Editing CouchSurfing "conversion" issues (section)

==English==

The issues with the "conversion" of CouchSurfing to a for-profit corporation are many and complex. Many members keep asking what the problem is, often accompanied by the remark "But for me, nothing has changed".

Here is an attempt to explain in a simplified and hopefully easily understandable way what to the best of my knowledge happened, with a summary of the issues at the end:


CouchSurfing was founded as a non-profit organization in the U.S. state of New Hampshire in 2003.

Under repeated assurances by CS management that CS would always remain non-profit, volunteers, dedicated members and donors helped build and rebuild CS after Casey Fenton accidentally deleted the database in 2006, gave up and walked away.

In 2010, CS was notified by the U.S. tax authorities (IRS) that it would be denied the 501c3 charity status for which it had applied because the way in which CS operated was viewed as social rather than charitable in nature (and for a number of other reasons).

At that stage, CS had to change its status. It could have chosen another non-profit type, such as 501c7 for the social and recreational organization which the IRS said it was, or go for-profit. Although CS had always pledged to remain non-profit, it decided to break that pledge and go for-profit.

To prepare this “conversion”, the chairman of CouchSurfing, Dan Hoffer, had already been working as an "Entrepreneur In Residence" at the venture capital firm Benchmark Capital months before the IRS denial was officially notified.

The bylaws of CS and the law stipulate that upon dissolution the assets of the non-profit organization had to be distributed to a charity or to the government.

CouchSurfing petitioned a New Hampshire court for authorization to buy the assets itself, telling the court that nobody else could receive the assets and that there were no interested parties to be notified of the plan to sell CouchSurfing. At the same, time CouchSurfing volunteers were told only that changes were coming, but not that CouchSurfing would be sold. Members and donors were told nothing. This lack of information deprived these stakeholders of their legal right to oppose the petition.

Based on a valuation commissioned and paid for by CouchSurfing, the non-profit assets were valued at only about $600,000, less than 1/3 of annual revenue.

The founders of CouchSurfing set up a new company under the name “Better World Through Travel, Inc.” (BWTT) in Delaware (a famous tax haven) which bought the CouchSurfing assets for a fraction of the actual value.

The proceeds of the sale went to a New Hampshire grant fund rather than to the CouchSurfing community which had created the assets in large parts.

The majority shareholders of BWTT, Casey Fenton and Dan Hoffer, issued shares to themselves and sold a minority share of the supposed $600,000 assets for $7,600,000 to two capital venture firms, Benchmark Capital and Omidyar Network. This puts the value of Casey Fenton’s and Dan Hoffer’s share at more than $7,600,000, most likely at more than $15 million.

Initially they announced that CouchSurfing had been converted to a Benefit Corporation, which was then corrected to “B-Corporation”. The right to carry the "B-Corp" label was obtained by submitting false information about the dissolved non-profit organization to B-Lab, the organization which hands out the label for a fee, and by using that label for the just created profit corporation under the false name “CouchSurfing International” (the real name being “Better World Through Travel, Inc.”).

CouchSurfing has been misrepresenting the nature of the business as “half-way between a non-profit and a for-profit” when in fact the legal form is a conventional for-profit C-Corporation (like Coca Cola or Microsoft). The future of CouchSurfing is now uncertain because it will have to go public in the not too distant future in order to repay the venture capital with a profit and to allow employees to exercise their stock options. Nobody knows who will then be the new shareholders and what their plans for CouchSurfing will be.

'''So, in summary, there are serious issues with the dishonest way in which CS, against repeated assurances that this could and would never happen, has been secretly privatized for the personal enrichment of a few when other alternatives existed, with how this has been justified, with the impact this has on the CouchSurfing community which in large part built what is now being taken away from it, and with how the nature of the new owner of the website and of our data has been misrepresented as a kind of non-profit when legally it is nothing but a conventional profit corporation illegitimately parading a B-lab label.'''


The moral issues with the above should be obvious. The legal issues are currently being investigated. The first consequence of this investigation is expected to be the withdrawal of the B-Corp certification. Other consequences could include the criminal prosecution of key actors in the above "conversion", its reversal, or the withdrawal of the investors.