Original URL: http://www.theregister.co.uk/2008/03/18/jimmy_wales_and_roger_mcnamee/

Why would someone toss $1.35m at Wikipedia?

Jimbo Wales catches VC from Bono on Mexico City rooftop

By Cade Metz

Posted in Financial News, 18th March 2008 11:21 GMT

Updated There's little doubt that anyone with the time and the inclination can overhaul at least a few Wikipedia entries to suit their personal ambitions. All they need is the right friends. Or a little pillow talk. The question is, could someone overhaul the entire encyclopedia?

Over the past two years, one man has donated or "lined up" donations totaling more than $1.35m to the charitable organization that runs Wikipedia, dwarfing the contributions of any other donor. And this man is among Silicon Valley's most conspicuous venture capitalists.

His name is Roger McNamee, and he runs Elevation Partners, a San Francisco-based VC firm whose partners include Bono, the U2 frontman more famous for pop records than venture capital. In fact, Bono played a significant role in the mysterious pas de deux between Elevation and the Wikimedia Foundation, making nice with Wikipedia co-founder Jimmy "Jimbo" Wales and his wife Christine before a U2 concert in Mexico City more than two years ago.

In the beginning, McNamee's donations were made anonymously - at least on official records. But the Elevation Partners connection has long been an open secret among Wikimedia insiders, and last week the secret spilled out onto the web when former Foundation executive Danny Wool posted a few details to his well-read blog.

After Jimmy Wales dumped his lover on the "free encyclopedia anyone can edit", and Danny Wool accused the site's Spiritual Leader of mismanaging Foundation funds, many assumed that the The Great Wikipedia Soap Opera had reached its climax. But there's more to come.

At the very least, McNamee's involvement with Wikimedia is a puzzle that needs solving. Considering the Foundation's status as a tax-exempt non-profit, a VC would need more than a little sleight of hand to turn it into a personal moneymaker. And if he did, this would surely raise the ire of more than few Wikipedians. Remember: Wikipedia was built almost entirely with free labor.

When Bono met Jimbo

According to Danny Wool, Elevation Partners - named for the U2 song - first approached the Wikimedia Foundation in late 2005. Wool took a phone call from a partner named Marc Bodnick.

"There was a period of time where everybody was trying to get in on the Wikipedia action," Wool told us. "Bodnick was really intriguing. He gave me the whole Bono thing, and I thought that was really cool. So I told Jimmy."

Wales soon met with Bodnick at Wikimedia's St Petersburg, Florida, headquarters, and later chatted with Roger McNamee in San Francisco. Then, several weeks later, Wales and his wife Christine had dinner with Bodnick and his personal assistant at a steakhouse in nearby Tampa. According to Wool, this was the $1,300 meal that Wales famously asked the Foundation to pay for.

In the end, the Foundation did not reimburse Wales for the steakhouse tab. But a few weeks later, on February 15, 2006, Wales and his wife flew to Mexico for that U2 concert, together with Danny Wool and another Wikimedia staffer. And this tab was on Elevation. "They paid for all the expenses," Wool told us. "All of them."

That night, the four of them joined Bono for drinks on the roof of their hotel, and at one point the pop icon suggested that Wales dump Wikipedia's volunteer editors and hire professionals.

Bono also suggested the Wikimedia foursome meet him for lunch the next afternoon before attending the concert. But in the end, that meeting included only Wales and his wife. "I was all dressed for the lunch with Bono and I was told that Bono only wanted to meet with Jimmy and Christine," Wool said.

Non-disclosure

But these weren't the only meetings between Elevation Partners and the Wikimedia Foundation. After the Mexico City trip, Wool claims, the entire Foundation board met with Marc Bodnick, who happens to be the brother-in-law of Sheryl Sandberg, the top Google sales exec who recently took over as Number Two at Facebook.

"There was a board meeting in Rotterdam in January 2007, and Bodnick walked in," says Wool, who was present at the meeting - though he was not a board member. "Half the board didn't know who he was, but I said hello. Then everyone else signed a [non-disclosure agreement], and I had to leave."

According to Wool, Bodnick also met with the board on several other occasions, and each time there was an NDA.

In the meantime, Roger McNamee started donating. During the 2006 fiscal year, he gave about $70,000 in Google stock, and in fiscal 2007 he donated another $286,000 - also in Google stock. When McNamee made his first donation, the foundation did not have a brokerage account, and it was Wool who opened one. All of this stock was sold prior to the end of fiscal 2007.

In the months since Wool left the Foundation, McNamee has facilitated additional donations. Foundation executive director Sue Gardner told The New York Times that the Elevation partner "lined up" a $500,000 donation in December and a second $500,000 donation just last week.

When we phoned Elevation Partners and spoke to Marc Bodnick, he referred all questions to Roger McNamee and said that McNamee is on vacation. Likewise, we didn't get an answer from the Wikimedia Foundation. But in speaking with The New York Times, Jimmy Wales claimed that Elevation's involvement with the Foundation ended after a single meeting.

"It took one meeting for them to realize it was off the table," Wales said. "Certainly there can be no investment in Wikipedia. Wikipedia is a non-profit and always will be." But Wales did acknowledge a personal relationship with McNamee, claiming the venture capitalist acts as "a bit of a mentor in doing fundraising". And McNamee said that his involvement with Wikipedia had nothing to do with Elevation.

"I am a Wikipedia volunteer - I help with strategy, fundraising and business development - it has nothing to do with Elevation Partners. And no one should be confused about that," McNamee claimed.

Not-for-profit meets profit

Nonetheless, Wool insists that Marc Bodnick met with Wales and the Wikimedia Foundation board several times since that first meeting, and Bono lunched with Wales and his wife in Mexico City, with Elevation footing the Foundation's bill. Judging from conversations with board members, however, Wool does not believe an official deal has been struck.

Such a deal would break the law, says Arthur Rieman, of the Los Angeles-based Law Firm for Non-Profits. After all, Wikimedia is a tax-exempt charitable foundation. "As a not-for-profit, you have no investors," Rieman told us. "If a VC is making donations, they may not have any expectations of a return as a matter of law. Otherwise the [non-profit] is not allowed to be tax exempt.

"Most of the laws regarding exempt organizations are designed to prevent what the IRS and Congress call private benefit - meaning the assets and activities of the non-profit may not provide any benefit to individuals or companies unless these benefits are incidental or causally related to the operation. For instance, if it's a child welfare agency and kids and their families are benefiting, that's OK."

That said, Rieman also points out that there are ways for board members or even a big donor to make money from a non-for-profit.

Without a doubt, the Wikimedia Foundation could turn on the profit tap at any time. "In the not-for-profit world, there are always non-profits that make money. If they do not have net income - from whatever sources - they do not survive," Riemen continued. "And many non-profits set up for-profit subsidiaries, or they spin off some of their assets to credit earned income."

Precedents include the Mozilla Foundation, which spun off a for-profit company around the Firefox browser. And Rieman points to the example of Minnesota Public Radio (MPR), which built a for-profit for Garrison Kellor's Prairie Home Companion, passing hefty salaries and compensation plans to MPR executives. The Minnesota attorney general investigated the deal for nearly two years, but eventually let it stand.

Yes, McNamee would be scrutinized if he horned in on a deal to commercialize Wikipedia, Rieman says, and he might even face a fine from the IRS. But there might be ways around this. "It would be dubious. But lawyers make many interesting decisions."

Whether or not McNamee is interested in making money from Wikipedia - for himself or for someone else - the facts remain: He's donated a hefty wad to the Foundation, and he has the ear of Jimmy Wales.

The Willypedia Affair shows that Wales is willing to violate Wikipedia's mission in favor of a personal relationship. And this particular personal relationship is backed by more than $1.35m. ®

Update

Our story originally said that Roger McNamee recently made two donations of $500,000 to the Wikimedia Foundation. The Foundation has now responded to us, and it says this is incorrect. McNamee merely facilitated these donations, "introducing" the Foundation to the donors.