Literati, the Austin, Tex.–based book box subscription service, pulled in $40 million in a series B round of financing earlier this month. This follows a previous round that raised $12 million. The generous financing has some in the industry wondering why so much money is being poured into a tried-and-true, if unexciting, business model. The answer is that Literati has aspirations to be more than a books-in-boxes delivery service: it’s aiming to become a literary social network—that sells books.
Literati was established in 2017 and charges a monthly $9.95 membership fee for children to receive a box of five curated titles each month. The books are accompanied by a personalized letter and various sundries. Parents can then choose to purchase the books or return them for free. Books are offered at a discount from list prices.
Last year, Literati expanded into book clubs for adult readers and launched five clubs hosted by what Literati CEO Jessica Ewing calls “luminaries.” These include clubs run by basketball star Stephen Curry, Nobel laureate Malala Yousafzai, businessman Richard Branson, and author Susan Orlean, with another book club run by the Joseph Campbell Foundation. These clubs offer just one book per month, with a letter from the club’s sponsor and access to online discussions.
Ewing, a former product manager at Google, said that Literati solves a key problem for book buyers, particularly parents: what to read? “We live in an era where there is a huge discovery problem in books—book lists and databases are overwhelming to people,” she said. “The answer to that is curation and what we are trying to do is help solve that discovery problem.”
Three years after launching, Ewing said Literati ships “hundreds of thousands of children’s books a month,” adding that the company is growing at an annual rate of 300%. To meet the increased demand, Literati now employs more than 110 people (half in fulfillment and customer support) and works with 75 publishers.
A year of pandemic may have given Literati (and other companies like it) an unanticipated boost, as parents, stuck at home, found it convenient to have books picked and shipped when bookstores were closed. In addition, Literati has since its founding favored books from smaller publishers and focused on diverse and inclusive titles, which have become priorities for many book buyers.
“The biggest challenge for parents—and by extension, for us—is choosing books for children so they are at the correct reading level,” said Ewing, who noted that children learn to read and advance at different paces and that age is not always a good indicator of ability.
Ewing said the series B financing, some of which came from Stephen Curry’s investment fund, will be used to support the company’s expansion and growth and to further augment its efforts at data collection and application of algorithms to better match readers with books. Much of this will be done by enhancing communication with its users. “We want to make the experience of being a member of Literati more interactive,” she noted. “Right now, I think what is missing for us—and in the book world in general—is the social piece.”
Ewing said she sees Literati becoming a “motivational, aspirational platform” that “encourages people to read more and is positive in its approach, where people can come together for more elevated and uplifting conversation.” Her inspiration is fitness companies like Freeletics, Peloton, and Strava. And pointing to the success of Oprah Winfrey’s and Reese Witherspoon’s book clubs, Ewing said, “Book clubs are an excellent way to sell books.”