Literati Inc. CEO Jessica Ewing is more excited than ever about the prospects of her book-club subscription company now that she and her colleagues “can finally invest in the big ideas" they want to pursue.
The company, which Ewing co-founded in 2016, announced Jan. 27 it had closed a $40 million series B funding round. Aydin Senkut, founder and managing partner of Silicon Valley-based venture capital firm Felicis Ventures, led the investment. Also investing were Dick Costolo, former CEO of Twitter and a co-founder and managing partner at 01 Advisors; 01 Advisors co-founder and Managing Partner Adam Bain; Austin-based venture capital firms Silverton Partners and Springdale Ventures; and Founders Fund, General Catalyst and Shasta Ventures.
To date, Literati has raised $55 million in funding. The startup closed a $12 million series A funding round in May 2019, which was announced that October.
Series B rounds typically indicate a company is ready to catapult beyond the development stage. With the capital infusion, investors assist the startup in widening its market presence. The money may pay for hiring the right people and creating traditional company departments including business development, sales, advertising, information technology and support.
Among the big ideas Ewing envisions investing in: using machine learning that could “make kids fall in love with books.” The kind of artificial-intelligence approach, which would sift through millions of books to pick five suited for any given child, also might “completely revolutionize our education system, and our entire democracy,” the CEO said. “It’s a brilliant and interesting problem."
Doing that is going to require doubling the company’s roughly 115-person headcount during the next 12 months, Ewing said. The bulk of those hires, anywhere from 60 to more than 100, will be in positions such as product engineering, design and data science.
Executive-team hires the company will make within the next year include a vice president of people, a chief business officer and a chief technology officer.
Another goal of the CEO: Create an app that will “nail the literary social network, one that will be truly modern and different,” Ewing said.
Making Literati a household name among motivational online social networks drives Ewing as she continues to build the business. The communities of fitness companies, such as those cultivated by New York-headquartered Peloton Interactive Inc. (Nasdaq: PTON) and San Francisco-based Strava Inc., are examples.
“I like social networks that make meaningful connections, motivate me to do things and accomplish something,” she said.
The company in August expanded into the adult-book market with clubs that offer monthly book selections curated by notable figures including NBA star Steph Curry, 2014 Nobel Peace Prize recipient Malala Yousafzai and famed entrepreneur Sir Richard Branson. Other curating book selections include best-selling author Susan Orlean, who wrote, “The Orchid Thief," and the foundation for the late mythologist Joseph Campbell, best-known for, “The Hero with a Thousand Faces.”
Those clubs include an iOS app that enables members to exchange ideas with each other and celebrities about their book choices.
Real estate conundrum
Literati in October moved into a 33,350-square-foot facility at Southpark Commerce Center Two, at 4509 Freidrich Lane in South Austin. It also has a headquarters facility at 1021 East Seventh St. in East Austin and two buildings in Del Valle. Cushman & Wakefield's Bob Wynn is the company’s real estate broker.
Those doing logistics and fulfillment duties in the warehouse received through June a 35% hourly-wage increase in pandemic hazard pay.
The company’s rapid growth has created a commercial real estate conundrum for Ewing — one that the coronavirus only is exacerbating. The CEO isn’t sure whether she will secure additional office space. “It’s so hard to sublet,” she said, simultaneously acknowledging the venture-backed startups like Literati “are constantly outgrowing” their commercially leased spaces. “It’s a real estate nightmare.”
With Covid-19 continuing to rage, however, “we’re not going to make any moves until it's safe,” Ewing said. When that day comes, the CEO plans to talk to the team and determine what each staffer desires, in terms of returning to work. Ewing has learned that the pandemic has caused some employees to realize they work better from home. Others, she said, want to and need to be in the physical office.
Ewing declined to share company revenue figures, but said the company remains in growth mode and is not yet profitable.
Competitors of Literati include the relaunched e-commerce company Book of the Month in New York and San Francisco-based Bookboard Inc., according to business intelligence company ZoomInfo.
Beyond the Covid-19 pandemic itself, growing two product lines that operate differently turned out to be among this past year’s greater challenges.
“It’s always difficult when a company becomes split from its one core thing,” Ewing said, adding that serving readers of varying ages has been a Literati goal from the beginning. “It can be a dangerous transition when you divert your focus” from that original, core thing.
While the children’s book club, with an assist from machine learning, soon will curate many books to a selection that is personalized for each reader, the adult book clubs are not curated. Instead, they’re more like product marketplaces curated by Literati’s celebrity partners, Ewing said.
Maintaining the Literati culture as “alive and sacrosanct” while the company grows looms as a hurdle during the coming year — particularly when hiring and on-boarding remain virtual, Ewing said.
Taking Literati public remains the ultimate goal.
“I feel like that’s every founder’s plan ‘A’,” she said, and laughed. “Then, everyone tells you that your plan ‘A’ is a pipe dream.”
