It has been said that for an industry supposedly in decline, there sure are a lot of people trying to get into the publishing business. In fact, over the past decade, there have been around 900 publishing startups, observes consultant and Future of Publishing blogger Thad McIlroy, who recently released a report on the state of publishing-related startups. “I did the work to satisfy my own curiosity and to understand the nature of innovation in the publishing industry,” says McIlroy, who started collecting data some five years ago.

Where would you say the digital startup scene is at the moment? Are we in a period where innovation and investment is on the upswing, or is it slowing?
If we talk more broadly than book publishing, about the digital startup scene generally, I would say that we are in a period of extraordinary innovation and generous investment. As an example, artificial intelligence is causing a great stir, launching literally thousands of startups, and attracting venture capital like pigs to the trough.

Do you get any sense from your work of who is behind most publishing-related startups? Are they publishing people approaching traditional problems, or are they coming from the outside?
I’ve strong sense that the people behind publishing startups are mostly newbies. Perhaps this is because publishing veterans are cynical or pessimistic about the possibilities for innovation. Naïveté has always been an advantage for the entrepreneur.

Right now, we ask ourselves what’s next, and what we see are the same containers with the same kind of content. But stay tuned, because that will change.

Most startups fail—that we know. Do you get any sense of whether the bar is higher or lower for publishing startups? If so, why might that be?
Working through my study of the 900 or so startups, I kept learning of one failure after another, and it gave me the impression that the failure rate among publishing startups was higher than it was in other industries. So I researched that question directly and found to my surprise, and to my pleasure, that the book publishing startups are failing at a level roughly consistent with other startups. It seems like a reverse compliment to say that book publishing startups fail at merely a rate of roughly a third within the first few years of operation. But that’s pretty good.

Can you talk about some of the common themes you see for would-be publishing startups? Looking at the data, is there a particular area where you see a lot of investment? Or any glaring areas of opportunity?
There is a remarkable diversity in the startups, but a few patterns emerge. Generally speaking, self-published authors are the main target for publishing startups. I had thought that lots of them would target publishing companies and publishing operations, but very few actually do so. The big category is self-publishing tools. And lots of the startups claim to be the very best, easiest hosts for self-published authors trying to get their books to market, with the most generous royalties.

On the reader side, many of the startups purport to help readers discover the best next book to read. But that’s a problem that I don’t think is nearly severe enough to justify a new business. The other one that startled me was that there were a dozen startups specifically targeted to finding the best price for used textbooks.

Funding, obviously, is a concern for all startups, but is it even more so for pub tech, given the industry’s famously thin margins?
Funding is the biggest problem that book publishing startups face. Among all 900 startups I tracked over a 10-year period, the total cash raised was under $1 billion. That sounds like a lot until you consider that VC [venture capital] investing in the U.S. totals some $50 billion per quarter.

And, when I took out the outliers from the equation—that is, the relatively few companies that had managed to raise $10 million or more in VC dollars—the average investment was under $2 million. If we assume that venture capital is rational, then we’d have to conclude that experienced financiers do not see much opportunity in the book authoring and publishing industries.

What inspired you to start tracking startups in publishing—and what do you think such a resource might provide?
I got interested in publishing startups because of my broader interest in where book publishing is going. Surely, the startups should be some kind of a leading indicator. And my report has lessons for a number of groups. Obviously VCs and entrepreneurs can get a deeper understanding of what’s been going on with new ventures in our industry. But I think it’s most interesting for all of us who work every day in book publishing and want to get an idea of where we’re headed.

So, nearly 10 years ago, Amazon launched the Kindle. But e-books are hardly the first big revolution in publishing—the desktop revolution, which peaked in the 1990s, comes to mind. As a veteran of the publishing startup scene, can you put today’s market in context?
I was deeply involved in the desktop revolution, which actually dates back to the mid-1980s. And that felt like a huge change. But, when all was said and done, all we had was a less-expensive tool set that could be used by less skilled operators while still achieving high-quality results. E-books are a much more profound change for publishing. Superficially they’re often just a digitization of an analog format. But they’ve changed the economics, how authors reach readers, the balance of power for the traditional players, the number of books that the public can access at any time, and onward from there.

But I believe there’s much more to come. The question comes down to the format and the container. People tend to assume that novels and narrative nonfiction have been with us since the dawn of time. But, if you study the history and evolution of publishing, you recognize that these are artifacts developed based on available technologies and distribution systems for a public hungry for entertainment and for knowledge. The digitization of text and images frees up the delivery mechanisms. More importantly, there are vastly more ways to be entertained and to be informed these days than there were when these formats first became popular. Right now, we ask ourselves what’s next, and what we see are the same containers with the same kind of content. But stay tuned, because that will change.