Español: Lobo en el zoo de Kolmården (Suecia).
Español: Lobo en el zoo de Kolmården (Suecia). (Photo credit: Wikipedia)

The recent sale of Mendeley to Elsevier for upwards of US$65 million (some estimates have pegged the sale at closer to US$100 million) has outraged open access (OA) and open data advocates, who had come to believe that Mendeley was on the side of the angels, which made the sale to Elsevier a betrayal of their shared goals. There have since been high-profile defections from Mendeley, many of which are being blamed on the fact that a for-profit behemoth now owns the company and has access to its customer (and customers’) data.

What surprising about this is that these people seem not to have realized that Mendeley has never been an academic or professional society endeavor — it has always been a for-profit company, one helped significantly by Silicon Valley venture capital funding from last.fm, Skype, and Warner Music Group alumni. As such, it was devoted to making money for its founders and finding a way to pay back the venture capital. It did this very successfully and very quickly, cashing out about five years after its inception. Its goals were aligned with openness only as long as necessary.

While the Internet has changed many things — and improved some things — one change is that scientific and scholarly publishing has been identified as new territory by Silicon Valley venture capitalists. This didn’t happen immediately. When PLoS started, it needed to get a large donation from a traditional foundation as seed money. Now, when another OA publisher starts up — in this case, PeerJ — the funding is venture capital, and the involvement has serious Silicon Valley moxie. PeerJ’s Silicon Valley ties come O’Reilly AlphaTech Ventures provided PeerJ with US$950,000 in seed money last summer. ATV’s founder, Tim O’Reilly, will keynote the upcoming SSP Annual Meeting.

There is nothing inherently wrong with Silicon Valley venture capital or seed money being used to start new companies. In fact, taking risks is commendable, and having those risks pay off is admirable from a business perspective. But there is an aspect of venture capital that is inherently different from the normal long-term view of professional societies and educational institutions, and that is the need to net a return as quickly as possible.

This need to flip a new venture for cash can drive behaviors in ways we don’t expect from native initiatives. Nature Publishing Group attempted to enter the same space with Connotea, but the filesharing aspect wasn’t part of Connotea, likely for good reasons (i.e., it’s an invitation to be sued). There is a knowledge of and respect for community standards when native entities launch new initiatives — perhaps too much so. When there is a short-term payout on the table and no deep connection to community standards, more straightforward behaviors emerge and larger risks are taken. Perhaps the risky behavior of Mendeley — dancing the copyright tightrope — would have been interpreted differently if we’d fully appreciated what was motivating the behavior.

More specifically, the Mendeley story provides some lessons to academics, professional societies, and scientific publishers which we shouldn’t miss in the furor over the Elsevier transaction.

First, Mendeley played scientific publishing communities against each other. By using a “divide and conquer” approach — speaking to OA advocates about evil publishers, then placating publishers at publishing conferences with speeches about innovation and fair use — Mendeley wasn’t aligning with either group. This raised a red flag for some that the company clearly it had a third goal in mind. I believe the only reasonable third goal was to quickly generate a payout for its venture funders. To do that, it needed to build audience as quickly as possible — hence, the appeals to people who believed in “open” and felt that sharing copyrighted material was rebellious — while running the clock on the copyright holders.

Second, academia, professional societies, and individual scientists did not benefit from the Mendeley business model or sale. This is perhaps something we need to be smarter about. Even maligned behemoths like Elsevier and Wolters-Kluwer pay a lot of money back into professional societies and universities through their activities. Mendeley and PeerJ are in a different realm, with a different economic relationship to professional societies and universities. In the case of Mendeley, former media executives and a few key Mendeley employees will get a lot of money, but no society or university or lab will receive a windfall. This was a private transaction. What happens when PeerJ cashes out someday? I don’t think the university or non-profit publisher near you will benefit.

Third, if the goal of OA is to truly give science back to the scientists (again, whatever that means), then why are we turning a blind eye to initiatives that represent venture capitalists siphoning money out of academia and away from scientific societies? The wolf may be in sheep’s clothing, but it’s still a wolf.

Yet the more important lesson to me is obvious — we’ve forgotten that we don’t need Silicon Valley money to fund innovation in scientific publishing. I did a quick survey via IRS 990 forms of some major professional society publishers. They are currently sitting on a lot of money — easily more than $1 billion. Now, the 990s don’t indicate the conditions surrounding all this money — some money may be in endowments or otherwise encumbered via bylaws (bylaws can be changed, by the way). But I’ll bet that half of what I saw is essentially retained earnings that these non-profit organizations could spend innovating in the market place. Mendeley cost only a few million dollars to get underway. What I saw amounts to hundreds of millions of dollars, sitting in banks and investment funds. All of these organizations could afford to start up (or fund) Mendeley. Many of them could have purchased Mendeley. But I doubt even one of them had their hat in the ring.

In early 2012, I wrote a post asking why these large stores of cash are not only preserved, but actively cultivated as an end to themselves, despite major changes in the world around us. The changes have not stopped coming — MOOCs, e-textbooks, data repositories, and so forth. Yet we sit on our funds, while the venture capitalists extract tens of millions of dollars of value from our markets.

Part of the problem is that non-profit professional societies have diluted missions — part membership, part community support, part education, and part publishing, making it difficult for these organizations to have strong publishing strategies and decreasing the likelihood they will pursue those they have with alacrity. Non-profits also pride themselves — wrongly, I would argue — on having large investment funds. Real businesses face concerns when they have too many retained earnings. It’s a sign that maybe they’ve run out of ideas.

So, non-profit professional society publishers with a lot of money in the bank, I ask you this — Do your leaders feel that a venture capital-funded start-up being acquired by a large commercial publisher is somehow a missed opportunity? Or do they feel no shame or regret about having missed being either the start-up or the acquiring company?

Joe Esposito presented the issue clearly earlier this week:

The mature, traditional business goes on, dominated by the usual suspects, but it does not grow significantly. It would be better if the people working in these companies spent less time worrying about disruption and more time thinking about why something like Mendeley had to be incubated on the outside.

Perhaps these innovations need to be incubated on the outside because innovation is an outsider activity at its heart. But perhaps it’s also happening outside our organizations because we’re not willing to spend the money we have, court the risks venture capitalists court every day, strongly pursue publishing strategies, create space for innovation, and use our intellectual capital to generate and cultivate new ideas.

Perhaps the wolves will think twice about hunting in our territory if we begin to look a little more like them.

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Kent Anderson

Kent Anderson

Kent Anderson is the CEO of RedLink and RedLink Network, a past-President of SSP, and the founder of the Scholarly Kitchen. He has worked as Publisher at AAAS/Science, CEO/Publisher of JBJS, Inc., a publishing executive at the Massachusetts Medical Society, Publishing Director of the New England Journal of Medicine, and Director of Medical Journals at the American Academy of Pediatrics. Opinions on social media or blogs are his own.

Discussion

23 Thoughts on "Wolves and Sheep — What To Do Now That Venture Capitalists Are Stalking Scientific Publishing"

Here is an irony for you. The strident anti-capitalism rhetoric of some of the OA folks brought the wolves in. All the complaining about huge profits (which is largely false) has to attract people seeking huge profits. Pretty funny when you think about it.

That said are you really proposing that scholarly societies establish venture capital offices? If so the way to start is to hire some wolves. That is what ARPA-E did in the US Energy Department. This is not a game for novices. Being prepared to lose large sums is a special skill.

I worked at a non-profit that had a venture fund for internal start-ups. I started two projects using it, and both worked. One ultimately came to blend into an overall transformation of the educational offerings, while the second still exists today, more than 10 years later. It could have been made more widely known internally, and it could have been run with more discipline, but I still think it was an idea ahead of its time.

Of all our authors, Joe Esposito has written the most (and best) on these topics. To paraphrase a post from a year or more ago (and if I get it wrong, that’s my fault), why aren’t non-profits big and scary companies like Elsevier and Wolters-Kluwer? Because they don’t think they are businesses. They think they are something else.

I think that the role of learned societies does not include being a business. They may incorporate aspects of being a business, but they are not organized like a business, run like a business, nor have the motivations of a business. In fact, should a “business” be incorporated into a society, it will be outside of the realm of governance and held at arms length.

Additionally, do societies want to be businesses? The answer to that question seems to be no. If they did, they would have converted to being ones.

If both your projects paid off then you were probably not doing wolflike venture investing. As for bigness one reason might be the relative smallness of the communities each society serves. The big publishers feed off of the whole of science, as it were. Something I greatly admire by the way. I also once owned a wolf. A magnificent creature named Keesha. One does not actually own a wolf, one merely works together with it, but I digress.

It should be noted that O’Reilly has recently come under some criticism for his exploitation of other “open” movements to drive profits for his own companies. The linked article raises interesting questions about what we mean by “open”: open for the benefit of the user, open for the benefit of advancing research or open for the benefit of entrepreneurs to use to make money (or all of the above if that’s even possible).

Morozov’s critiques are not without fault, and are somewhat over the top as is pointed out in this review of his book. But he does raise valid points about Silicon Valley and “solutionism”, the notion that all problems can be solved with technology. Scholarly publishing has been under, as you note, something of an assault by businesses in this realm for quite a while now (I was complaining about it back in early 2008, so huzzah for me). The reason for this is that we have something vital to many new web business models and technology–highly valued online content.

Because we bypassed a great deal of the disruption that has damaged other content industries (newspapers, magazines, music, movies), we have become something of a target for anyone whose technology business relies on online content for which users are willing to pay. And thus we are presented with a never-ending hype cycle of the newest-latest technology that’s going to revolutionize science, whether it’s social networks for scientists, science blogs, wikis, folksonomies, widgets, mashups, workflows, online reference management tools, altmetrics, what have you.

There are clearly interesting ideas being presented and some pathways for actual real world progress from some of these technologies. But the technology itself must be separated from the sales pitch. And as you note, many of the endpoints of these technologies are planned so the creators and owners of the companies get lots of money, rather than the world of research being advanced or aided. And this is important. There’s a great deal of resentment being leveled at commercial publishers these days, yet the solution commonly offered is to turn scholarship over to a different set of corporate masters, Silicon Valley entrepreneurs and investors. Meet the new boss, same as the old boss but on a much faster schedule.

If the research world truly wants to regain control of its output, there is indeed already a system in place, already owned by the researchers themselves through their societies and institutions. Sadly this is often overlooked as the scorched-earth rhetoric that all publishers are evil makes for a better story.

I agree about the hype but the scholarly publishing industry is still an industry. We see the same profit versus nonprofit debates in electric power and they are largely irrelevant. Either way a business only succeeds if it provides value and the market is no fool. I do not agree that the research world has lost control of its output. That sounds like the very hype you are decrying.

It is indeed the very hype I’m decrying. It’s not my argument, but one I often hear/read. My experience has only been through working for publishers owned and run by academic institutions for the benefit of those institutions and the research community in general. But you wouldn’t know such things exist if you listen to those for whom the entire publishing industry is Elsevier.

Nicely put, David C. I saw the same thing in electric power which in the US includes 1000 municipal utilities and 2000 rural electric cooperatives, all nonprofit, but everybody thinks they are being gouged for profit. It is easier to complain than to understand.

Accusing us of insincerity re: open access will get you nowhere. We vigorously campaigned for open access, as a brief perusal of our blog will show, and we will continue to do so.

But this post wasn’t really about Mendeley, it was about trying to scare people away from PeerJ and to try to make societies feel like startups are taking something away from them. Venture capital was never available to societies, so to say VCs are “siphoning money from societies” is just nonsensical. VCs are siphoning talent and ideas away from societies, because societies are too risk averse, that’s true. For a society to fix this, all they have to do is be willing to fail. Any takers?

How do you feel about Tim O’Reilly keynoting SSP?

William, you have missed Kent’s argument completely and ventured down a path of obfuscation and accusation. His post was about venture funding entering publishing–a detail that was missed in the coverage of the Mendeley sale by major news sources. And his main question is why VC funding has moved into the publishing arena while societies have been quietly sitting on their largess. His argument is nuanced and something that isn’t easily conveyed in 140 characters.

You also campaigned vigorously for a boycott against Elsevier and now you work for them. Actions speak louder than words.

Your company chose to cash out and sell everything off to a company with a less-than-stellar reputation regarding open access, a company that even very recently was working to derail progress in this area. That was the best move to make from a business standpoint and to me, that’s one of Kent’s key points here. Mendeley was and is a business, a venture run to make money, not a charity run to promote a particular ideology. The backlash against Mendeley is misguided. To quote Aesop’s scorpion, “It’s my nature.”

Personally, I’m excited to see O’Reilly speak. He’s been such a pioneer and so ahead of the curve in so many business methodologies and strategies that there’s much the scholarly publishing world can learn from him.

One clarification and expansion of fact, because you (and probably most other readers) don’t understand an important point which frankly I should have included in the post originally — you state that “[v]enture capital was never available to societies . . .”. This is not true. There are VCs who specialize in non-profits, and I worked with a prominent VC funder at one point in my career, and he was willing to fund a large initiative. The problem came when the management of the NFP retreated into its bubble, and became complacent. So, there is VC money available to non-profits, but whether non-profits are available to VCs is a question they need to wrestle with. As long as they are not, VCs will continue to work outside of their structures. But it’s not because there are laws — physical or otherwise — making it impossible for VCs and NFPs to get together. My post was actually more about the problem of reticence and somnambulance within the management structures of NFPs, using the fact that VCs have had to work without them as examples of the fact that water will follow the path of least resistance. But it will flow whether you like it or not. But there is another point, which is that individuals within STM publishing have shown themselves susceptible to believing that VC-backed initiatives have the same goals as they do. They need to understand why an initiative like Mendeley or PeerJ was funded by a VC — usually, it’s in order to generate positive cash flow within 3-5 years; otherwise, it will be abandoned if no further funding is forthcoming.

I’m personally very pleased that Tim O’Reilly is speaking at the SSP keynote, and voted in favor of inviting him as an SSP Board member. He’s always thought-provoking and speaks from the vantage point of someone who backs up words with actions. I respect those traits immensely.

I think the time frames you mention, 3-5 years, are worth further consideration.

Back at the end of the dotcom boom, the next big thing was going to be the biotech boom. This fizzled for the most part when VC’s learned the real time scales involved in creating a drug, testing it and gaining approval for its sale. 10 plus years was far too long for many to wait for return on investment.

The question then, is the compatibility of aiming for such a time scale in scholarly publishing, or at least understanding how such an aim affects strategy and the product itself. Think of PLoS, which took a decade to break even and start turning a profit. If it had been VC backed, rather than charitably-funded, it likely would have been sold off long before then, perhaps even before PLoS ONE could have been conceived and started. Was the privately-owned BMC profitable before it was sold to Springer?

Here you have Mendeley, which employed a particular strategy to maximize perceived value, rather than actual profits, and was sold off before breaking even. The product itself, and the features included, were likely influenced by this successful business approach.

And that makes for interesting questions about something like PeerJ. What sort of influence will VC ownership and business strategies have on the journal? It doesn’t preclude PeerJ from being rigorous or important and useful for the research community. But it will likely make the journal something different than if it were funded by other sources with other goals.

The key point, which is quite easily conveyed in 140 characters, is that non-profits have to be willing to fail if they want to be more like venture-funded startups.

There are many other points — that scientists and researchers should realize the difference between a VC-funded start-up and not be so naive that they are surprised when a VC-backed start-up cashes out by selling its assets to a larger entity; that in order to contemplate the riskiness you mention, they need to address certain financial and management realities, as well as cultural norms; that having VCs in our midst is a newer thing, and we should understand what it might mean; and that playing it safe isn’t playing it safe at all.

Which point is key? I don’t think you can actually reduce it that far. They are all related.

Kent: Perhaps I am wrong but I don’t think VC is new to the scientific community. When I go on campuses I see many with either University affiliated tech parks or research parks. Often these facilities are tied to VC monies.

When it comes to journals, I don’t think the researcher really cares if the start up is funded with VC money or grant money from say the Wellcome Trust. Nor do I think the community misunderstood PMC or Plos. In the founding days of PMC when at seminars or sessions regarding it, it was fairly evident that the goal was to get it up and running and then to sell it off. The community at that time, even with the knowledge of the end goal of PMC, were enraptured with the idea of OA and not the ramifications of the plans of the company.

My point is that they are new in scientific publishing, not in academia. You’re correct about that.

I think you meant “BMC” instead of “PMC.”

To your point, I think OA provides — rightly or wrongly — a halo effect that can blind people to what’s really going on, whether it’s funders colluding to launch a new journal (NIH, Wellcome, HHMI, and Max Planck around eLife), venture capitalists entering with new offerings they intend to sell off, or predatory publishers. We need to be smarter about these things. Being enraptured, to use your word, isn’t very level-headed.

I think we should be cautious in labeling all non-profits as too timid to take risks. Science is part of a not-for-profit, and they have a rich history (and present) with investing in new and unproven technologies and ventures.

Having worked for a small university press though, we just didn’t have the funding available for anything too grandiose, but it wasn’t a question of being risk averse, more it was a question of priorities. Any money the press made was always seen as money that could be put to funding research at the institution. It’s hard to justify wanting to play around with a few million dollars to try out some unproven social media technology when instead you could get a few million dollars closer to curing cancer.

Additionally, one only has to look at IEEE and ACS to see very aggressive activities in creating new products. Additionally, some new products are done only for membership and when membership is some 50K or more these products have to be attractive.

To say that Mendeley’s approach was to ‘divide and conquer’ is peculiar. A more accurate (and far less emotive) analysis is simply to recognise a smart piece of brand marketing when you see one. The founders of Mendeley spotted a gap in the market and exploited it to the full. OK, a few high profile users have taken issue with the sale and the founders have ‘cashed out’. Good luck to them. The vast majority of scholars who use Mendeley on a regular basis will not be unduly concerned about the issues you raise; they will vote with their feet and continue to use Mendeley for as long as it adds value to their scholarly endeavours. It’s about value, not dogma. Surely this is the point.

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