Thinking org-onomically

I’m cheerfully stealing the title from the current advertising campaign from TIAA-CREF, which I’m finding interesting in the context of this post — how can a corporation for the public benefit (my own non-legal term) make money?

As a bit of background — the premise of the creation of MailCo is that Mozilla will provide $3 million in seed funding, to build the initial organization and fund it for an initial period. One of my mandates, however, is to work towards self-reliance. Currently, there is no set deadline by which we must be “cash-flow neutral”. The Foundation board has made it clear through Mitchell’s comments both public and private that it’s possible that the foundation would provide more funding in the future, if MailCo is seen to make progress on a variety of fronts. It’s also clear that the preference is for MailCo to find other sources of funding to at the least complement Mozilla’s contribution.

I think that encouraging me to figure out other sources of income is critical to ensuring that MailCo does what it’s supposed to do, which is to help people communicate over the internet. If, after years of work, we haven’t found anyone who cares enough to allow for some workable funding mechanism, then something’s not right. There is so much money in the software and communications arena right now, and we have the potential to reach so many people, that, based on no analysis but a pure gut check, I believe there’s got to be a funding model out there. In fact I’m sure there are a few, and that the biggest challenge will be picking the right ones. It won’t be easy. But it could be fun.

One unfortunate bit about business deals is that there is often value in keeping the details private, and very little value in talking about them in public. So I don’t think I’ll be blogging extensively about potential deals, negotiations in progress, and the like. Luckily, there’s nothing yet to worry about “leaking”, as I’m just ramping up and have only had the most exploratory of conversations so far.

In trying to come up with funding models, it’s sometimes useful to come at the problem from a variety of perspectives: market segmentation, understanding the industry players, identifying possible customer types, fitting into a competitive landscape, building a strategic “plays”, identifying “customer pain”, trendspotting, forecasting industry shifts, etc. Each one can lead to possibilities. it’s also clear that different people, because of their different backgrounds, tend to come up with different ideas as well.

If you’re used to selling “enterprise software” (a category name that I don’t particularly like), then the “obvious” thing for MailCo to do is to tackle the Outlook/Exchange market. I don’t know the exact bookings from Exchange licenses, but it’s a billion-dollar business (if anyone knows the exact number, let me know). It’s important to realize that Microsoft has an incredibly strong hold on that market, as many who have tried to tackle it have found. At the same time, it wouldn’t take a large percentage of that annual business to make a big difference for MailCo’s budget. If we had a scalable “enterprise support” offering, it wouldn’t take that many customers to allow us to break even! Please don’t read too much into this paragraph — I’ll have more to write about Outlook and Exchange in the future, I’m sure. At this point, I’m just using it to point out the incredible amounts of money being spent on email systems today, even though many email clients (and servers) are free.

Alternatively, if you’re used to selling to teenagers, you might think about making something pink and furry with a USB stick and some built-in, branded communication software built-in. With a bit of luck and design talent, those would sell well, and the pink would become unfashionable after three months, making it easy to sell the better, orange version. Or something.

Alernatively, if you’re used to selling “eyeballs”, or “users”, or “subscribers”, then the details of how the people associated with those eyeballs, etc., interact with other people over the internet is a potentially valuable asset. People seem on the whole willing to trade some exposure to advertising for free software and services. At this point, I don’t think the fit between something like Thunderbird and standard web advertising is a very good one, but a) no one said the income had to come from Thunderbird, b) there are lots of very interesting variations on “advertising”, and some companies will see value in advertising-like things which most of us wouldn’t even recognize as advertising-related.

Alternatively, if you’re a central organization for a possibly niche or clearly segmented part of the market, you might want to pay for to ensure that versions of software exist that are particularly well suited to your community/market/members/customers. Mainstream proprietary vendors routinely ignore “small” markets because they’re not “big” enough. But small for them might be plenty big enough for us.

Alternatively, … Well, you get the idea. At this point, I’m happy to talk to anyone who has ideas as to how we could make money someday. I’m happy to talk to businesses about possible relationships. But I’m going to be concentrating, for the first little while at least, on building the organization, building the community, improving the product, enabling innovation beyond the product, and improving our ability to reach users. If we have great products used by more and more millions of people, then, with some care and feeding, the economics will sort themselves out.

The Mozilla Organizational Hack

It’s been discussed before, but given some of the comments I got about my post discussing MailCo’s legal structure, I feel I need to try again and explain the whole for-profit/non-profit structure, and why it’s not only the logical thing to do but also a brilliant organizational hack.

First, the usual caveat — I’m very much not a lawyer, and I may get some of the details below wrong. I think I have the fundamentals right, though.

A constant: Mozilla assets belong, either directly or indirectly, to the Mozilla Foundation, which is a “California not-for-profit corporation dedicated to the public benefit”.

One of the significant consequences of this is that the full power of the US Internal Revenue Service (the friendly folks who took down Capone, remember?) is available to make sure that the public benefits from the Mozilla Foundation’s activities. This is a fundamental bit of legal architecture which has a real impact on the trust that can build between Mozilla and its users, developers, partners, and the public at large. People generally trust the IRS to make sure that, in exchange for being tax exempt, non-profits are monitored so that no swindling of the public can occur.

The downside is that the IRS ends up defining the rules of operation of such an organization, and those rules are so focused on funds transfers (in and out) that many non-profits end up being effectively glorified (and occasionally glorious) financial houses, raising funds and disbursing funds. Which is great in some fields, but doesn’t tend to produce great software, or allow for the kinds of relationships with companies which are needed to change an industry.

On the other end of the spectrum you have “Corporations”, which are taxable entities, and in exchange have more freedom and autonomy from these IRS regulations, as their social purpose is not direct public benefit but private benefit (from which, at least theoretically, the public should benefit in aggregate).

As any manager or executive is well aware, if a company has shareholders, the courts have, since 1916 (we’ll get back to that date), ruled that companies must act in the best interest of their shareholders, and they’ve defined that interest as fiduciary interest — meaning, how much money the shareholders can make.

While this standard corporate structure has led to awesome world changing businesses that employ hundreds of millions of people and have generated wealth for many, it’s also true that the need to look out for shareholders first and foremost sometimes leads companies to do things that hurt the general public. The sad thing is that company directors and managers legally don’t have a choice — they are bound by law to look out for the interests of the shareholders, beyond all other interests. I’m grossly oversimplifying, and there are lots of great debates to have on this topic, but the main point is valid.

(I do recommend both the movie version and the book version of “The Corporation” to people who are interested in that topic. As an example, starting on page 35 of the hardcover edition, you’ll find the story of the fight between Henry Ford and the Dodge brothers which led to the landmark 1916 ruling mentioned above).

So it would seem that corporations are legally bound to be “amoral”, while non-profits, while “moral”, are stuck in a mess of paperwork. If you want to work in a software shop that wants to make the world a better place, that would be a depressing conclusion.

We now get to the the organizational scheme that Mozilla picked and why it’s such a wonderful hack. By making a wholly owned subsidiary of the foundation (which means making a corporation with a single shareholder), it’s possible for the corporation to do what’s in the best interest of the shareholder, using whatever metric the shareholder wants to specify. And given that the shareholder’s interest must be the public interest, it means that while the corporation is taxable, there are safeguards in place to ensure that it stays aligned with the mission of the foundation. The only “downside” is that the subsidiary must pay taxes. Personally, I’m a big believer in taxes as a key mechanism for the improvement of humanity, so that doesn’t seem like a significant bug.

As an aside: Mozilla isn’t the only organization to use this setup — it’s just the only one I know in the software field, and probably the first to have such a big impact on an industry of “hard core” for-profits.

For the conspiracy theorists out there, I realize it’s a bit disappointing. There cannot be an IPO or acquisition. No one can buy or sell stock in any of these organizations.

Which leads to the next question I wanted to clarify, viz. how can MailCo make enough money to become more self-sufficient? Tune in tomorrow for the answer, or a least a hand-waving version of an answer.

Category specific feeds exposed

After a little bit of struggling with PHP (it’s been a while), I’ve exposed category specific feeds. Specifically, if someone wants to keep track of my Mozilla-related posts, here’s the feed (or the browser-oriented archive page). Similarly for ActiveState stuff (feed, archive), etc.

I haven’t yet figured out what tweaks are needed to my WP templates to make the feed exposed in the category-specific archives be the category-specific feed. It doesn’t look simple, as the category archives is really just a specialized search.