Ello Enshrines Ad

Last month, Ello garnered headlines - and more than a few eye rolls - when people finally took notice of the budding social network and its promise to keeping advertising off its site.

Now Ello is making clear that its commitment to an ad-free existence is real.

The start-up plans to announce on Thursday that it has reincorporated as a public benefit corporation whose very charter forbids the company from using ads or selling user data to make money.

'It basically means no investor can force us to take a really good financial deal if it forces us to take advertising,' Paul Budnitz, a co-founder of Ello and its chief executive, said in a telephone interview. 'It points us in the right direction, and it protects us.'

Though seemingly anathema to an Internet start-up, especially given the reams of money that ad-supported businesses like Google and Facebook earn, that ideological purity hasn't kept the company from finding financial backers. It also plans to disclose that it has raised $5.5 million in financing from Foundry Group, Bullet Time Ventures and FreshTracks Capital.

It is the latest move by Ello and its iconoclastic team to try a different approach to the world of social media. Created with an artistic bent - among its current users are designers, artists and a man whose public persona is a pony - the company isn't necessarily aiming for world domination.

But it still aims to be profitable while holding onto its ad-free mission, with its legal charter specifically prohibiting the selling of ads or user data and declaring that any buyer of the social network must also adhere to those rules.

It isn't clear by how much that stance will limit the company's ultimately growth. But Ello points to other public benefit corporations like the sportswear maker Patagonia and the ice cream maker Ben & Jerry's as role models.

'There are a lot of great companies that are using this law to do good in the world,' Mr. Budnitz said.

So how does the company plan to make money? Mr. Budnitz compared Ello's approach to Apple's App Store: Users will eventually be able to download widgets and modifications, paying a few dollars for each purchase.

To Ello, Facebook's approach of a one-size-fits-all template is an 'old model.' Its own approach, by contrast, is essentially letting users customize their own experience.

From the beginning, Mr. Budnitz said that Ello didn't plan on raising much outside money anytime soon. But it hit new levels of popularity late last month as the company grew from an initial 90 users on Aug. 7 to over 1 million now. As a result, the team realized that it needed to raise more money to make sure that the site didn't go down, as well as finance future growth.

That surge in popularity also drew the attention of the usual giants in the venture capital world, some of whom offered to ferry Ello's executive team around in private jets. But Mr. Budnitz said that he instead turned to investors whom he could trust to back the start-up's mission, including Foundry Group, whom he came to know when he lived in the firm's hometown of Boulder, Colo.

'I loved it. I was totally all in,' said Seth Levine, a managing director at Foundry Group. 'Ello isn't saying this isn't the only way a social network can monetize, but that this is the way they want to monetize.'