I read in the minutes of a recent meeting of the Lawrence Freenet project that the nonprofit Internet company was seeking venture capital from Los Angeles investors. How can that be if it is truly a nonprofit company?
Joshua Montgomery, a founder of the company, said the minutes misused the term venture capital, which typically involves an individual making an investment in a company in exchange for an ownership interest . That would not be allowed in a nonprofit company because a nonprofit does not have owners or shares to sell. Montgomery said what Freenet is seeking is money to buy additional equipment. The investor would be paid back with interest through a lease-purchase agreement on the equipment. Montgomery said it would be similar to a bank loan. He said the company had approached banks but had not had success obtaining bank financing. He said Freenet had no plans to change its not-for-profit status.