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4 Ways to Fix the Publisher-Startup-VC Relationship

A new survey of publishers, startups and venture capitalists reveals what needs to change for the three groups to collaborate.

By Edward Nawotka, Editor-in-Chief

“Telecom companies invest in telecom startups. Biotech companies invest in biotech startups. Aerospace companies invest in aerospace startups. But the publishing industry doesn’t invest in publishing startups. Why would I invest in an industry that doesn’t invest in itself?”

This question was posed to Javier Celaya, founder of Spanish publishing consultancy Dosdoce, by a venture capitalist as he researched the opportunities for collaboration between startups and publishing companies. Celaya surveyed more than 170 companies — 70% publishers and 30% startups, as well as 10 VCs — for a new survey, the results of which were released on Thursday at O’Reilly’s Tools of Change for Publishing conference in New York.

“The lack of engagement with startups has got to change. It is inevitable that publishers and startups will have to work together,” Celaya told Publishing Perspectives. “In the digital age, technology is part of your competitive advantage. As the price of content pushes closer and closer to zero, publishers are no longer in the content business, they are in the content business are with services. Those services are going to be provided by technology companies or startups and you have to figure out which are the best service providers for your authors and readers.”

Of publishers surveyed by Celaya, just 26% reported having met with a startup in the past year.

Alas, the survey reveals publishers and startups don’t often meet — just 26% of the publishers participating reported having met with a startup in the past year and only 10% of them had a meeting every a month. Of those meetings, 35% resulted in a followup.

“Part of the disconnect is that each party arrives at those meetings with different expectations. Publishers go in looking merely to talk and explore ideas. Startups are going in to close a deal.”

Celaya offers several prescriptions:

  1. Appoint one person to be the point person as a startup relationship manager. Make that person to be the point of contact for the startup community. They will identify who is out there and what kinds of technology are available, manager the relationship and make a final decision.
  2. Assign resources to working with startups. And while many companies balk at the idea of working with a startup because of the perception of high costs (one publisher Publishing Perspectives spoke to says that working on a single title with a startup can range from the “thousands” to “a hundred thousand or more, once you include all the back office activities, such as legal costs, logistics) Celaya suggests, “consider collaborating with other publishers and pooling resources to mitigate the financial cost and risk. He notes “this is a particularly relevant option for small and medium-sized publishers.”
  3. Work to change the perception of the industry in the venture capital community. “It’s a huge problem that we’re not perceived as a innovative industry,” says Celaya. “The venture capitalists we surveyed related that they felt there were too many startups with similar approaches, particularly in discoverability and ecommerce. Even in areas that have strong potential, like subscriber services, the proverbial “Netflix” of books, you have 24Symbols, Booquo, Skoobe…
  4. Think global, not just local. “The venture capitalists pointed out that many initiatives have a local geographic focus, but if you look at Facebook and Twitter, while both were born in the US they are the size they are because by went global.” The key to going down this path, pointed out Celaya, is simple: translate your platform into new languages.

The opportunity to work with and learn from startups should not be dismissed, said Celaya, merely because of the financial costs or perceived risks. The upside of potential collaboration is too important to ignore. “Startups create new products and services unders conditions of extreme uncertainty. They are going to give you a lot of clues in how to work in the digital age.

PDF DOWNLOAD: How to collaborate with startups — International study conducted by Dosdoce

DISCUSS: Attracting Publishing Programming Talent on the Cheap

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  1. Posted February 15, 2013 at 11:53 am | Permalink

    It would be great if all Publishers could break free of the ‘old’ way of doing things, particularly decision making. As a start-up we’ve worked with a number of publishers, and it’s those that could make decisions really quickly, were up and running with a digital solution in 6 weeks, those that couldn’t get a decision from up the chain of command are floundering. I also think there is value to be had by engaging with start-ups early on, they are eager to please, and there is a mutual advantage to working closely, ultimately resulting in a ‘market fit’ offering. I think the very large publishers have the breadth to try a lot of different things, from large multinationals to start-up providers. Smaller entities need to be more discerning, and the first step is probably to invest in a talented digital projects person who is eager to make a mark and knows or can get to know what to ask of a digital vendor.

  2. Posted February 18, 2013 at 4:29 pm | Permalink

    Large publishers do invest in start ups but we don’t read much news about them. I know of some self-publishing companies with investments from B6 when they were starting but I suppose those were not publicised much. What we do read all the time are acquisitions. Large publishers acquire smaller companies with services that complement their theirs or add value to their offerings particularly technology-driven ones. There are many of them around and counting.

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