When Jessica Ewing left her job as a product manager at Google in 2009 to become a novelist, friends and former colleagues did not mince words about what they thought about her decision to leave a secure job in the nadir of a recession. “Everyone thought it was this crazy, disastrous thing,” Ewing says.
For a little while, their concern was well-founded: Ewing wrote the book—“a thinly disguised memoir,” she admits—and found a literary agent, but she also began dreaming of a startup to better connect unknown writers with publishers and readers. “There were a lot of problems I was trying to solve in books and literature and I pitched probably 18 different companies in the space,” Ewing says. “I had one investor who told me literally—and this is a quote: ‘There’s nothing interesting to be done in books.’”
Five years after that meeting, Ewing can confidently say that the naysayers were wrong: Literati, the book club membership service she founded in 2017, tells Forbes exclusively that on Wednesday it closed a $40 million Series B round of funding, bringing the company’s total funding to $55 million. Aydin Senkut, founder of Felicis Ventures and an early backer of Shopify, Fitbit and Credit Karma, led the round; additional investors include Dick Costolo and Adam Bain of 01 Advisors, Founders Fund and General Catalyst. Golden State Warriors star Stephen Curry—who hosts one of the adult-focused book clubs on Literati—also participated in the round.
Literati has two lines of business, one for kids and one for adults. The children’s book service, which costs $9.95 a month plus the cost of the books, works similarly to Stitch Fix, sending a curated box of books to subscribers once a month. The adult offering, which launched in August, is a “luminary” series curated by famous figures: Malala, Steph Curry, Richard Branson and Susan Orlean all have their own book clubs on Literati. For $25 a month, adults can join Malala in reading Fifty Words For Rain (the January pick) and interact with other readers and even Malala herself, including through prerecorded videos, on Literati’s app.
“To be able to layer multiple product lines like this happened to Shopify—they were a commerce platform, then payments,” Senkut told Forbes about his decision to lead the Series B. “So the thing that got me excited was not just the mere growth, but just as a vision of where the company can go. [Ewing] can really increase volume, and at a certain volume, she has a chance to be a very important, if not the definitive platform.”
Senkut also praised the company’s capital efficiency, noting that “any company that can generate $1 in sales for less than $1 spent is pretty rare.” (Literati declined to comment further on its revenue; the company also declined to comment on its postraise valuation.)
Ewing intends to use the fresh round of capital to invest in data science and personalization for the kids-book-selection side of the business. “To take something like machine learning, and use it for a purpose, like matching the right book to the right kids, so they fall in love with reading and education is something I’m really excited about,” she says. And on the adult side, she wants to build the luminary platform into “a functional, beautiful literary social network.”
These expansion plans are well timed: While both Ewing and Senkut did not deny there’s seasonality to the book-buying business, they’ve both seen the trend of people (particularly adults) reading more than ever as the coronavirus pandemic continues to keep people at home. Book sales have boomed. Some 750 million units of books were sold in 2020, up 8% from 2019, and, according to BookScan, the largest increase since 2010.
Meanwhile, competition is circling: Earlier this month, Padmarsee Warrior, Motorola’s former CTO, unveiled Fable, a subscription-based book recommendation service and private social network.
“I welcome the competition, but I feel we do have a great advantage here, which I hope we can keep over time,” Senkut says.
Ewing is inclined to agree. While Oprah and Reese Witherspoon’s massively successful book clubs were inspiration for the “luminary” part of the business, she doesn’t want to stop with the current crop of celebs on the platform. Among her dream curators: the Dalai Lama.
“We’ve just barely scratched the surface,” Ewing says.