Sramana Mitra: What are some of the major trends that you are tracking and building your strategy around as you’re watching the book business?
Tony DiCostanzo: I think the one that’s most prevalent is the momentum that e-books are building in the market. That’s one of the reasons that we pursued and made the investment within the e-book platform. The challenge for us and distributors in general is the cross-platform compatibility of e-books. To take a step back on this, all the major publishers, for the most part, require digital rights management. What that means is that when we sell a book, it has to be locked down to a specific device. Because of that platform requirement, we’re able to provide an app and allow our customers to download the app onto any Android or iOS device.
When you start looking at the market, Amazon has its Kindle framework, which is most popular among consumers. The challenge is it’s a proprietary format. Because of the digital rights management, we’re unable to allow customers to email a book they buy from us to their Kindle. If they have the Kindle Fire, it’s an Android tablet. There are some things that they can do to get it there.
With the traditional reader devices such as the black and white e-ink devices, we’re unable to push our content to those. The e-book world is quite a few years behind where music was but that was one of the big things that transitioned within iTunes and music a few years ago. They were able to convince the music houses to start stripping content of digital rights management. It allowed a much more universal experience for customers. They could buy music anywhere and play it on their iPhone or iPad. E-books, unfortunately, doesn’t have that seamlessness. If you adopt a platform, you’re stuck to keeping your content on that platform unless you strip the digital rights management.
Sramana Mitra: What else do you want to discuss? What have you learned in this journey that’s worth sharing with people?
Tony DiCostanzo: The lean startup approach resonates as a key point for me. It’s something that I continually reinforce entrepreneurs with. That initial investment of $5,000 was a proof of concept. I was willing to recognize that it had a lot of shortcomings. Within about 12 months of launching that site, I invested another $25,000 in the next site. That site provided a number of enhancements. It still wasn’t exactly where we wanted it to be, but it allowed us to grow the business from $1 million to $3 million. At that point, we engaged a major developer of more enterprise level websites. We ended up spending about half a million dollars on the third iteration of our website. That step stone approach was a key to our success because we didn’t over burden the firm with capital outlays until we justified making those continuous investments.
Sramana Mitra: Have you organically funded the whole project?
Tony DiCostanzo: I did organically fund it with the one exception of having access to some bank capital. I continue to own 100% of it, which is part two of this. The excitement of entrepreneurship certainly spurned a lot of reality TV shows over the years. It becomes fun to watch those shows and see what other entrepreneurs are doing. The part that troubles me is the movement of entrepreneurs so willing to give up ownership in their firms. Having additional partners can mean not only challenges in making day-to-day decisions, but also in how the business is run. They’re putting their blood, sweat, and tears in to the company, yet they easily part with 30% to 50% of the firm. That’s been something I’ve been cautious about over the last few years. I make sure to develop this into something more substantial before I do that capital raise so that, by the time I get diluted, it’ll be much more minimized.
Sramana Mitra: Bootstrap first then raise money later. That’s our core philosophy. Entrepreneurs follow that maxim to whatever extent they want to follow. Part of the problem is there is a big hype driven by the media creating the misconception that entrepreneurship equals financing. It is a completely wrong concept.
Tony DiCostanzo: I definitely echo that message.
Sramana Mitra: Nice talking with you. Thank you for your time.