I was waiting to see someone much smarter than me write their opinion on Ello's move to become a public benefit corporation and the implications that has for startups and VCs, but I have yet to see any good posts on the news. So I thought I would share my thoughts and reaction to hearing this.

In case you haven't seen the news yet, a couple weeks ago Ello—the latest social media sensation to hit shelves—converted to a Public Benefit Corporation (PBC). According to their manifesto, Ello is:

Your social network is owned by advertisers.

Every post you share, every friend you make and every link you follow is tracked, recorded and converted into data. Advertisers buy your data so they can show you more ads. You are the product that’s bought and sold.

We believe there is a better way. We believe in audacity. We believe in beauty, simplicity and transparency. We believe that the people who make things and the people who use them should be in partnership.

We believe a social network can be a tool for empowerment. Not a tool to deceive, coerce and manipulate — but a place to connect, create and celebrate life.

You are not a product.

Ello noted that many were starting to think that in order for them to be successful and profitable, they would be forced at some point to allow paid ads. Ello became a benefit corporation so that they could operate as a for-profit company with a legal mission to "never make money from selling ads" or user data. A benefit corporation operates to serve both investors as well as the public in its "mission." This means that Ello legally cannot sell ads on its platform now.

3 Major Impacts from Ello's News

Product Development

We have yet to see a social platform succeed in scale that hasn't in some way sold advertisements and user data. They monetize the traffic they receive and everything then revolves around increasing traffic and time spent on the site.

Your business takes a completely different approach to product development, marketing, and product marketing when increasing traffic in order to increase ad dollars is not your primary focus. This will make it extremely interesting to see what Ello becomes from a product development perspective. Ello will have freedom to build a product revolving exclusively around the customer and customer needs.

Venture Capitalism

Ello announced at the same time a $5.5 million round of financing from the Foundry Group, Bullet Time Ventures, and FreshTracks Capital. These firms' investment thesis with Ello is fascinating to me. It definitely shows that they are in it for the long haul and will not be pushing the founders for an early exit or return. It's also a much different investment philosophy than we've ever seen before in the social media space. I applaud them for taking this bet. I personally would not have made that bet—not from the investment perspective, but mainly from my issue below.

Benefit Corporations

To catch up on benefit corporations and their recent popularity, you can read more about them here.

While this is all very intriguing and I love the idea of benefit corporations, I'm not quite sure Ello's mission as a b-corp is worthy of "benefit" status. Is a social network really a "public benefit"?

While it is interesting, I'm excited to see the future of benefit corporations. I think benefit corporations are a step in the right direction for society as a whole. I think we should be holding corporations applying for benefit status to a higher standard, though. While building an ad-free social media platform is a great concept, this is what will cause the next bubble—B-corps cannot become a scapegoat to building a profitable business. Their ultimate purpose is to build businesses with a higher purpose than simply profits. It defines "shareholder wealth" in a completely new way. It's up to us to define that higher purpose and whether ad-free social networks warrant that distinction. It's my opinion it doesn't.

I would really love to have some discussion on Ello's move, what this means for product development and VCs, and whether their business model warrants benefit corporation status. What do you think? I'd love to have some other opinions in the comments or on Twitter at @drewbeechler.