New eBook Service Kobo Launches, Raises $16 Million From Borders, Others

Add another entrant to the white-hot eBook market … Kobo, a startup backed by Borders. After all, Borders can’t afford to let Barnes & Noble (NYSE: BKS) and (NSDQ: AMZN) gobble up all the market share this early in the game.

Newly-launched Kobo has spun off from parent company Indigo Books & Music; the Canadian book retailer first launched the mobile-based eBook service under the Shortcovers name in February. The eBook apps caught on quickly — racking up a million downloads — attracting interest from a group of international investors, including Borders, Hong Kong-based Cheung Kong (Holdings) and Australia-based REDgroup Retail.

Kobo has raised $16 million in its first institutional round; Indigo Books & Music invested $5 million for majority stakeholder status, the other three companies put up the remainder. The international influence gives Kobo an instant global distribution footprint; the company says its library already has over two million books for sale, with an additional 1.8 million free titles available. The handset-agnostic platform means that BlackBerry, iPhone, and Android users can all access the eBooks; some titles are transferrable to Adobe Digital Editions-compatible eReaders.

Meanwhile, Borders clearly intends to make-good on its investment from the start, as it is launching a new Kobo-powered eBook store on Tucked into the bottom of Kobo’s launch release is news that the company will develop its own eReader device in the future — and with its stake in the company, that means Borders will also be able to compete with Amazon’s Kindle and B&N’s Nook in the long run. Release.