon’s Kindle Unlimited program alone distributes over $500 million per year in author royalties to independent authors, representing a multibillion-dollar “department” within Amazon’s much larger e-book and print retail empire.)
It was difficult for me to decide whether each new author service provider should be included in my database. Self-publishing, and hybrid publishing, are in themselves innovative, but the companies are mainly copycats of one another, and not particularly innovative beyond their core model. My first criterion for inclusion is tech-specific: Do they include some unique technology as part of their broader service offering? Beyond that,
I looked to those organizations that operate at scale, with more than a couple of employees and a few dozen authors. If you think I’ve overlooked your company, please get in touch and tell me why—I’m updating the database daily.
Into the mix comes hybrid publishers, a cross between a self-publishing practitioner and the traditional publishing model. As readers of this magazine know too well, the hybrid industry has been surrounded with controversy around its trade practices. IBPA has taken a leadership role in bringing order to this sector, and its Hybrid Publisher Criteria bring clarity to how individual organizations should be evaluated. It is only companies that adhere to the IBPA standard that are represented in my database, but again with an eye to those that have scaled their operations.
Traditional Publishers and Their Approach to Startups
In the late 2000s, when e-books took hold in the market, and self-publishing blossomed, there was a flurry of startup activity. Each of the Big Five publishers got their feet wet in the startup pond, some through internal startup incubation. A few of the publishers were burned when their investments went astray.
One executive I spoke to (off the record—none wanted to be quoted by name) referenced a frequent and perhaps accurate criticism of our industry: It is neither agile nor innovative. Publishing can move at a glacial pace, and publishers are not early adopters. Another executive noted that while there have been bursts of enthusiasm for startups over the last dozen-plus years, when an investment didn’t work out, it was perceived as a failure, not as a learning opportunity. Cynicism follows failure.
Do the startups cataloged here threaten to disrupt the existing order of the publishing industry? There’s an example at the Big Five. During the recent Penguin Random House/Simon & Schuster trial, we learned from PRH executives how much self-publishing has hit the company’s bottom line: its income from fantasy, mystery, romance, and science fiction fell from nearly $350 million in 2011 to $89 million in 2019 most of which migrated to independent authors. Now that’s disruption.
Hybrid publishers attract an increasing number of high-profile public figures with offers of better royalty splits, personalized service, and greater control of their publishing destinies. They’re siphoning off bestsellers that might ordinarily have landed with the larger trade publishers.
Is artificial intelligence disruptive? What about the metaverse? Well, then, where will the next disruption come from?
One in five of the startups in this database have some degree of venture funding, but many of these publishing startups are not just lean, they’re emaciated. In numerous cases, there is no startup, per se, just a website and some good intentions. The marketing and promotion is scant.
Too many of these startups are trying to fix a problem that doesn’t, in fact, exist. “Room for innovation” is quite different from “ripe for disruption.” While few of the startups aim to disrupt the entire publishing business, several make claims to disrupting the editor’s role, the agent’s role, or the balance of power between writers and publishers. As Elizabeth Spiers puts it, too many startups “think incumbent companies are using broken models because they’re idiots and not because the problems are not easily solved.” I sometimes think that startups might better seek just to innovate, not to recreate.
The Summary Data
Here are a few observations about the summary data collected for this report, updated from the 2017 edition. There are over 40% more listings in 2022 than in the 2017 edition, and from many more countries. (To qualify for inclusion, the international startups must include US customers within their target markets.)
The total funds raised by all the startups is some $3.4 billion, over three-and-a-half times more than had been raised five years ago. A significant portion of the investment went to a dozen or so companies—Wattpad garnered $118 million. The average investment for all funded companies is $12.9 million.
If counting just the smaller investments at $10 million or less, roughly $425 million has been committed (up from $218 million in 2017), an average of just over $2 million per company. There have been five initial public offerings (IPOs).
2021 was by far the most active year for large-scale acquisitions of publishing startups. Wattpad earned the most dollars, purchased by South Korea’s Naver in January 2021 for $600 million.
In response, in May 2021, Kakao Entertainment, also from South Korea, bought online comic app Tapas and serialized fiction app Radish for $510 million and $440 million, respectively. By all accounts, Naver and Kakao are fierce competitors in the international online cartoon, serialized fiction, and e-book markets; there’s nothing like competition for goosing acquisition target pricing.
In July 2021, Epic, a digital reading platform for kids, was acquired by India’s Byju’s, an educational technology company, for $500 million in cash and stock.
Latest Trends and Opportunities
As these high-priced acquisitions demonstrate, in the last several years, the most successful startup categories have been serialized/fanfiction reader communities. Wattpad, Inkitt, and Radish have proved that short serial fiction from mostly young novice writers works extremely well on mobile devices and can drive huge audiences. Readers have direct input into what gets promoted. Authors are earning real dollars. It’s a form of self-publishing, but with a business model quite different from many of IBPA’s members.
Between comics, graphic novels, and manga, narrative is also becoming more of a visual medium, driving the success of Tapas and others.
The extraordinary growth of audiobooks and podcasts continues to augur an industry surrounded by sound. Spotify’s $123 million purchase of Findaway, completed in 2022, reaffirms this. (Bookbaby’s recent agreement with Speechki is another indicator.)
Children’s books startups are always hot, whether the intention is entertainment or education—the $500 million Epic sale, mentioned above, being the latest example.
Book clubs and book discovery remain very active sectors, though with dozens of competitive players.
After a decade watching book publishing startups, I can attempt to draw some conclusions.
Startups embody innovation—if a new idea, grounded in technology, is sufficiently innovative, it can drive a new business.
The majority of readers still connect with their favorite authors via ink on paper. Invariably this has an impact on the type of opportunities presented to book publishing startups, for better and for worse.
Self-publishing is the only part of the trade publishing industry that is mainly digital—print makes up a modest percentage of sales for the average independent writer. A significant portion of their sales come from subscription platforms, mostly via Amazon Kindle Unlimited and Prime Reading, and via Audible for their audiobooks. Self-publishing sales growth has slowed from the heady early days, but there continue to be many thousands of new authors joining the ranks each year. Established authors continue to build their catalogs. Authors continue to face challenges surrounding marketing and discovery, providing a wide range of opportunities for startups.
There has been a modest decline in reading in the last decade, but the numbers are still huge. Reading, once a solitary activity, is now increasingly social, as most recently evidenced by #BookTok and a host of other startups in the database.
IBPA’s vision is of a world where every independent publisher has the access, knowledge, and tools needed to professionally engage in all aspects of an inclusive publishing industry. My hope is that IBPA members will look more closely at the startups in this database, the failures as well as the successes, to get an idea of what worked and what didn’t. Lessons shared are lessons learned. Ours is an industry full of opportunity—I’m going to be watching for the next group of innovative startups from the IBPA membership ranks.