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Ello, the hottest social network out there, is getting a $5.5 million investment from two of Boulder’s coolest VC’s: The Foundry Group and Bullet Time Ventures. The round, which also included Vermont-based Fresh Tracks Capital, is the largest investment Ello has received to-date.
Ello is an advertising and data-collection free social network that has exploded with new users in the past several months. Founded in just March 2014, Ello’s growth first seemed to correspond with Facebook’s refusal to allow drag queens to use their stage names. Facebook later backtracked on that controversy, but not before solidifying a small but growing disillusionment with the social networks’ control over user information. Ello allows for pseudonyms, has proven popular with the LGBT and artistic communities, doesn’t collect any data from its users and has no plans to run advertising.
“Ello is basing their business on a fundamentally different premise than other social networks – specifically eschewing building a business that is reliant on third-party advertising or the selling of user data,” said Foundry Group managing director Seth Levine in a blog post.
To secure its reputation as the anti-Facebook, Ello recently chartered itself as a Public Benefit Corporation. As such, Ello’s charter forbids the company from:
- Selling user specific data to third-parties
- Entering into an agreement to display paid advertising on behalf of a third-party
- In the event of an acquisition or asset transfer, the company will require any acquiring entity to adopt these requirements with respect to Ello or its assets
“It’s important that we state this clearly, since there are bound to be people who view this financing with skepticism. Foundry Group is completely supportive of the Ello mission,” said Levine. “We’ll either build a business that doesn’t rely on third party advertising or the selling of user data or we won’t build a business.”
Though based in Vermont, Ello’s Colorado connections run deep and beyond its investors. The company was co-founded by Boulder design studio Berger & Fohr, Boulder-based toy company Kidrobot founder Paul Budnitz, and Denver-based design firm Mode Set.
Without advertising and user data collection, Ello has plans to make money with a freemium revenue model. Basic social networking features will remain free, but for additional premium features Ello will charge a small amount.
“Our belief is that there are products and features that Ello can develop that users will be willing to pay for. While the price points may be low, as part of a much larger ecosystem with millions of users, will provide an economic model for the company which supports the business and our investment,” said Levine.
Previously, Ello had a $435,000 seed capital investment from FreshTracks Capital. The need for new capital rose with Ello’s expanding user base. Reportedly, as of August 9th of 2014 Ello had just 90 users. As of October 23rd, the startup had over 1 million users, with about 3 million on the waiting list.
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