CouchSurfing Raises $7.6 M; Will Users Cry “Sell Out”?


CouchSurfing International is one of those rare Web companies– like Mozilla or Craigslist– that has eschewed the normal Silicon Valley values of growth, greed and venture capital. Started in 2004 and smaller than some for-profit iterations it inspired, the company has turned away investment offers for years, happy to focus on doing right by its community of three million or so surfers. Its user profile contains questions like “What is your personal mission in life?”

It’s one of those startups that uses the word “community” to mean people that have lasting, real-world connections to one another, not just the new industry jargon for “eyeballs.”

And its CEO Daniel Hoffer still talks a bit like a man running a combination of an ashram or an online dating service: “We specialize in creating meaningful connections.”

But as of today, CouchSurfing is going all corporate on us. B Corporate to be specific. The company is announcing a $7.6 million round of funding and its transition from a nonprofit to a B Corporation. B Corporations are a relatively new classification that allow socially responsible companies to function like a for-profit company, but they’re regularly audited by a certifying body that decides whether they’re living up to their do-gooding promises at the same time.

The dual-bottom-line approach is echoed by who their investors are: Socially responsible Omidyar Ventures and the more classic VC Benchmark Capital.

The big question I had for Hoffer: Didn’t you just embrace the worst of both worlds? Now you have investors to answer to, and no matter how warm and fuzzy they may be, they are investors who will want a big return. Investors are going to want to see a hell of a lot more user growth than three million users over six years, and could push the company towards business models that could make that community balk. Meantime, CouchSurfing is still holding itself up as a company trying to do something good, not simply provide a service or utility. It can never brush aside user concerns with “we have to do what’s best for the business.”

He brushed such concerns aside saying, “I think the best possible structure is the one we have. One of the challenges with nonprofits is it’s difficult to adapt quickly and easily from a business model perspective because you need clearance from the IRS. Now we get that flexibility and we’re still making a statement.”

The message he hopes comes across loud and clear to his community: “We are the same organization we have always been; we are merely changing our legal structure.” For instance, he insists CouchSurfing will still be about free accommodations, and that the company will find other ways to make money. To date, it has charged only for doing background checks on guests and hosts.

Some things will of course change. The company which has been appropriately virtual and nomadic until now is moving to a proper headquarters in San Francisco and will aggressively hire engineers. Indeed, one of the big reasons they decided to take funding and switch the company’s classification was to make it easier to recruit stock-option seeking engineers.

And one can only hope some of that money will go towards contingency plans for any Airbnb-like meth-head episodes. Like Airbnb several months ago, CouchSurfing boasts a stellar track record of millions of visits without nefarious incidents. But the question of whether that scales as the company grows is– like anything in social media– an open one. Matt Cohler of Benchmark Capital– who is joining CouchSurfing’s board– noted that people raised the same fears about meeting people over online dating networks and social networks back in the day. I countered that those people aren’t necessarily immediately sleeping on your couch.

Both Cohler and Hoffer pointed to the existing reputation systems already in place on the site. Additionally, part of the outrage surrounding the Airbnb episodes was that unlike Craigslist or CouchSurfing people were paying for the service, so there was an expectation of higher scrutiny. Either way, I imagine it’s a question users will ask as CouchSurfing seeks to expand its audience.

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