Proton, the Swiss company behind a number of privacy-focused apps like ProtonMail, is following in the footsteps of Signal and Mozilla by moving to a new nonprofit foundation model.
The newly formed Proton Foundation will be the majority shareholder in the existing corporate entity that is Proton AG, which will continue as a for-profit company under the auspices of the Foundation. This, according to the CEO Andy Yendesigned to make the organization self-sustaining, without having to rely on donations; grants or commercial relationships with companies.
Indeed, while the likes of Signal have relied on the backing of billionaires such as WhatsApp co-founder Brian Acton, and Mozilla relies heavily on search revenue from Google, Yen says the Proton Foundation wants to set itself apart by maintaining a “profitable and healthy business » at its core. So basically, it wants to operate like a bona fide for-profit business without having to convince people that its promise of privacy plays second fiddle to outside entities.
“This change in governance does not signal a change in the way our core businesses operate,” Yen wrote on Monday in suspension announcing the change. “Proton is not based on profit, but we must maintain profitability as a key objective because a cornerstone of safeguarding Proton’s mission is independence through self-sustainability.”
Proton’s move signals the inherent challenges of building a business around privacy, particularly when outside funding has been raised and investors are looking for a return. Proton, for its part, has always positioned itself as “independent” — both in terms of ownership without VC investors and in terms of technology, as it bypasses the usual public cloud providers to run its own servers and equipment network.
By transitioning to a for-profit to nonprofit model, the company is trying to chart a course that keeps privacy as a central tenet while retaining some of the advantages that private companies offer. That includes the ability to offer stock options to “attract and incentivize the best talent in tech,” according to Yen, who added that the facility would allow the company to go public in the future if it needs to. .
“As with much of what we do, this approach is unique, but we believe this hybrid model offers the best of both worlds,” said Yen. “However, institutional control would always require the company to act in a way that does not jeopardize Proton’s original mission, and Proton’s financial success is directly tied to the public good. In doing so, we seek to uphold not only Proton’s values, but also our culture of innovation, entrepreneurship and ambition, as well as our relentless competitive spirit.”
In addition, the Proton Foundation said it will allocate 1% of Proton’s revenue to “philanthropic activities,” typically around supporting other privacy-focused products and initiatives.
The story so far
Founded in Geneva in 2014, Proton is best known for its encrypted email service ProtonMail, but the company has expanded into all kinds of privacy-focused products, including a VPNpassword manager, Calendar and cloud storage. While most of these services have free versions, the company offers subscriptions to unlock additional features, including bundles that make all products available for a monthly fee.
Shortly after launching in 2014, the company set up one crowdfunding campaign which went on to raise around $500,000, before continuing to collect an additional $2 million by Silicon Valley VC firm Charles River Ventures (CRV) and Swiss non-profit organization Fondation Genevoise pour l’Innovation Technologique (FONGIT). Today, Proton says it no longer has venture capitalists as shareholders, with CRV selling his share at FONGIT in 2021.
Yen, co-founder Jason Stockman and the company’s engineering manager (and first employee) Dingshao Lu have donated some shares in the foundation, thus making it the “major” shareholder, with other minority shareholders including employees and FONGIT.
Both Yen and Lu will serve on the Foundation’s board, along with Web inventor Sir Tim Berners-Lee. Carissa Veliz, professor of ethics at the Institute for Ethics in AI at the University of Oxford. and Antonio Gabardellamanager at FONGIT.
As the major shareholder, the Proton Foundation has the most voting power, with the board obligated to protect the founding mission of the foundation.
“As Proton’s largest voting shareholder, no change of control can occur without the institution’s consent, allowing it to block hostile takeovers of Proton, thereby ensuring the mission is permanently adhered to,” notes Yen.
