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Hot new VC hot market: Children's books?

Dave McClure, leader of venture capital firm 500 Startups, sees e-books for education as a big market that male, single entrepreneurs overlook.

Dave McClure of 500 Startups speaking at LeWeb.
Dave McClure of 500 Startups speaking at LeWeb. Stephen Shankland/CNET

PARIS--Sure, social networks are sprouting like weeds as venture capitalists pour money into what they hope will be the next Facebook.

Dave McClure, leader of 500 Startups, has a different idea: children's books.

It may sound old-school, but it's not, exactly, because books now can be read on tablets.

"Historically, education has been a hard market," McClure said at the LeWeb show here, in part because of the difficulties of government regulation and fragmented state markets. "Now you can go direct to the consumer."

He thinks that entrepreneurs--largely male and single--are overlooking the market. "It's huge, and it monetizes extremely well," he said.

It's not the first time the idea has come up. Also today, Idealab founder and chief executive Bill Gross talked about his long history of start-ups, one of them being Knowledge Adventure, which sold CD-ROM titles such as Space Adventure and Dinosaur Adventure.

Like McClure, Gross appreciated the market by virtue of fatherhood. Looking at his son, he thought, "Maybe I can make educational software that will make him fall in love with learning."

500 Startups focuses on small, early-stage investments. Another McClure priority is subscriptions to commerce services.

One example: Manpacks, which sells socks, underwear, and condoms. Its tagline: "Get your manly goods on a schedule--lest ye forget!"

"You can take any magazine off a shelf and you can turn that into a subscription commerce option with very predictable revenue," McClure said.

Such companies have been commanding more of a premium from venture capitalists recently, he added.

"Valuations are probably a bit overheated," McClure said. "It's kind of crazy that you see a company like Dropbox at $3-4 billion value when it was $5 million or less a couple years ago."

Idealab founder Bill Gross
Idealab founder Bill Gross speaking at LeWeb. Stephen Shankland/CNET