Simultaneously, it has structured itself in a novel way that might allow it to live up to its stated principals.
Ello has raised $5.5 million from Bullet Time Ventures, Foundry Group, and FreshTracks Capital, Wired reported on Thursday. It had previously raised about $450 million from FreshTracks. In an interview with Inc. in September, Ello founder, entrepreneur Paul Budnitz, said the money it raised from FreshTracks did not pose a threat to Ello's ad-free ideals, since the venture capital firm is a small, Vermont-based fund run by friends. Ello is based in Vermont.
Budnitz, a serial entrepreneur who is well-known for starting the designer toy retailer Kidrobot, said he plans to make Ello profitable by operating it on an iTunes store model, where users will ultimately pay for upgraded account capabilities on an ad hoc basis.
Ello has also reportedly registered as something known as a public benefit corporation, a somewhat new category of corporation. As its name suggests, that means Ello will function a bit like a non-profit--though it will continue to be taxed as a for-profit--with a stated goal of making a materially positive impact on society and the environment. As a public benefit corporation, all of its decisions will have to factor in the impact on shareholers, employees and the community. Additionally, it will have to make public an audited accounting of its social and environmental performance annually, according to B Lab, a non-profit that has helped create the public benefit corporation standard.
Ello rose to prominence in September when it came to light that Facebook was indiscriminately tossing hundreds of drag queen performers and transgender activists off the network for violating the company's real names policy. Facebook's community is self-policing, and apparently one person was responsible for reporting transgender people and drag queens who used names other than the ones they were given at birth, Facebook said.
That provoked a firestorm, not only in the LGBT community, but elsewhere among Facebook users who had grown tired of the social network's collection of personal information and its relentless advertising. (Facebook partially reversed its real names policy as a result of the controversy earlier in October.)
Disaffected Facebook users chose Ello as their new social network of choice, mostly for its manifesto opposing collection of user information and advertising, but also for its minimalist look and design aesthetic. They moved over in droves. At is peak, Ello reported new user sign up rates of 45,000 per hour.
In addition to Kidrobot, Budnitz has founded the hand-tooled bicycle company Budnitz Bicycles.