It’s been a dizzying week for the people involved with the Burlington-based social media site Ello. Worldwide media coverage of the site, which is being touted as a more private and less profit driven alternative to Facebook, has exploded.
The attention is bringing Ello tens of thousands of new subscribers every hour and the pace shows no signs of slowing.
It has also been a busy time for FreshTracks Capital, the Vermont firm that is financing Ello’s growth.
Last Sunday evening, FreshTracks Capital co-founder Cairn Cross grabbed some of his homebrewed Maple sap beer and headed to a meeting with Ello’s founders.
“Those guys were exhausted,” says Cross. “I don’t think they’d slept much since Friday because Friday was a big day from a media perspective.”
Just as Ello has been inundated with media inquiries, FreshTracks Capital has been flooded with calls and emails. It's been so busy, they've had to hire an outside public relations firm.
Cross says he sat on the floor listening and offering a little advice.
“Sometimes you just need to hang around your entrepreneurs and be a sounding board and a place for them to vent,” he says.
Cross says it’s not unusual to have this kind of get-together with the start-ups his company invests in. What is unusual is the level of interest in this one.
Just as Ello has been inundated with media inquiries, FreshTracks Capital has been flooded with calls and emails.
It's been so busy, they've had to hire an outside public relations firm.
Along with media requests, there have been inquiries from entrepreneurs everywhere looking for venture capital.
“It’s been fun to be able to write back and say, ‘Sorry, we don’t invest outside of Vermont,’ which is probably something they have trouble understanding,” says Cross.
FreshTracks is Vermont’s only privately held venture capital firm.
The Ello experience is unprecedented for the 14-year-old company. Cross says it’s been interesting to watch the world come to terms with the idea that a potential social media phenomenon is being run and financed from Vermont.
FreshTracks Capital co-founder Cairn Cross says it's been interesting to watch the world come to terms with the idea that a potential social media phenomenon is being run and financed from Vermont.
“Almost like it must be a joke,” he says. “'How can the next tech company emerge from, of all places, Vermont'? And then, 'Who the heck is Fresh Tracks Capital and how are they involved?'”
Ello’s business model is very different from Facebook's. The Vermont company says it will accept no advertising and will not sell information about subscribers.
Instead, unlike Facebook, it will make money by charging subscriber fees.
There’s been some skepticism about whether Ello can stick to its principals if it’s beholden to venture capital investors who are looking for a return on their money.
Cross says the criticism fails to distinguish FreshTracks’ approach from typical venture capital firms that focus on a shorter time line.
"We like to get into a company early and work with the team to build that company over a long period of time, as long as necessary if they’re making progress,” says Cross. “I think this industry is very, very focused on, ‘Get in, grow it like crazy for a couple of years then bail out.'"
FreshTracks manages $25 million in investments, which is a small amount compared to its peers. According to the National Venture Capital Association, the average venture capital fund is $149 million.
There's been some skepticism about whether Ello can stick to its principals if it's beholden to venture capital investors who are looking for a return on their money. Cross says the criticism fails to distinguish FreshTracks' approach from typical venture capital firms that focus on a shorter time line.
Reportedly, FreshTracks has invested roughly $400,000 in Ello and Managing Director Lee Bouyea says it will continue to make investments as the company grows.
He cites a nine year relationship with Eating Well – another of the Vermont companies his firm has invested in – as an example of FreshTracks' commitment to those it invests in.
Bouyea sits on Ello’s board, which he says is typical of the role FreshTracks plays in the companies it works with.
“We’re equity holders in each company alongside CEOs and founders, so we often take board seats and really want to dig into the business,” he says.
Bouyea says usually one of FreshTracks three partners takes the lead on an investment and he’s the point person in Ello’s case, but the attention the social media site is receiving is requiring the time of everyone in the firm.
FreshTrack’s investment in Ello came long before the site took off, when only the founders and a few of their friends were using the site.
“We really believed in the team,” says Bouyea.
The feeling was mutual, according to Ello founder and CEO Paul Budnitz, who says he was approached by other investors but chose the Vermont firm.
“To me FreshTracks really shone out for their social consciousness, for the things that they really believe and for their real alignment with me because I’m exactly the same way,” says Budnitz. “It is true that if you have the wrong partners your life can become a nightmare.”
Ello’s fame may also provide an opportunity for FreshTracks to attract more investor money.
Bouyea and Cross say there are plenty of investment opportunities already in Vermont and along its borders – and they’re not inclined to expand further even if the company grows.
(Note: A small portion of VPR’s investment portfolio is with one of FreshTracks Capital’s funds.)
