Why Book Publishing is Like Venture Capital

My roots are in Silicon Valley. For most of the last three decades, Silicon Valley was the world's hotbed for startup innovation. Our advantage over the rest of the world was our unique ecosystem of talent and funding, and a culture that celebrated creative risk taking, creative destruction, knowledge sharing and yes, even failure.

In Silicon Valley, our heroes are the risk-takers, those who put their skin on the line to pursue a dream of changing the world. For much of these last 30 years, venture capital provided the dreamy entrepreneurs with the money, counsel and connections to make their dreams a reality. Earlier this decade, the Silicon Valley gravy train fell off the tracks.

Non-stop success can breed complacency and arrogance. Many in Silicon Valley thought we possessed the secret sauce to building great tech companies. Actually, we did help invent and improve the secret sauce, but like secrets that shouldn’t be kept, the recipe spread around the world and was improved upon, so that today, promising tech companies sprout in every corner of the globe without our assistance. Silicon Valley has eaten its share of humble pie lately, and that’s a good thing for the future of our industry.

For many Silicon Valley entrepreneurs, venture capital was the oxygen that breathed life into what might have otherwise remained an idea scribbled on a napkin. After all, startup creation is expensive. In exchange for the capital, the entrepreneur usually gave the VC anywhere from 20 to 60 percent of their company, and with that ownership they also gave up some control.

VCs, while usually super-intelligent people, are fallible like the rest of us. They have a recurring habit of getting caught up in the greed and feeding frenzy that occurs when a startup in a hot new category hits pay dirt with an IPO. Like drunken lemmings waving fists of cash, they compete against one another to fund similar startups in the same category. The ensuing competition sparks bidding wars that inflate the valuations of the companies and lead to a glut of cookie-cutter startups in the same category. Other entrepreneurs, spellbound by the razzle dazzle of the big dollars, rush to modify their startups to fit the same mold so they too can get funded. Inevitably, consolidation comes because the market can’t support so many clones.

Many entrepreneurs who’ve sold their souls to a VC view VCs with equal parts admiration and contempt. Key positives: VCs offer access to capital, advisors and connections that can maximize their odds of getting their company out there. Key negatives: The VCs make promises they often can’t keep (such as “spend our money quickly, we’ll be here to give you more when you need it”); their allegiance is fleeting (VCs are legend for losing interest at the first signs of hardship); and their interests aren’t necessarily aligned with those of the entrepreneur.

This last two points are the most critical. A VC’s allegiance is to their investors first and foremost, not the entrepreneur or the entrepreneur’s company. At times these interests are aligned, but more often than not they diverge.

VCs play a numbers game. They understand that out of every ten companies they fund, six or seven will be outright failures, maybe two will be “base hits” or “doubles,” and then maybe one will be a home run. The one home run, like the next Cisco, Netscape, Google or what have you, makes up for the other nine duds.

This desire to hit a home run will often cause a VC to manage their portfolio contrary to the best interests of the entrepreneur or their company. In other words, if you are one of the three most promising companies in a batch of ten, the VC may encourage (or force) you to take big risks and swing for the home run, even when a base hit or double is a smarter move. By forcing companies to take inappropriate risks, they do create the occasional home run, but they create many more failures along the way.

One of the reasons a thousand Silicon Valleys have sprouted up around the globe is that it no longer takes the same amount of funding to create a startup. The tools to build the company are essentially free now. With low cost or free open source software, and limitless free access to knowledge (Wikipedia and Google) and relationships (social networks) acting as equalizers, more and more entrepreneurs are turning their backs on the VCs. Some will utilize angels instead. Angels are service providers or fellow entrepreneurs who have experience in the same field, and who contribute much of the same value as a VC without exacting the same quantity of flesh.

Some of these entrepreneurs grow their business to profitability and then have the option, but not the necessity, to partner with a VC. Once an entrepreneur has proven the success of their business (i.e. they’ve eliminated much of the risk), they can either forego venture funding altogether, or they can bring on the VC under more favorable terms.

Fun with Words
So now, my dear reader, if you haven’t already come to your own conclusions about why publishing is like venture capital, I encourage you to perform this fun word play exercise. Enjoy!

Instructions: Copy and paste this post into a word processor, do the following search and replace ("CTRL-H" in Microsoft Word) in the following order, and then re-read your creation:

replace “entrepreneurs” with “authors”
replace “entrepreneur” with “author”
replace “tech companies” and “companies” with “authors”
replace “startups” with “books”
replace “startup” and “company” with “book”
replace “VC” with “publisher”
replace “venture capital” with “publishing”
replace “funded” with “published”
replace “an IPO” with “a bestseller”
replace “service providers” with “experienced publishing professionals”
replace “business” with “writing career”
replace “open source software” with publishing tools like Smashwords”
replace “venture funding” with “a commercial publisher”
replace “Cisco, Netscape, Google” with “Breaking Dawn, Eragon, Da Vinci Code”
replace “Silicon Valley” with “New York.”

In my next post, I’ll share what I think all the above means for the future of publishing and indie authorship.

Interview with Shelley Lieber, The Wordy Woman

The other week, publishing industry veteran Shelley Lieber, the subject of today's Smashwords interview, posted a thought-provoking comment in response to my interview with author Norman Savage.

She expressed concern Norman wasn't pricing his book high enough given the quality of his novel. Her comment sparked an email thread between Shelley and myself, which led to a phone conversation, which led to today's interview.

Shelley is the author of 4Ps to Publishing Success, now available at Smashwords, a book that educates authors about the art of writing and business of publishing.

In our exclusive interview, Lieber hints at a coming renaissance in self-publishing as authors and publishers alike begin to shed previously held misconceptions about the quality and potential of self-published books. As Lieber notes, the secrets to writing a great book remain the same, but the path to publishing and marketing a book are forever changed thanks to new publishing tools.


[Mark Coker] - Your experience in the publishing industry goes back 30 years, both as an author and as a book editor at Holt, Rinehart & Winston, Macmillan and McGraw-Hill. How has the industry changed in this time, and how have these changes impacted authors?

[Shelley Lieber] - The industry has probably changed more in the past two years than it has in the previous 50 to 75 years. Of all the creative industries, publishing is the most conservative and slowest to change. As technology advanced and became more readily available and affordable, individual artists in every creative field began to take on more responsibility for all areas of their craft. Authors were no exception; however, at first authors did not get the favorable response that film artists or musicians got from their respective industries or from the general public.

Everyone is probably familiar with the term “vanity press” and the accompanying insinuation that if one couldn’t get a traditional publisher’s stamp of approval, the work was unworthy so it had to be self-published. With the advent of print on demand (POD) printing and the easy accessibility of digital publishing in the form of ebooks on the Internet and now on ereaders such as Kindle, iPhone and more, everything has changed.

Faced with the prospect of spending years trying to get an agent, who then may take yet another year or more trying to find a publisher, who may take another 18 months to produce the book, which may not earn back the advance, ambitious authors looked for other avenues—and found them. People are publishing their own work, and getting their message out to their audiences using the new methods because it’s faster, easier and more effective than the traditional way.

A loose translation of Victor Hugo’s famous quote is, “An invasion of ideas cannot be resisted.” And while the majority of the old school publishing community dug in its heels and refused to budge, the rest of the world began to incorporate those new ideas. What we are witnessing in publishing today is the result of “an idea whose time has come.” The budget cutbacks, acquisitions freeze, restructuring and layoffs rampant in the publishing may have been hastened by the current economic situation, but were not caused by the recession. The old system wasn’t working, and the recession became a convenient label or excuse to explain it. Or, perhaps it was the straw that broke the camel’s back.

Either way, the changes are good for authors. I believe this is the beginning of a new era in publishing. In January of this year I declared 2009 as “The Year of The Author,” because there are more opportunities for publication today than ever before and it’s going to get even better.

[Mark Coker] - In our phone chat, you mentioned that just a couple years ago, you might not have recommended self-publishing to authors, yet now you do. What changed your opinion?

[Shelley Lieber] - I think what I said was that I would not have recommend self-publishing with the specific intention of attracting a traditional publisher and contract, because back then, self-publishing served more as a mark against you than for you, unless you had sold thousands of books. Today is a whole new market, however. Two things are working for the self-published author: one, is that there’s much more help available to make sure you put out a good book and the quality of self-publishing as a whole is rising. Second, with the limitations acquisition editors are facing—smaller budgets, celebrity authors not being guaranteed successes and memoir writers turning out to be liars and frauds—a “safe” bet is the self-published author who has sold 5,000 to 10,000 books on her own. Suddenly agents and editors are trolling the Internet in search of these self-published authors. Ironically, now successful indie authors are finding themselves being approached by the very publishers wouldn’t even return the SASE two years ago.

[Mark Coker] - In your view, what's driving the rapid growth in self-publishing?

[Shelley Lieber] - More than anything else, technology is driving the rapid growth. People are doing it themselves because they can. It’s empowering to have artistic control over your work. And serious writers are taking the steps to do it in a professional manner. The stigma of “vanity” press is diminishing because the product is improving. Yes, there’s still tons of bad stuff being put out. But that will change. The cream always rises to the top. The poorly executed projects won’t sell and the fun of doing it won’t sustain. But, the books put out by authors who took the time and money to do it right will sell, make money and make a difference.

Plus, right now the DIY trend is huge. More and more, the focus is on favoring the little guy (or gal) making it, and it’s especially appealing to the public when it’s done in the face of the big, mean corporate machine. People are really tired of the demands and restrictions of bureaucracy and ever more ready to root for the underdog who triumphs in the face of obstacles. It’s sooo American dream. And if a book is good, it’s good. Most people don’t give a hoot who the publisher is if they like the book. The snobbery associated with traditional publishing is much less appealing and powerful than it was before.

[Mark Coker] - In the 4Ps to Publishing Success, you argue that authors need to treat their writing as a business. What do you mean by this?

[Shelley Lieber] - I encourage everyone to write; it’s a wonderful form of self-expression and helps individuals explore and examine their inner selves. Writing is a passion, a soul-driven activity. However, publishing is a business, and successful (VIP) authors know the difference. For some reason, perhaps because there’s no heavy machinery involved, people think all they need is a computer and printer and that makes them an author and publisher. Yet, these same people wouldn’t enter any other business on a whim. They would take classes, work in the field and perhaps seek the services of a coach or mentor. It must be the same for publishing.

The truth is that most mistakes first-time authors make are the result of one BIG error: not getting educated about the publishing process. So many people jump right in without knowing what they are doing. The result is they spend way too much time and money (or too little, thinking they can do it all themselves), and end up with inferior products because they didn’t know enough to make informed decisions.

I’m working with an author right now who came to me for marketing help just before she was going to press with her book. I asked her to wait until I saw her final file before going ahead with the printing. This is what I saw in her proof copy: an inferior photograph and uninspired graphic presentation on the front cover with poorly crafted back cover copy. The inside the pages were not designed well, either. The pagination was incorrect, and the title and copyright pages were not formatted correctly. The layout was amateurish. The header style changed from page to page, the paragraph indents were too wide and the inside margin was too narrow. The page layouts were dull without use of any graphic features, and it needed a good copyedit for style consistency and language use. That was on the first thumb-through.

Once I spot read a few chapters, I saw the book was a well-written, interesting and compelling read on a topic that would have broad appeal in the marketplace. But if she had gone ahead with that original file, she never would have garnered any attention or positive response because everything about it said unprofessional presentation. Even if you don’t have my professional eye, you would know just by looking at it that it was self-published.

I titled my book the 4Ps to Publishing Success because publishing is a four-part process: plan, produce, publish and promote. There is a right way and a wrong way. Just because you are self-publishing doesn’t mean you want to throw out all the conventional wisdom of how to do it. Education is the key. You don’t necessarily need to become a publishing professional to put out a good book on your own. You have to know enough, though, to know how to hire the right people to provide the right services without getting ripped off.

[Mark Coker] - In your comment on Norman's interview, you wrote, "Writers do a disservice to the craft (and other writers) when they give away their work." Do you think authors are too quick to discount the value of their works, and too quick to embrace FREE as a marketing tool? And if so, how do you recommend authors compete against the growing number of free and low-cost alternatives to their books?

[Shelley Lieber] - I absolutely think that authors are too ready to give away their work. In the magazine industry, it’s not uncommon for publishers pay writers in copies of the magazine or as little a one or two cents per word. New writers are so eager to get their name in print, they often will give away their work. However, when writers undervalue their own work, it sends a message out that writing is not valuable. Typically, writers are underpaid for the amount of time and effort they put out, especially compared to other services such as design, illustration and photography—and that’s across all industries: publishing, advertising, public relations, etc.

This is not to be confused with writing free articles for ezine directories as a marketing strategy. Writers can employ “free” as a method that will serve to promote themselves and their work. For example, it makes sense to me to give away a chapter of a book via a free download on Smashwords. Or, offering a lower-cost ebook version of a book may lead to the reader purchasing the print version later on. Authors need to be creative using their writing talents: blogs, commenting on other people’s blogs, press releases, letters to the editor, etc are all ways to get make your name visible to the public and offer an opportunity to advertise your website or blog. Authors can give free tele-seminars, offer podcasts, create short videos for YouTube…there’s no end to what you can do for yourself. Create demand for your work, create value…and then you can charge what you’re worth.

[Mark Coker] - Thanks Shelley!

***

Shelley Lieber's 4Ps to Publishing Success at is available as a multi-format ebook at Smashwords for $5.99 by clicking this link: http://www.smashwords.com/books/view/1321

To learn more about Shelley, visit her Smashwords author page or visit her web site at http://wordywoman.com.

For authors interested in Shelley's author mentoring services, check out the VIP Author's Mentorship Program, where she offers a newsletter, weekly group teleconferences, and one-on-one consulting.