S.F. dot-com becomes dot-org
Philanthropy Site PledgePage Handed Over to Nonprofit
-- By John Boudreau
San Jose Mercury News, April 20, 2002
It's come to this: Earlier this month, a local charity without a single paid staff member acquired a faltering dot-com.
Call it Internet karma.
During the late 1990s, numerous Net entrepreneurs, filled with social idealism and New Economy bravado, stormed the non-profit world vowing to revolutionize charities by showing them a "new paradigm.'' Now, the Internet landscape is littered with failed dot-com business plans. And it's the charities that are picking over the wreckage for salvageable assets.
PledgePage.com launched in San Francisco in fall 1999 with this business premise: Individuals and charitable organizations would use the site to gather pledges for walkathons, readathons and other fundraising events, with PledgePage.com receiving a fee from the non-profit client. "We've been a financial non-profit since our inception,'' jokes PledgePage co-founder John Petersen, a software engineer. Now it's official. Two weeks ago, PledgePage.com re-launched as a bona fide non-profit.
CharityFocus, the acquiring organization, plans to continue PledgePage's original service without charge and make improvements to the site. Within a year, CharityFocus expects to have a one-click donation mechanism on the site.
The deal reveals there is value amid the dot-com rubble. And it's more than almost-new Herman Miller Aeron chairs, foosball tables and cheap commercial office space in San Francisco's South of Market area.
`A certain poetry'
"There's a certain poetry to all of this, without a doubt,'' says Nipun Mehta, a 26-year-old Santa Clara software programmer and CharityFocus founder.
PledgePage generated about $1 million for charitable causes. But like so many dot-coms hoping to cash in on the non-profit world, the company couldn't turn a profit. So after running the site as a labor of love for the past two years, the five founders agreed to do the charitable thing. They came up with an unconventional exit strategy, essentially giving their company to CharityFocus, a thriving 3-year-old organization that links volunteer Web developers around the world with non-profits.
Non-profit experts, who have been skeptical of dot-com intentions, are pleasantly surprised with this business-to-non-business deal.
"It's not what folks in the capital markets think of as an exit strategy,'' observes Michael Gilbert, editor of Nonprofit Online News.
"It's the upside-down irony of the bubble burst: Dot-coms that don't make it turn to dot-orgs to run their business,'' says Michael Stein, an East Bay Internet consultant to non-profits.
Gilbert counts about 100 dot-coms that failed in the charity sector. Charitableway.com, founded by former Microsoft executive Pete Mountanos with $43 million in venture funding as a general online giving portal and then switched to run company donation campaigns, was probably among the most spectacular dot-com crashes in the non-profit world.
"The dot-coms came and went,'' Mehta says. "Here is a dot-org that stayed. The glue that binds people together is inspiration, not stock options.''
For all that has gone wrong during the rise and fall of the dot-com era, this is one deal where there are only good guys.
Though CharityFocus is just getting into the pledge business, the virtual agency (which runs almost entirely on the Web, with no physical office) already had its own working non-profit service. Some 1,400 Web experts, the majority of whom are in Silicon Valley, use www.charityfocus.org to connect with non-profits that need Web help.
The founders of PledgePage, on the other hand, might have made a small mint had they put the dot-com up for sale sooner. Now, rather than close up shop and suddenly pull the plug on the few remaining individuals using the pledge service, the company founders handed over the keys to CharityFocus.
"There is this cliche about customer service in the for-profit world,'' Gilbert says. "Nothing could be more customer-oriented than this. The people who start things like PledgePage really care about their market. They are willing to give away their technology and their customers to preserve it. It's tremendously cool.''