Ello Takes $5.5M in VC Money, Signs Legal Papers to Never Sell Ads on Service - The UpStream

Ello Takes $5.5M in VC Money, Signs Legal Papers to Never Sell Ads on Service

posted Sunday Oct 26, 2014 by Nicholas DiMeo

Ello Takes $5.5M in VC Money, Signs Legal Papers to Never Sell Ads on Service

We were all curious what was going to happen when Ello ran out of money. An ad-free social networking platform is a noble idea, but pay-for-feature websites have sprung up in the past and have failed, so many were worried about Ello's sustainability. Well, the good news is that Ello has answered both the money question and its promise to remain ad-free.

Ello's creators, in their effort to stay true to their promise, has taken $5.5 million in venture capital funding, but not without signing legally binding papers that say Ello can never sell advertising space or sell its user data. How can a for-profit company do this without upsetting stakeholders? By registering under a special company type, a public benefit corporation, or PBC. As one of only about 1,100 PBCs in the US, a company can use its money in different ways as it sees fit, instead of simply spending money to build profit at any cost. In the charter, Ello writes,

Ello's explosive growth over the last few months proves that there is a hunger to connect with friends and see beautiful things - without being manipulated by ad salesmen, boosted posts, and computer algorithms that don't always have our best interests at heart. On an ad-driven social network, the advertiser is the customer and you're the product that's bought and sold.

All of this to simply avoid selling out like other companies sure does seem like a solid commitment to the initial idea of what Ello is supposed to be. Analysts everywhere have essentially made Ello's founders to look like they don't know what they're doing by thinking they can take money without a stream of ad revenue. However this charter, followed by the $5.5 million, effectively puts a sock in all of those mouths rather quickly.

Ello's co-founder, Paul Budnitz, also made sure to add in that if Ello were to ever be acquired, it cannot be by a company who would make Ello sell ads or user data. He said in a statement that,

A PBC is obligated to consider the mission based. We really cannot be forced by our investors to break the basic principles. Ello is a business, and we're here to prove that the internet doesn't have to be one big billboard. There's a better business model, and by becoming a PBC, we're hoping that other people are inspired to follow our example.

Ello has already gone to work with the added funding, too. The 10-week schedule of updates and features has been crunched into three weeks worth of work and Ello hopes to launch worldwide before the end of the year. Some of those updates include the already-implemented privacy options and new servers to hold the heavy influx of traffic to the site. What's at the end of the road for Ello? The founders have said there is no exit strategy and that never in any financial conversation has the talk of launching an IPO or selling the business come up.

For a full breakdown of what Ello's charter actually is and how it affects the company, be sure to check out the source link below, as it goes into insane detail on the nuances of the documents.


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