CouchSurfing Moves from NGO to B-Corps: Bona fide or Bogus?

By: Margaret Wohler

CouchSurfing International has been riding a wave of success since its August 2011 restructuring which turned the group from a non-profit public charity to a for-profit C-Corporation with a B-Corp certification and $7.6 million in funding from Omidyar and Benchmark. The web-based homestay organization has had more than 3 million profiles created since 2003: pop the beverages and get the beach party going!

…or, not so fast: CouchSurfing (CS) has been hit with a tsunami of protest from its own membership over the reorganization. To date, more than 2,500 CS members have joined an online forum, and a Facebook group, entitled “We don’t want CouchSurfing to be a corporation.” The protesters seek to limit investor profit, increase control of their uploaded data, and gain legal guarantees of organizational transparency.

Why are they so angry?

Members are forbidden to use the CS network for profitable gain so they question why founders and investors, who are also members, now have the opportunity to benefit commercially from the community.

The CouchSurfing network was built on volunteer labor and donations from passionate members who valued the company's nonprofit status. Members were also told that the organization's database would never be sold.

While B-Lab's certification offers certain protections that the company will act in an ethical manner, the company only audits 10% of randomly chosen B-corporations annually to make sure they're holding the line. The CS protesters fear that the newly-minted for-profit corporation will escape proper scrutiny.

Is further scrutiny of a dissolved non-profit entity appropriate?
The protest provides an early test case of B-Lab’s certification process, as members wonder if a failed non-profit can become a for-profit company and still be worthily characterized as “socially responsible.”

CouchSurfing managers are working hard to calm the revolt and repair their image. Founder and Chief Inspirational Officer Casey Fenton is currently on a world speaking tour of the most active CS cities. He’s visiting members, fielding questions, and Skype conferencing to communicate about the transition with one message in mind: CS is justified in having the B-corporation label. I had a 2 ½ hour Skype call with Casey; his enthusiasm for the CS mission, “to create inspiring experiences” is apparent and convincing.

Fenton has always used creative methods to solve problems and spread CS ideals. He promoted the exploration of new thinking through social structures and alternative lifestyle experiments. CS early-adopters lived the vision: bunking and working in communal ‘collectives’ around the world and at the San Francisco “Base Camp,” organizing ‘free hugs’ events, having pillow fights at staff meetings, eschewing high salaries for perks of free food, rent, fun excursions and paid airfare around the world. In 2009, nearly 10% of CS’ total income was spent on travel unrelated to website function, yet, no charitable programs were funded. Life devoted to “inspiring experiences” was exhilarating, but costly. By 2011, CouchSurfing was headed for a wipe-out.

After four years and significant legal costs, CouchSurfing International was denied the 501(c)(3) tax exempt status this past August. The IRS defined the CS mission as social, rather than charitable, and the CS non-profit entity was dissolved. Appraised at $1 million, all assets were put into a cultural scholarship fund, now managed by the New Hampshire Charitable Foundation. To remain viable, CS reincorporated and landed venture capitalist funding.

CouchSurfing’s corporate future seems assured. Its current CEO, CS co-founder Dan Hoffer has solid business chops and promises accountability and organizational integrity. CouchSurfing will continue to offer its cost-free homestay service, social events, and database for scholarly research. CouchSurfing now has the financial backing to hire top-notch programmers to create premium, creative applications that members will want to buy. If it can resolve questions about its non-profit past, CS has a sunny, for-profit future.

Margaret Wohler has been a a CouchSurfing member since 2007.

[Image credit: aphasiafilms, Flickr]