A new approach to social networks?

Ello.co About page

Ello is a new ‘social network’ which claims to be free, while not selling you ads or selling your data to any third party. Laudable goals, indeed. But it costs money to run services like these, and that money has to come from somewhere. Traditionally (if the commercial internet is even old enough for tradition), companies have taken VC funding which arrives with strings attached like achieving a profit, going public via shares or aiming to get bought out by a larger company, or all three. Essentially, VCs seek to get their money back with profit where possible, which is their business.

That’s all very fine and well, but how does that mesh with Ello’s stated goals? One Ello user (waxpancake) has asked that question, in a post on the site itself:

Building something like Ello costs money. They have a team of at least seven people, and have worked on it for months. That doesn’t come cheap.

The About section makes it seem like Ello was built independently, a group of artists making something for themselves, presumably funded by volunteer effort and maybe a seed investment from Ello president and CEO Paul Budnitz, who also founded Kidrobot and Budnitz Bicycles.

But a little digging shows a much more predictable source: they took a $435,000 round of seed funding in January from FreshTracks Capital, a Vermont-based VC firm that announced the deal in March.

Why is this problematic?

The Ello founders are positioning it as an alternative to other social networks — they won’t sell your data or show you ads. “You are not the product.”

If they were independently-funded and run as some sort of co-op, bootstrapped until profitable, maybe that’s plausible. Hard, but possible.

But VCs don’t give money out of goodwill, and taking VC funding — even seed funding — creates outside pressures that shape the inevitable direction of a company.

So how will the founders square that circle? By selling premium features? Perhaps. It would be great to get away from the investor storytime driven approach to something, well, less invasive for starters.