We have been covering AirBnb for a while, and the trend of travelers crashing on the couches of locals is surely an interesting one. Recently, Benchmark Capital funded a non-profit company in this area, which intrigued us greatly.
The idea for social travel network Couchsurfing.com came in 1999 when Casey Fenton made a network of friends in Reykjavik. Fenton was looking for an inexpensive couch to crash on in Iceland, and he e-mailed more than 1,500 students in Reykjavik searching for one. Not only did he end up finding a couch to crash on, he also got to experience Iceland in a new way and figured out a new non-profit business idea.
Fenton teamed up with former colleagues and friends Daniel Hoffer, Sebastien LeTuan, and Leonardo Silveira to turn his experience into Couchsurfing.com. San Francisco–based Couchsurfing was created with an objective to provide a social platform that connected people from across the world to offer affordable travel and help them gain a local’s experience of the place they were visiting.
Today, Couchsurfing connects more than three million people with each other across 240 countries worldwide in 330 languages. The company does not charge any fees from its members for these services. Its primary source of revenues is the identity verification services it offers to users. This service verifies users’ credit information to confirm they are who they claim to be. For the most part, Couchsurfing has managed to create its model through donations and volunteers. Its source code has been developed through voluntary effort of coders across the world.
Couchsurfing was set up in 2004 as a non-profit organization. Last year, the IRS denied its application for a 501(c)(3) nonprofit status, saying the business model did not fit in any of the defined non-profit categories. Recently, the organization registered itself as a B Corporate. B (or “benefit”) corporations are part of a new class of corporations in the U.S. that cater to both social and financial goals. As a B corporation, Couchsurfing, is now able to receive venture funding.
The company landed its first round of funding for $7.6 million from VC funds Benchmark Capital, Omidyar Network, and Point Nine Capital. Couchsurfing needs the money to manage operations and acquire the much-needed talent pool do develop a robust platform.
The money may have spelled good news for the team at Couchsurfing, but analysts and users are skeptical. The company will now need to start earning more revenues and obviously turn profitable. Some users are irate at the decision, and more than 3,400 of them have set up a protest site expressing their dissent. The protest group wants more transparency on the commercialization of the operations and also wants the code and database that have been developed using volunteer efforts to be made open.
Couchsurfing claims that the change in its setup will not distract it from its goal. It is still searching for an optimum revenue model that will enable it to maintain and improve the user experience while ensuring that it meets its financial goals as well. It also believes that the B corporate setup will make it simpler and faster for them to adapt their business model to changes, a freedom it had to sacrifice when the IRS controlled its non-profit status.
So, why does it make sense for top VCs to fund a non-profit that barely has a viable business model? I am not sure. However, I have some ideas about the kind of business models that may be able to monetize such a site.
For example, if this were to become a private club of sorts whereby carefully selected people of certain profiles would meet and potentially visit one another or share other experiences, that would make sense. But the trick is to curate the groups and make the service such that compatible people can be brought together, not just random groups.
The business model of private clubs is also well known. Members pay subscription fees to become part of a club that assures a certain exclusivity and compatibility.
For example, if Couchsurfing could meaningfully group its three million members into compatible “private clubs” and show evidence of successful matchmaking within those groups, there is a distinct possibility that members would be willing to pay a reasonable subscription fee to be part of a network of travelers, or of people looking to meet others with compatible tastes, interests, and so on.
The world is full of lonely people wanting to establish meaningful human connections. And unless you are looking for a date or professional connections, today’s Internet is woefully inadequate in helping with other kinds of connections like friendship. I mean true friendship, not just the superficial Facebook kind of friends. An eHarmony for friendship is missing.
Couchsurfing could take the eHarmony concept, apply it to global travelers, and do something truly wonderful with it!