TECHCITYINSIDER100: What do Last.fm’s former executive chairman, a Russian billionaire and former Monty Python star Michael Palin all have in common? Answer: they all played a part in getting Mendeley, a social service for organising academic papers, off the ground. Its founder is Victor Henning. Interview by Andrew McDonald
Mendeley’s story stretches back more than six years, when two German PHD students decided to ditch academia to pursue a career as entrepreneurs – building a service born out of their respective research frustrations.
Victor Henning first met Mendeley co-founder Jan Reichelt 12 years ago when they were at business school together at WHU Koblenz. Although the two ran the entrepreneurship club together and the university was a hotbed of German startup activity, each went their separate ways in 2004 to do PhDs. Reichelt studied information management at the University of Köln, Henning opted for marketing, consumer research and social psychology at the Bauhaus University. However a strong idea set the two to work together again in 2005/2006, as they started to develop sideline that would eventually become their livelihood.
Speaking in the meeting room of the company’s Farringdon headquarters on a rainy Wednesday afternoon, Henning explains: “We both realised that even though we were working in different fields, we had the same problems in managing our research work. Gathering 100s of PDF documents that you needed to get – the complete literature for your field – managing that and keeping a track of what you’ve read was just extremely difficult.
“We wondered why wasn’t there a software like say an iTunes for research papers where you could just drag and drop the PDFs into the software, that would automatically try and figure out the relevant metadata – like author, title, volume, journal name, issue, page numbers, references and so forth. Basically take your unstructured collection of PDFs and turn that into a structured database.”
After working on the idea for a year or so, things kicked up a notch in 2007 when the pair recruited third co-founder, Paul Föckler, a computer science masters grad, also from Bauhaus University. Using personal savings to the tune of EUR30,000 the trio paid to develop a prototype for the Mendeley software and set about getting funding.
“Armed with that prototype we approached Stefan Glaenzer. Back then Stefan was the executive chairman and first investor in Last.fm. Jan and I knew Stefan because he had been a guest lecturer at our business school about five years earlier in 2003. We had contributed a case study to his book that he published with our entrepreneurship professor, so we got in touch with him.”
Explaining the Mendeley concept as a Last.fm for research, Glaenzer was sold. “He immediately understood the power of scrobbling (when a song you listen to is published online) and how much data you’d get and how interesting it would be to do that for the research space and in a handshake deal, essentially decided to become our fourth co-founder. With that seed funding, we moved from Weimar and Cologne to London,” says Henning.
The firm initially set up shop using spare space in comedian, actor and broader Michael Palin’s Covent Garden production company headquarters. However, as Mendeley grew, fuelled by more investment, it soon moved to Farringdon, and its current offices in the White Bear Yard complex on Clerkenwell Road a hive of start-up and entrepreneurial activity.
The space is co-run by Glaenzer, former AOL Europe executive Robert Dighero and former Skype and Yahoo! executive Eileen Burbidge. All three are co-founders of Passion Capital, an early-stage technology investment firm that resides on the first floor of White Bear Yard. Burbidge is also an advisor to Ambient Sound Investment, an investment firm by Skype’s four founding engineers, which became Mendeley’s second investor after the firm moved to London in 2008.
The third investors to sign up were Alex Zubillaga and Len Blavatnik, who came on board together bringing with them a wealth of experience. Zubillaga had set up Venezuelan cable TV operator Net Uno in the 90s, was involved in Time Warner’s sell-off of Warner Music Group in the early 2000s and went on to head up the major label’s digital business.
Blavatnik, a Russian oil billionaire who now lives in the UK, ranks at number 72 on the Forbes rich list with an estimated fortune of US$11.9bn. In 2010 the businessman and philanthropist, who has a clear interest in education, invested £75m in a new School of Government at Oxford University – one of the most generous donations in the University’s 900-year history.
Though Mendeley’s only disclosed investment round to date was for a rather more modest EUR1.5m, it has also taken a further undisclosed internal round and is on a strong growth trajectory – helped, Henning claims, by its London roots.
“The reasons that we came to London were that, back then, and I think still today, London was just the most vibrant hub of venture capital in Europe. Access to capital was important, but probably even more important for us was we needed to do this in English. All of the founders of the company, including myself, are German. We knew that the language of research was English so we needed to have an English-language software website and developing with native speakers was important.
“Today, the US is actually our biggest user-base. About 20% of our users are from the US. The UK is second, with I think about 8%. Our biggest user-bases in terms of universities are Cambridge University, but then it’s Stanford, MIT and Harvard. It’s really the top universities in the world that are signing up to this the fastest.”
Despite its English-language focus, at its core, Mendeley is globally-focused. Its algorithms, developed to extract information from documents, are language agnostic, and the firm is popular in big research nations like Germany and Japan and has experienced “tremendous growth” in countries like China and India. “We recently did a check, and we have users in every country on earth, including the research station in Antarctica,” says Henning.
The company has 36 full time employees, the majority of which are on the technical engineering side. It recently set up a US office, where there are two full time staff members and a number of part-timers, mainly PHD students, who run an advisor programme in the states to help spread the word about the software.
Henning explains that in moving into the US, “the goal was really to build relationships with US institutions, both government and academic.” The firm has been certified by the US government for use with US government agencies, and is experiencing growth elsewhere outside of academia with users in pharmaceutical companies, consulting firms, banks and even a film production company.
“Once we launched we got 20,000 users in the first, maybe, six months. Now we’re getting 20,000 users in less than a week. So per-month we’re signing up 130,000 people at the moment,” says Henning. The company currently has 1.6 million users and aims to get to 2.7 million by the end of the year – no small feat considering that the firm is going up against billion dollar database and information companies, like Thompson Reuters.
Yet part of Mendeley’s stength is that it can nimble and also tap into socially-driven information, out of reach to many of its competitors. “What we do with the content that we get from our users is we build a global index, and to date our users have uploaded more than 230m papers, of which 60m roughly are unique. If you compare that to the world’s largest commercial databases, they have about 40m unique records, so we’re already 50% larger and still growing exponentially,” claims Henning.
However, the factor that will make or break most startups over the course of their lifetime is their ability to make money. “We had that very typical question as a startup, do you want to go for growth, or early monetisation,” says Henning, admitting that the firm is yet to hit profitability. “We decided that we were going for growth early, because we felt we needed to just gain critical mass and grow the user base quickly to be able to get leverage with publishers, to get meaningful data that we could then in turn also commercialise, so growth was the main objective.”
Yet the firm is on the right track and has recently introduced a range of premium account models for storage and collaboration space. These range from US$5 to US$15 per-month for individual users, between US$50 and US$550 per month for teams of people, depending on the size of group and academic or commercial use. An institutional version of its dashboard, aimed particularly at University libraries, starts at prices of US$10,000 per-year.
Henning explains: “If you want to share with 10 people, 20 people and discuss papers in closed groups that are private to the outside world, then you can only do that in those premium upgrades. As a premium user you also get access to the recommendation engine, which tells you based on your existing library what else you might be interested in reading.”
There are also other potential money making avenues for the company. “One thing that I’m tremendously excited about in terms of vision, but also in terms of revenue potential is our third-party app ecosystem,” says Henning, pointing to the potential of a Twitter-style model of allowing third parties to use its API to build apps and services that harness its growing database. “Even though we haven’t started commercialising that aspect of the business yet. That could be a huge remnant driver and it could re-invent the entire academic publishing industry, because you’re generating value in a different way and capturing it in a different way.”
Co-founder and CEO at Mendeley
London-based social, academic research service
Bauhaus-University of Weimar, Germany
PhD in marketing, consumer research and social psychology
Student, WHU – Otto Beisheim School of Management,