Directory:Akahele/Omidyar venturing out

For the past couple of years, I've dreamed of being discovered and capitalized by a wealthy venture investor who might see the potential of the semantic web directory that I now own with my sister. Also for the past couple of years, I've vied for a seat on the Wikimedia Foundation board of trustees. Last week, I discovered that if you're a venture capitalist, you might buy yourself a seat on the Wikimedia Foundation board. I'm still stuck out here in the virtual cold, though, on both counts.

Let's be fair

Okay, let's be fair. "Buying a seat" on a non-profit board may carry too strong a pejorative tone. So, let's just stick to the facts.

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Pierre Omidyar and Richard Branson

Have you ever heard of Pierre Omidyar? If you have, you're a tech junkie, I'll bet. Mr. Omidyar (pronounced AH-mid-yar) is the founder and chair of the eBay online auction site. Thanks to that vision back in 1995, Omidyar's personal fortune exceeds that of all but perhaps two hundred other souls on this planet. You know you're rich when you hang with Richard Branson for some drinks. Wikipedia describes Omidyar as a philanthropist who with his wife founded Omidyar Network in 2004. Wikipedia has also stated that Omidyar is "the biggest douchebag", one of the world's top "cheese lifting" men, and for a brief spell in November last year went by the name "Omidyoodle".

So much for the man; what about his non-profit Omidyar Network? According to its own website, the Omidyar Network is based on a

"conviction that every person has the power to make a difference. [Its] work enables people to discover that power, improve their own lives, and make lasting contributions to their communities."

We can corroborate this on Wikipedia, where the article about Omidyar Network says that it is "based on the belief that every person has the potential to make a difference". This text was added back in April 2008, along with a substantial quantity of other congratulatory text, by an IP address at 207.47.3.98. Fellow Internet watchdog Seth Finkelstein deduced that this IP address traces to -- you guessed it -- Omidyar Network Services.

There are guidelines against publishing self-laudatory text about your own person or your employer on Wikipedia, but no repercussions ever befell IP 207.47.3.98.

What will $2 million buy?

So, on August 25, 2009, there was a big announcement that the Omidyar Network was committing up to $2 million in grant money to the Wikimedia Foundation. Almost in the same breath, it was mentioned that an Omidyar Network partner, Matt Halprin, would be taking a seat on the WMF board of trustees.

Now, this may or may not be unusual in the non-profit world. The money is technically coming from the 501(c)(3) component of the Omidyar Network, even though that organization also operates a limited liability corporation (LLC) that is free to (and does in fact) make traditional capital investments in for-profit enterprises. It certainly is not an unusual practice for the Omidyar Network -- many of their large cash infusions are accompanied with the bonus of Mr. Halprin or another partner getting a seat at the boardroom table. That's what happened when $4 million went to the Sunlight Foundation; Halprin was simultaneously seated. That's what happened when $4 million went to Goodmail Systems; Halprin was simultaneously seated. That's pretty much what happened after DonorsChoose.org got Omidyar as a "National Expansion Funder" in 2007; Halprin was seated in 2008.

And it's not just Halprin. When Seesmic received $6 million from the Omidyar Network, Pierre Omidyar got himself a seat on the board. When Endeavor landed $10 million from the Omidyar empire, Omidyar's Matt Bannick took a seat on the board.

What would I do?

If Omidyar approached me tomorrow and said they had $2 million (heck, let's just say $200,000) to help MyWikiBiz "make a difference" for every person, but that the investment was stipulated on Matt Halprin taking a seat next to my sister and me on the board of directors, would I take the money? Not only would I take the money, I would hand-embroider the seat with Matt's initials in golden thread.

But, I would know, and I would freely admit, that Omidyar Network just bought a seat on my enterprise's board.

So, how has the Wikimedia Foundation handled this obvious appearance of a seat having been bought?

The Germans are restless

Not the straightforward and direct way, which means apparently not altogether well. The German Wikipedia community is asking Wikipedia co-founder Jimmy Wales to clarify what just happened. Wales admits that Foundation "communications could have been handled better", so he is quick to let Halprin do the talking, quoting Halprin's interview with the folks at the Wikipedia Weekly audio podcast. Halprin assures any skeptics:

So there's no tie between the grant and Omidyar Network taking a board seat. That's absolutely not part of the conversation. It's something that Omidyar Network likes to do with our organizations, because we think we tend to be able to help and we have experience, but there's no tie with the grant that we've made to Wikimedia Foundation.

No tie, folks. Move along. Nothing to see here.

Here's what I find "interesting", at least. Omidyar Network has a portion of $4 million invested since 2006 in the for-profit enterprise Wikia, Inc. Therefore, the fact is that someone Matt Halprin works alongside at Omidyar is the active partner responsible for managing a cash investment in Wikia. Jimmy Wales is the co-founder of for-profit Wikia, and he is also the emeritus chair of the Wikimedia Foundation, which this week received $2 million from Omidyar, and seated Matt Halprin on the board.

Is that a conflict of interest? If I were Mr. Wales, I'd be a bit uncomfortable having one of my key private investors now also keeping an eye on my non-profit magnum opus.

I guess it's no surprise, though. When the Ruth and Frank Stanton Fund donated over $800,000 to the Wikimedia Foundation, one of the first things the money went toward was rent for sub-leased office space at Wikia, Inc. (Even though Wikia hadn't presented the lowest competitive bid, and they were the only bidder invited to re-submit their bid to match the average of the other bids received.) If that's not a wired self-deal, I don't know what one is.

Omidyar's perspective

I spoke with Sarah Steven, a manager in the Marketing and Communications department of Omidyar Network. She emphasized that the two halves of the Network, the LLC and the 501(c)(3), are "one big office" and that they approach any investment first from the angle of "what is the social impact" of the target entity. Then, only after they decide if a cause is worth pursuing, they worry about whether it will be a for-profit or a non-profit driven allocation, and that is what determines which entity will actually do the investing.

So, I guess it's just pure coincidence that the Omidyar LLC has invested cash-for-profit's-sake in Jimmy Wales' workaday enterprise, and the Omidyar 501(c)(3) has invested cash-for-humanity's-sake in Jimmy Wales' greater good enterprise.

No tie, folks. Move along. Nothing to see here.

Image credits:

Omidyar and Branson, Attribution 2.0 Generic.

Comments

9 Responses to “ Omidyar venturing out ”

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Jon Awbrey Greg,

Just wanted to say “Thanks!” for yet another intelligent, well-researched piece on the complicities, er, complexities of the business world that boggle the brain of a simple-minded math-muncher like —

Yours truly,

Jon Awbrey

Dan T. Their website is a .com rather than a .org, which implies that the for-profit arm dominates the nonprofit one.

Anonymous There certainly is more to this deal than meets the eyes–and don’t expect anyone in the Foundation to open their mouths. Little birds have told me more, but I’d rather not disclose exactly what right now.

Somey Pierre Omidyar’s eBay shares are worth billions, so $2M isn’t a huge expense for him, but for the Wikimedia Foundation it’s at least another year or two of “safety” from their having to carry advertising on Wikipedia in order to stay afloat. Various people (including Jimbo Wales) have suggested that it would be “pointless” to buy a seat on the board of a non-profit, non-revenue-producing organization. But when you’re the dominant force in an important market (like eBay is with small-time online retail and private auctions), helping to prevent Wikipedia from becoming a potentially major advertising venue for your competitors is probably worth at least that much.

Wikia, OTOH, already takes advertising, so for them there must be some other reason – possibly having something to do with collectible lunchboxes.

Gregory Kohs And it would appear that the Austrian faction is also cognizant of the underlying basis for Omidyar Network’s existence.

Gregory Kohs Interesting to note that this blog article and its author were mentioned by The Wikipedia Signpost of September 14, 2009. You’d think that one of the editors of that article would have contacted us for comment, but no such luck.

Prashanth Hmm…well researched blog. I appreciate it. Wandered here from a discussion somewhere in the hinterland of wikipedia’s bureaucratic red tape.

One would always like to imagine that WP will not succumb to the same ills that plague most organisations committed to public good, but depending on private money. I was sure, it was bound to happen….naivete to expect otw.

That said, it is very disheartening for me as a WP editor of many years to learn this. Hmpf…

hilarious I love two things about this: first, that it is somehow evil for a major donor to place someone on the board of trustees of a charity (no, actually, that’s perfectly normal). Second, that as soon as it’s published the Legion of the Banned happen along to sing your praises. Funny stuff!

Gregory Kohs Nobody said it was “evil”. I’m just asking them to label it for what it is — a seat was purchased on the board of trustees. End of story.

That you’d find “hilarious” a desire to have a purportedly transparent organization be more honest about what is plain to the eye may say more about you than about me or any legion of banned Wikipedia editors.