Oyster, a Start-Up for E-Reading, Raises $14 Million

With Netflix soaring, investors are betting that a start-up based on the same business model â€" but for e-books â€" will succeed as well.

Oyster, which gives customers access to more than 100,000 books for $10 a month, has raised $14 million in a new round of financing. The new investment was led by Highland Capital Partners and included additional capital from an existing investor, Peter Thiel’s Founders Fund.

That raises the company’s total fund-raising to $17 million.

The new cash will help Oyster as it embarks on a significant expansion effort, according to Eric Stromberg, a co-founder and the company’s chief executive. The start-up opened for business in September with an iPhone app, then added an iPad app the next month, nearly doubling its subscriber count. (Mr. Stromberg would not comment on the company’s financial performance or its subscriber numbers.)

Now the company wants to expand to other platforms in a bid to claim a significant niche in the e-book market.

“The thesis is that over the next five to 10 years, more reading will happen on tablets and phones,” Mr. Stromberg said by phone. “We’re trying to create an experience that will lead the way.”

At the same time, the company has sought to convince publishers that the all-you-can-read model will benefit them as well. It has signed up a number of big publishers, including HarperCollins and Houghton Mifflin, as well as smaller ones like Workman Publishing and Perseus.

Oyster’s pitch: the business will draw in more readers, eventually expanding the universe of book customers. The start-up argues that it has made the process of e-reading easier, using a slick app.

“If you can build a product that builds a new audience, inspires people to read more books, that’s a win for publishers and readers,” Mr. Stromberg said.

It competes with a rival service, Scribd, that offers a similar value proposition and that has raised about $25 million in venture capital.

But what about e-readers, a booming business â€" that happens to be dominated by Amazon.com’s Kindle? Oyster is betting that use of e-reader apps on multifunction devices will continue rising.

“Our bet is more on the great experience that a tablet or mobile phone provides,” Mr. Stromberg said. “The reading experience will reach par, if not become better.”