Publishing Without Borders

When Amazon revealed it now sells more digital books than print, it represented a permanent shift for the publishing industry. Borders’ bankruptcy filing only drives home the point. More Americans consume daily media online than anywhere else, and, as the tablet business continues to expand, a growing number of people all over the world will acquire, store and consume books in digital format.

For some VCs, this is welcome—and by no means unexpected—news. There are start-ups awaiting what will undoubtedly be a greater need for their software and technology to enable longtime print operations to successfully transition into the digital age. Already, tablet makers like Kobo, which tethered itself to Borders’ retail sites, are in danger of falling by the wayside as the industry rapidly develops. The flipside of this is Plastic Logic, the Calif.-based tablet maker that—after a production hiccup—revealed last month it would raise $700 million to mass-produce next generation plastic displays in conjunction with existing investors and the government-owned Russian Corporation of Nanotechnologies. Since 2002, the company has raised about $200 million from Oak Investment Partners, Intel Capital, Tudor Investments and Morningside Group, to name a handful. It won’t be until 2013, at the earliest, that consumers have access to Plastic Logic’s products, however.

It remains to be seen what impact M&A by traditional print publishers will have on the start-up publishing space. Indeed, because Apple and Amazon are currently engaged in a web turf war, trying desperately to differentiate one another’s product lines and claim supremacy, opportunities exist for a good many start-ups—some of which have gotten little funding to date.

New York-based Vook, which sells both iPad and Kindle titles and allows publishers to mix their media, including adding video to works of fiction, last month raised $5.25 million from VantagePoint Venture Partners and Floodgate; the company had previous raised $2.5 million from investors like Baseline Ventures, Ron Conway, and Floodgate.

But Boston-based Zmags, which provides e-publishing services for magazines and is poised to take advantage of smaller publications’ need to access tablet users, hasn’t raised new funding since 2009. And ScrollMotion, based in New York, has only raised limited debt funding. Considering its established relationships with mega-publishers like McGraw-Hill, Houghton Mifflin, Pearson and Kaplan to carry education text products, as well as its partnerships with The Tribune Co., Conde Nast and Hearst to deliver mobile media, investors might want to take a harder look at the company.