The Land of the Free and the For-Profit
{{Industy Standard Gif#34651}} Slate and the Industry Standard join forces to examine the effect of the Internet on Campaign 2000.
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Tracy Westen is no typical Internet executive. A gray-haired college professor who has focused on public service since the 1960s Free Speech movement at the University of California, Berkeley, Westen lacks the usual obsession with "brand building" and "eyeballs." Nevertheless, he's in the unusual position of trying to turn a not-for-profit Web site into a real company.
In 1996, Westen co-founded the Democracy Network, a nonpartisan, nonprofit interactive project to encourage voting and citizen participation in government. A joint project of the League of Women Voters and the Center for Governmental Studies, the Web site offers information about local, state, and federal elections.
Last month, the Democracy Network made the surprising decision to sell out to Grassroots.com, a San Bruno, Calif.-based IPO-minded startup. Seeing a booming business in politics, Grassroots has made news by using stock options to lure high-profile political operatives such as former New Hampshire Gov. John Sununu and ex-White House spokesman Mike McCurry. The company's plan: Strike Internet gold by helping citizens organize political movements, find information about issues, and decide which candidates to support.
Under the terms of the acquisition, both the League of Women Voters and the Center for Governmental Studies (which was also founded by Westen) have become Grassroots shareholders with seats on the board. Grassroots will make unrestricted cash contributions to both organizations, but the company won't disclose the amount of those contributions.
Some people are horrified. "This is the commercialization of politics," says Michael Weiksner, chairman of a new nonprofit called the Democracy Project, which is setting up an online town hall. "It doesn't really sit right with the mission of Democracy Network or the League of Women Voters. Grassroots is doing exactly one of the things we fear."
Others see a trend in the making: Nonprofits are realizing that the costs of running a successful Web site climb with the number of users--and at the same time, the foundations they turn to for funding often refuse to commit to long-term support.
Which is why Westen decided to sell.
The 58-year-old Westen, now Grassroots' chairman, says the Democracy Network board was simply facing reality. "The more successful the site became, the more danger of bankruptcy we faced," he says. "The more hits we got, the more expensive were our bandwidth costs. If we were successful beyond our wildest dreams, we would have been put right out of business."
Since its founding, the Democracy Network survived on grants from foundations--$20,000 here, $30,000 there. But with interest in politics high due to the current presidential campaign, the site's server charges totaled $35,000 a month. Foundation grants weren't going to be enough. "Foundations are enormously valuable resources," Westen says. "But to take it to the scale that it really deserved to be, not only did we need a fairly secure ongoing source of funding, but a substantial investment of capital."
Westen's vision was that the site wouldn't hang its future on one presidential race but would make a name for itself by providing information about the estimated 125,000 other elections each year. The Democracy Network was designed to allow any candidate to participate, regardless of their fund-raising ability. Unlike the televised debates in the latest California gubernatorial race, which featured four candidates, the Democracy Network offered an ongoing interactive debate among 17 candidates.
Elizabeth Wasserman is the Washington bureau chief of the Industry Standard. You can e-mail her at elizabethw@thestandard.com.


