To affirm its founding manifesto, the company converted to a public benefit corporation (PBC) in Delaware, promising within its legal charter never to make money from selling ads or selling user data. New owners would also have to follow the terms.
As a PBC, Ello would still be able to make money as a for-profit business, but would balance shareholder interests with the goal of producing a public benefit and operating in a “responsible and sustainable manner.”
"The Internet is turning into one giant billboard, and with essentially all social networks relying on advertising, data mining and selling user data, it can be hard for some people to imagine a better way. At Ello, we're building it," stated company co-founder and CEO Paul Budnitz.
Ello instead plans to make money by selling personalized features and other services at small prices through an online store, “inspired by the Apple App store.” The start-up said it already has thousands of community members asking for specific paid features.
Launched earlier this year, Ello saw membership spike from just 90 users in August to hundreds of thousands the next month. Helping to propel the September surge was an influx of people, especially within the LGBT community, defecting from Facebook following the controversial enforcement of its real-name policy, seen as an affront to drag queens. (Facebook has since apologized and changed its policy.)
Invite-only Ello says it’s now getting 45,000 invite requests per hour at peak times. Budnitz told Re/code the site now has over 1 million users, but another 3 million on the waiting list. The company intends to invest its new financing on product development, especially on the back-end infrastructure to handle Ello’s fast-growing user base.
While the social network bans advertising, brands including wireless speaker maker Sonos, Netflix, The Wall Street Journal and The Atlantic have already rushed to set up profiles on Ello. As The Atlantic itself has pointed out, and today’s announcement makes clear, Ello may be free of paid advertising, but it doesn’t necessarily make it a commercial-free space.
Along with Foundry Group, Techstars' Bullet Time Ventures, and FreshTracks Capital participated in the first-round funding.