in Mergers & Acquisitions, Startups

The Untold Story of Kobo

So I read most of the news this morning around Kobo and the links being passed around. Generally I was miffed. When folks in the startup scene complain about media doing a lame job covering entrepreneurial stories, this is a great example. The story being published in the media is “Indigo sells Kobo”, “Indigo builds Kobo”, etc, etc. All Indigo, all the time. Probably due to PR agencies spinning the story that way, and also due to lazy business journalism. Well, having chatted with a bunch of folks involved with Kobo, I have a different take on the Kobo story:

Mike Serbinis

If you are in the startup scene in Toronto and you have not heard of Mike Serbinis – shame on you. He is another example of an amazing entrepreneur in the community who has been wildly successful. The first company he started, DocSpace, was an internet leader in security. He founded it in 1997, and went on to sell it to CriticalPath in 1999, for whom he was CTO and EVP marketing for some time. Throw in a master’s in engineering, a few patents, and you can see why folks were pretty excited about his return to Canada, joining Indigo in 2006.

The Indigo/Shortcovers/Kobo story is as such. In 2007, 2008 Serbinis starts lobbying Indigo about the coming sea of change called “ebooks”.

In April of 2008, Shortcovers is created within Indigo. Shortcovers is an online ebook store and mobile app meant to work across the plethora of new smarter devices – Apple, Android, BlackBerry, Palm, etc. Access to books on any device.

This date is important, April 2008. If you think this is just another dumb Canadian “me-too” play, you should look up the launch date of the Kindle. The Kindle launched in November of 2007. And Amazon blew the Kindle launch, and had no stock available until April of 2008. Every attempt before April of 2008 at ebook readers and online ebook stores had been nothing short of disasters, ripe with lost capital. Let me double down on this point:

ebook Sales 2007-2010

In 2007 and early 2008 it was NOT obvious that ebooks would be a big factor, and that Indigo should meaningfully go after the ebook space.

So Mike Serbinis, within Indigo, stared at this in 2007/2008 and said “Indigo should enter the ebook space”. Wow – those are some big brass entrepreneurial balls.

So they create Shortcovers. Shortcovers name was from their original “gimmick” in that they let folks buy books a chapter at a time. Shortcovers was a pure ebook store & software client. No hardware. They were originally intending to put their ebook app on as many devices as possible. No hardware. So somewhere in 2009, things change.

Kobo is Created

Serbinis then goes on to do the unthinkable. At some point in 2009, he see’s the only way for Shortcovers to get critical mass adoption is to launch its own hardware. Whattt????

Shortcovers is a software company. Serbinis is a software exec – CIO & EVP Online at Indigo. Indigo is a brick and mortar retailer. They have ZERO hardware background. That’s a big-ass, high-risk pivot folks!!

So he goes off with his “lets build a device” vision and convinces Indigo to spin them off into their own business, but also gets Indigo to cough up another $5mm as part of a $16mm round where he gets Borders, RedGroup & one of the most famous Asian investment firms around – Cheung Kong Holding.

In early-mid 2009, it probably looked like launching a new ebook reader was a good idea. By the end of 2009 though, everybody and their sister was launching a new ebook reader. Check out this article: Everybody I know who went to that CES said “maannnn, so many ebook readers”.

I remember talking to Dan Leibu, CTO of Kobo, who in early 2010 was nervous as hell about launching their own device. He said something to the effect of “if we had known so many ebook readers were going to launch, we probably wouldn’t have launched our own”.

Kobo launched in July 2010, well after many of the above devices were in market. How did they do? The rumour on the street is that Kobo cracked $100mm in sales in its first 12 months. $100mm in revenue in its FIRST YEAR!!! They only raised $16mm in their A round and built a $100mm revenue company in 12 months. That is simply unbelievable. How about you other startups, have you done 10X your initial investment in revenue yet?

And how did the rest of the industry do? Anybody know where the Skiff Reader, the Plastic Logic Queue, the Alex Reader, and so on and so forth ended up? Probably not with $100mm in sales and a $315mm acquisition.

And that my friends is why I’m miffed at the coverage on Kobo. This is a wild and crazy story entrepreneurial story full of big risky moves. Its a story of an entrepreneur doing things that only great entrepreneurs can do – even making elephants dance. And its a rare story in Canada, and as such a story that deserves proper coverage.


  1. Thanks for the new angle on the Kobo story. As always, its about the team and entrepreneurs willing to go beyond general market perceptions and appraisals. Congrats to Mike Serbinis, Dan Leibu & Kobo team

  2. “And its a rare story in Canada”
    It’s just too bad these Canadian success stories don’t stay Canadian.

  3. what part isn’t “Canadian”?  The $315mm flowing mostly to Canadian investors/shareholders?   The team that is staying in Canada?  The fact that the founder (Serbinis) will probably get yet another crack at another business adventure, and possibly build ANOTHER big CDN success story?  Or you are miffed that their “profit” is flowing to Japan?  Because I’m pretty sure these guys aren’t making a lot of profit, in fact I wouldn’t be surprised if they were burning.

  4. Great story!  Attracting Todd Humphrey to the team was certainly a critical point — he has a track record of incredible success stories.

  5. I’m not sure the declaring that prior to April 2008 every attempt to launch ebook readers and stories was a complete disaster is accurate. Sony’s ebook platform predates both the Kobo and the Kindle by a gigantic margin — the PRS-500 went on sale in the U.S. on November 1st, 2006, according to Wikipedia — and they’re still in the game, their ebook store still exists and they’re still coming out with new device models.

  6. actually Sony is the perfect example of the blood bath that was ereaders.  While googling look up their sales in 2007.  “thousands” of units globally.  I.e. jackshit and millions spent.

  7. you give far too much credit to Serbinis during his tenure at Indigo. there were people there prior to his arrival pushing to launch an ebook service. the only reason indigo moved at all was because of the Kindle launch in 2007 and even then it took them two plus years to get kind of serious about it.

    the launch of the kobo device was not driven exclusively by kobo. their investores pushed for it. the device launches have all been painstaking for early adopters. kobo real sales success has been in Canada and that’s largely predicated on indigo pushing the device.

    why did indigo sell kobo now? there was real money on the table and they weren’t prepared to invest anymore into kobo. they weren’t prepared to give up majority control with another round of institutional funding AND their bricks & mortar business is under major pressure.

    this was simple a time for Indigo to turn a profit, give them cash to spend to try to shore up their b&m business and stop the bleeding in the ebook business.

  8. well I appreciate the insider view – just like I don’t care much for all the entrepreneurs who have “great ideas” and never execute on them, I also don’t care much for people within a corporation who write powerpoints and have “great ideas” and never execute on them.

    I’m sure lots of people within Indigo, and lots of vendors & companies from outside of Indigo, pitched Indigo on various ebook strategies.  But only one of them actually executed and timed the market.  Only one of them built a company that got acquired for $315mm.

    i.e. ideas are cheap, execution is hard.

  9. Nothing against Mike Serbinis, who seems like a very smart entrepreneur, but the principals at docSpace were the Chrapko brothers and Val Pappes. If you’re going to criticize journalists, be careful with your own facts!

  10. I think I said “founder” not “principal”.  Serbinis’s own profile says “Founder & CTO at DocSpace”.  I’ll trust that he doesn’t use that title lightly.

  11. Please, for the love of God, keep your punctuation inside your quotation marks.

  12. Great story! Kobo deserves a lot of credit for this move. Many people are complaining that the company isn’t going to be “Canadian” anymore… It was founded in Canada so it will always be “Canadian” and its good to see that!!! This is also a great opportunity for our low economy right now! We are short on jobs and this is a great way to create more jobs in Canada which we desperately need right (Especially in Ontario but in the country overall!) Good for KOBO they deserve this and I wish them all the best on their success with this new venture! They are the best e-reader and will be for a very long time!

  13. The British standard (i.e. the one that should be adhered to and taught in our schools) is that the punctuation only goes inside the quotation mark if the punctuation belongs to the quote.  

    The American standard is “always inside the quote”.

  14. Not to take anything away from Mr. Serbinis, but it was pretty obvious even in ’07/’08 that digital content could not be ignored long term in the global book market. The growth rate of e-book/e-reader sales took most people by surprise, but I don’t think there was much argument that e-books would be a factor. The Kobo readers are based on a white label e-reading solution by Netronix, so launching their own e-readers did not require much hardware expertise and was not as risky as you make it sound. Besides, neither Amazon nor B&N had any hardware background before launching their devices. Finally, if Kobo did well compared to Skiff and al., it is because of the content, not superior hardware. And the content side of the equation was largely solved by Indigo.

    It is a very interesting story, but calling it wild or crazy is a bit of a stretch imo.

  15. Very cool article. Love seeing companies who are willing to adapt to changes in technology. Far too many big fish remain stagnant while smaller firms are able to pivot to changing business conditions.

  16. You aren’t using British English and where you’re using your English is Canada, which follows U.S. quotation-mark rules lock, stock, and barrel. You’ve shown you have one of the two available inferiority complexes, both of which have the same result: Pretending Canadian English doesn’t exist and is actually British (in your misapprehension) or American.

  17. Which standard is it that includes non-words such as “see’s?”

  18. Your grammar is awful. mm? Comma splices? Caps for emphasis? Non-words like “CDN?”

  19. I think it’s great to highlight a Canadian success story, and I understand you were trying to balance out the hype, but I think your enthusiasm ran rampant at times.  $100M in revenue, and $16M investment, doesn’t equate 10x… but more along ~6x investment.  $16M to $315M is what we should be focusing on, which is a fantastic return.  

    A part of me wished that it wasn’t Kobo being acquired, but Kobo doing the acquiring.  I dislike seeing Canadian companies with fantastic potential selling out so soon, and to a non-Canadian company.  Their eBooks were priced below the competition and the industrial design was hands-down the best in the eBook market (not so much Vox, but hey, can’t win them all).

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