Mendeley: from start to exit, then growing again

Several million dollars in VC funding… 200 employees… A global research network with 4+ million users… 2500+ advisors all around the globe… An exit… This is a story of Mendeley in a nutshell and, at a first glance, it is the dream of any tech founder out there. And still, there’s always the untold version of any success story: the dark side, the difficult moments, the struggles. Jan Reichelt, Co-Founder & Manging Director of Mendeley, took the stage last November at How to Web Conference 2015, to present the inside story of the company and the emotional rollercoaster they faced from the beginning until the exit and beyond.

Entrepreneur at heart, Jan has spent his professional career in tech startups, professional information services and digital media. After working as an advisor to the supervisory board of SAP, he started Mendeley in London and grew it into one of the hottest education technology startups worldwide. The company was acquired in 2013 by RELX Group (formerly Reed Elsevier), Europe’s largest media company, and Jan has been working on the successful integration and he’s been executing the company’s vision of building a global research collaboration platform ever since.

Along this journey, Jan Reichelt has been ranked as one of the “top 100 most influential British entrepreneurs” and he has been awarded the “European Founders of the Year 2013” by TechCrunch during The Europass. Besides being in charge with growing Mendeley, Jan is the non-executive director of Emerge Eduation, a London-based education tech accelerator, a trusted startup mentor and business angel, and he has openly shared with us the “behind the scenes” story of Mendeley.

“It’s important to understand that every success story always has another side of the medal. And I am going to share with you today that side of our story”, Jan said in the beginning of his talk.

Mendeley. The beginnings

Mendeley is an academic social network and program that enables users to collaborate online and discover, manage, and share research papers. Founded back in 2008 by Victor Henning, Jan Reichelt and Paul Foeckler (students at the time), Mendeley helps researchers extract information intelligently, organize their research library and share their work with their peers, thus giving them access to a unique tool to fit their specific interests and needs. Nothing similar was available at the time, and the founders received great user feedback from the very beginning.

“When we started out, we were completely inexperienced and we had no idea what it takes to build a tech product. And, contrary to the general belief, this is a good thing: if we’d known, we wouldn’t have started it in the first place”, Jan remembers.

Raising money. Series A

With a great product solving a real problem for the researchers’ community, traction, and exceptional user feedback, raising money for scaling was the next task on the agenda. And it went on smoothly: Mendeley closed a $2 million series A round in 2009. Some high-profile investors such as Stefan Glanzer, early seed investor and former chairmen of Last.fm, Alex Zubillaga, Executive VP of Digital Strategy and Business Development for Warner Music Group, and Ambient Sound Investments, the investment vehicle of Skype’s former founding engineers, participated in this round (check out the TechCrunch story for more information here).

“You raise lots of money and everything is great: you build fancy offices, offer free breakfast to your employees, recruit more people. And then comes the downside of the story: things don’t go so well, you are tied into a burn rate that’s quite high and you realize you’ve set some wrong expectations. What then?”, Jan remembers

Running out of cash

So what happens when things don’t go on as planned and your bank account balance nears zero? That was the situation Mendeley was facing. They needed to raise one more round, but the traction and revenue they had at the time were not enough to make the company interesting for Series B funding. And this is how they ended up with only one option: a VC fund in London that was interested in giving them the breathe of fresh air they needed to survive.

“It was our only option since the others were not interested in academia and we eventually managed to get a term sheet from them. However, VCs are very clever: they figured out they are the only ones interested so they changed the rules of the game while playing”, Jan remembers.

Saying “NO” to the only option available

“What happened is that I got a call announcing us that they want to change one of the terms. We told ourselves that it’s not very nice, but it can happen. And then they called again for another change. We accepted this one as well since we had no other chance to survive, but we committed to no longer accept any changes. And… they called again, this time with the purpose to change the renewed time of vesting. For us, that was the breaking point: we had 2 months of cash left in the bank, but we decided to stop conversations there.”, Jan remembers.

It was the beginning of 2012, and the Co-Founders got to terms with their decisions. They said “NO” to the only option available at the time, and they were ready to close the business and try something else.

From bankruptcy to exit

Said and done, they went to their investors to give us the news that they were going to declare bankruptcy. However, their existing investors were so impressed with their decision to not accept a deal under any conditions that they offered a new 2 million round in convertible loans. It was the capital they needed to keep going.

“Failure is temporary. If that wouldn’t work out, we would have done something else that would.”

“One year after we almost closed, we sold. And we didn’t sell because we needed to, but because we received an offer that was simply too good to refuse. Looking back now, it’s been an incredibly journey. Not an easy one, but everything that comes in easy won’t satisfy you”, Jan remembers.

And… growing again

After the acquisition, the biggest challenge was to keep growing as a startup within a large established business. Jan stayed with the company for both the team, and the product that they were working on. Sharing the same vision, Elsevier just gave them the fire-power to execute what they already had planned for Mendeley.

As he admits, Jan initially thought that the processes were going to kill him and he will not be able to work in a corporate environment. However, he got to understand that there are also good parts that come with this. It’s true that decisions are no longer taken within moments, but that is because there’s lots of valuable know-how and expertise in the company that they have to factor in.

“The dynamics of the team has changed, there are more processes, but in the same time we no longer have to worry for the paycheck. It’s always a tradeoff — you have to give up something to receive something else in return. Back in 2013, we were roughly 50 people and, as we speak today, we grew our team to 200. We couldn’t have done this ourselves.” Jan explains.

Ever since the acquisition, Jan is an entrepreneur inside a corporation, and he considers this a privilege.

Lessons learnt along the journey

It was one hell of a journey, at the end of which they not only have revolutionized communication in the industry of scientific research, but also learnt lots of valuable lessons for the future that Jan has kindly shared with us.

• Keep in mind it’s going to be a long journey!

“It’s important to understand how long it takes to be successful — and we talk 4 to 9–10 years for a company to get to that point. The others are exceptions.”

• Keep going!

“It never gets any easier. Keep your eyes on what you have to do and keep going, no matter what. As long as you take this as a journey for yourself, you will be able to appreciate it at its best”

• Find the people to enjoy the ride with

“For me, the most difficult part has always been to deal with the emotions that come along in this rollercoaster. The way I mitigated this challenge was by finding the right people to enjoy the ride with. And it’s not only the Co-Founders I’m talking about, but your entire team that helps you create a company culture. In the end, entrepreneurship is a lifestyle and a state of mind”, Jan concludes.

Discover the inside story of Mendeley in the words of Jan Reichelt, its Co-Founder and Managing Director, by taking a look at his talk delivered last November on the main stage of How to Web Conference 2015.