CouchSurfing’s cash injection

Posted on December 27, 2011 by

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Like the story of 6Wunderkinder that Nico treated in one of his posts, Couchsurfing was also one of the lucky start-up communities that were able to retain sponsoring money in this year. In the case of CouchSurfing it was an amount of $7.6 million in funding from Benchmark Capital and Omidyar Network. Accepting this money in August forced the former non-profit corporation to convert to a B Corporation.

“B” for benefit

In Nicole Perlroths blog entry “Non-Profit CouchSurfing Raises Millions In Funding” on forbes.com she explains that B Corporations (B standing for benefit) define themselves as socially responsible to investors and consumers. Daniel Hoffer, one of CouchSurfings members justifies the change from a non-profit to a for-profit as a good opportunity for CouchSurfing to take investment money and at the same time “be nimble and flexible while sticking with [their] social mission.”

Matt Cohler, an American investor I already mentioned in my first blog, led the investment for Benchmark and will take a board seat in conjunction with the funding. He claims that nobody else in the world would have such a strong vibrant community and such a deeply engaged active network of people as CouchSurfing.

What is CouchSurfing?

For everyone who hasn’t heard about CouchSurfing: It’s a network, founded in 2003 by Casey Fenton, which offers hospitality exchange and social networking services to their members. Via the network, members who want to travel a certain region can look for other members who live there, send a CouchRequest and hereby ask for free accommodation or meet someone for a drink or a city tour. This year CouchSurfing counted more than three million members in more than 80.000 cities and the numbers are still rising.

How the community commented on the change of state

On the CouchSurfing website, there is a statement according to the change of state: “When we started CouchSurfing, being a non-profit was the best option that we could find to make sure that we achieved our vision. But achieving the top status for American non-profits — known as 501c(3) status — has turned out to be very difficult. Although we’ve operated as a non-profit financially, our mission isn’t traditional enough for the government to grant us this type of status. So we need to make a change. After 5 years of trying to go in the direction of 501c(3), we’ve finally understood that this isn’t going to work for us. We need to find another structure in order to continue our progress towards a world where anyone can explore and connect.”

Some members voice doubts

Some of the members haven’t been so happy about CouchSurfing’s convention to a for-profit business and now fear that the initial spirit and values of the community might get lost. As well some people are somewhat sceptically about the fact that Casey Fenton tried oh so hard for five years to be granted a non-profit status for his community. Even though it is a pretty complex process in the US to be granted this status, people claim that Fenton knew exactly how it could be done and maybe just didn’t try hard enough, because of personal interests.

Forbian, a blogger commenting on Nicole Perlroths blog, states: “Don’t get me wrong, CS is a wonderful idea, and it has largely been well-executed. But Casey has been the opposite of the transparency he always promised. Many in the community are very angry that what was billed as a non-profit has been sold for profit. The idea that Casey seriously wanted to gain non-profit status is quite doubtful, because if it had, he would not today own shares that have a paper value of $15 million.”

Future outlook

Hard to tell what Fentons intentions really were, but fact is that he has built up a very successful network that is constantly growing, has many fascinated users and is therefore very attractive to investors. So far, all the services offered by CouchSurfing are for free, except from a tiny fee you have to pay to get your profile verified. We are going to see how and if the CouchSurfing community will shift in the future and if there will be any changes in its core values.

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