Ello World

elloAt the front end of every new investment we hope we’ve found the next break-out company. But it’s rare when you have the feeling that you’re investing in a business that may both be that and has the potential to touch millions of lives. We feel we’ve found that in Ello – a social networking business that’s part Twitter, Tumblr, and Facebook, but at the same time all its own. Ello is a beautiful and easy to use product that allows people to express themselves as they see fit but without relying on selling its users to make money. We’ve just led the Series A financing for the business along with Bullet Time Ventures and FreshTracks Capital. As part of the financing, I’ll be joining the Ello board. You can find the Foundry post about this investment here, and a post from Mark Solon of Bullet Time Ventures here.

Before I go any further in talking about my thoughts on this investment it’s important for me to state unequivocally my support (and Foundry’s support) for Ello’s manifesto to build a company that doesn’t rely on advertising or the selling of user data. We’ll either figure out a sustainable business model that doesn’t rely on compromising these values or we won’t have a business. Below is the mission statement that I’ve signed – along the Ello founders and all other investors – making our intentions around this completely clear (you can click on the image below to see a larger version).

ello-pbcAlong with the financing we’ve also reincorporated Ello as a PBC (public benefit corporation). PBC is a relatively new concept and this is Foundry’s first PBC investment. The idea is reasonably simple – being a PBC allows us to write into our Charter (the founding document of our business from a legal perspective) that we exist to serve not just our shareholders, but also to uphold specific values. In this case we’ve included in our charter a prohibition for selling advertising and user data. While the charter is an agreement among and between the shareholders of Ello, we took the unusual step of essentially restating our mission in our charter because we wanted to emphasize our commitment to building a business on these terms.

I suppose it’s easy to be skeptical about these claims – or for that matter, the fact that Ello has investors in the first place. And perhaps nothing I say here will allay the concerns of those who are looking to take shots at something that is gaining momentum and excitement in popular culture (and it might even be a mistake to try to defend Ello and our involvement with it from those that would prefer the company fail). I know plenty about selling advertising on the internet – we have many portfolio companies that help publishers do this (or that are publishers themselves and who make money selling ads). I’m on the board of several of them (you can see the full Foundry portfolio here). And I’m sure those that want to view this financing negatively will point to these companies as evidence that Ello has somehow sold out or they’re bound to change their business model and lose their way in the pursuit of cash.

Simply put: this isn’t the case.

To be clear, Ello is a for profit business. They plan to make money to support the costs of developing and growing the business. They raised this round to support those efforts. I’m confident the team will develop a profitable business model that supports our investment. This wasn’t a charitable investment by Foundry; our mandate is to make money for our investors and we believe that our investment in Ello will help us do that.

One of the things I’m most excited about Ello is Paul Budnitz, Ello’s co-founder and CEO (and the founder of Budnitz Bicycles and before that Kidrobot). I’ve known Paul for 7 years, and over on the Foundry blog talk a little about how we first met Paul, and the singular position he holds in the history of Foundry. I love Paul’s passion and his creative instincts as well as his singular pursuit of his ideas. Creative Genius is a term that’s thrown around much too loosely in our industry, but Paul truly is. He has a visceral passion for Ello and is unstoppable in his quest to create a place for people to interact with their friends that puts users first. It would be easy to dismiss Ello – a new and of late extremely popular social network – as either a flash in the pan or as too idealistic in their mission to stay true to it. But from our perspective Ello is on the cusp of something huge and potentially game changing. And our belief is that they’ll be successful because of their mission, not in spite of it.

You can find me on Ello at @sether.

  • B corps don’t really change the functions of the business when making decisions about allocation of resources to make more money. It’s more about how they treat their employees and customers. Nextspace.us is a B corp-and that ethos filters down to the customers of the co-work spaces they operate.

    • to be clear, ello isn’t a b-corp. it’s a pbc (public benefit corp). incorporating as such allows us to write into our charter that we serve a constituency other than just shareholders.

  • Be fun to watch this move forward!

  • Facebook has every means of monetization available to them that Ello does, as well as literally billions of users and an incredible ability and willingness to leverage data in ways that drive competitive advantage.

    Ello is a variation on the theme of DuckDuckGo, except without the ability to make advertising revenue (which is how DuckDuckGo survives, feebly). The pro data privacy movement exists primarily in the tech echo chamber — the masses who make up the bulk of Facebook’s user base (including myself) don’t give a shit about these things. They can’t even be bothered to change Facebook privacy settings or read the terms of use, let alone pay for services on a new social network that none of their friends use.

    I wish Ello the best of luck, and hopefully I’m wrong, but I view best case outcomes as (a) being acquired before the echo chamber goes silent, or (b) pivoting into a completely different business.

  • Hi Seth. First time commenting on your blog although I’ve followed it for awhile. If I read the document carefully it says the company will not sell “user-specific” info. If you’ve ever read any of my comments on Brad’s blog, you know Mr. cynical is about to query you. This says to me that they will be selling data in the aggregate about their users to make money. Is this the case or is it also prohibited?

    • I think the prohibition that we’ve agreed to includes selling data in aggregate but I’ll let @sethlevine:disqus weigh in.

    • thanks frank. that wasn’t intended to create some kind of loophole. we’re not going to make money with data.

  • Ello’s Paul Budnitz has talked (to Carson Daly) and, I believe, posted information about their business strategy: basically, selling apps to Ello users. I think that strategy may expand with time, just as Ello expands with time. There are a lot of good directions they could go, including creating of very cool network visualization tools for power (corporate) users. Interesting to see that the founders of Netscape and Craigslist are hanging out on Ello now. Some pretty high profile folks from Google and Disney are as well. As well as innumerable artists! Let me know if someone reading this would like an invitation to join Ello! I have just a few left as I have tried to be strategic with them My co-presenter at College of Engineering Guindy, Chennai, Vic Hayes “the father of wifi” http://en.wikipedia.org/wiki/Vic_Hayes regrettably declined my offer;) (true story) I figure that folks reading this would be consistent with that strategy;)

  • OK, so forget privacy for a moment and lets just look at how valuable our digital lives are for a second…

    Some big numbers here’s some highlights #Facebook makes over $1Bn per month, #Twitter just announced Q3 revenue of $361m and for all its “Googling innovation” 92% of #Google’s $356Bn revenue comes from advertising.

    So to be clear our/your personal data is worth a ton of cash The social media moguls would have us all believe that asking users to pay for a service will #fail and perhaps once upon a time they were correct.

    When MySpace, Bebo el al all burst onto the scene free really was the only way forward in an attempt to attract users it had to be free, who was going to pay to join a site to post pictures of cats and tell the world how awesome they are?

    Back then, not many.

    So whats changed & why do some folks predict a shift from free to pay and what’s driving this shift?

    OK, so aside from the money element, social media sites existed to be social platforms for people to share stuff.


    In order to pay for the site Ad’s were overtime injected into users feeds, OK we all get this.

    Some people are not happy with Ad’s in their feeds and also a little spooked by the types of ad’s that are appearing their feeds and worried about privacy.

    So really Facebook you sold out, you diluted the experience from social fun to marketing platform for brands – and although this in itself will not kill Facebook there is for sure a population that’s willing now to pay to be private.

    Considering Facebook has a global population of over 1 billion users if a couple of %
    of that user base change then that’s impactful, that’s interesting.

    Again, lets look at numbers…

    In order to be in the top 5 social media sites in the world entrance is slightly north of 12m users – so thats around 1.2% of Facebook’s total user base.

    That number is really not that scary in terms of being achievable, so that’s why Social Media start-up #Ello has a shot at becoming the first of a new kind of social media platform.

    Ello is going to provide a basic level of services to its users, all the normal stuff you get with a Facebook platform but no ad’s, no selling of data, no mining or third parties polluting users feeds.

    If 1.2% of the world think this is a good idea then they have a hit.

    They just raised a cool $5.5m from some VC’s who probably shoved a few bucks
    in out of morbid curiosity and here’s a quote from the lead man Seth Levin @sether

    “There are a lot of things about the future Ello that we don’t know yet. It’s
    going to mature and change,” said Seth Levine, a managing director of
    Foundry Group which co-led the $5.5 million round. “We collectively felt
    it was important to put a stake in the ground about what we weren’t
    going to do and make it clear to people we would not share user data or
    have advertising.”

    Gotta love that honesty, it could be awesome, it could #fail and guess what we’re never gonna know until we try so lets get busy.

    Now considering #Twitch a wonderful platform that show’s users playing videos games and then allows other people to watch those users playing video games (don’t even) was recently sold to Amazon for an eye watering $970m. Twitch “only” had a user base of c55m and boom its worth nearly a billion dollars.

    Most tech investors plugging in anything between $5m-$50m would be absolutely delighted with a return of a billion dollars.

    So what does this all mean?

    Because of viral globalization a social media platform can gather avalanche momentum very quickly, yes the top dogs like Facebook and twitter have acost base, shareholder expectation and have to just keep on growing (and thats a challenge) in order to be successful.

    I’m liking a new breed of companies that are saying its OK to be niche, its OK to be small(er) and our value to society is different and perhaps more valuable and people will pay to be part of that.

    Choice for the consumer is important and people bashing Facebook or bashing Ello are missing the point. Both these business models deserve airplay and both are as important as each other in the ecosystem, both are not right or wrong – its simply a consumer choice.

    If Orange is the new Black – sign me up


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