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.