The Trouble with Taking CharityS

Adrian Holovaty has sold his hyperlocal news startup to MSNBC.com, allowing the programmer to cash out and keep his staff employed. For most entrepreneurs that would be unalloyed good news. But Holovaty isn't just any entrepreneur. Just ask his critics.

The j-school graduate (pictured) is on a mission to save journalism, and his venture, EveryBlock, was in turn funded to the tune of $1.1 million by a grant from the philanthropic Knight Founation, which was hoping Holovaty would "make it easy for people to learn more about life around them." After two years, Holovaty open sourced his code and had accumulated a daily audience estimated at 14,000.

That's not good enough, says CUNY assistant professor Christopher Anderson, who writes that MSNBC has skimmed off the value of a project "developed by common labor;" Anderson is upset in part because it's not clear whether EveryBlock's code will remain openly available. NYU Local publisher Cody Brown has called for more transparency around the deal.

These sorts of critiques would be unimaginable around an acquisition involving privately held companies funded by stock and venture capital. But they're perfectly predictable when nonprofit money and promises of public benefit are involved. The Knight Foundation has already been through it once, with MTV.

America's newspapers should remember these headaches; as they seek government favors and mull nonprofit status, they'll find they have as much to learn from Holovaty's business story as from his technology.

(Disclosure: I applied for, and ultimately did not receive, a Knight Foundation grant one year after Holovaty.)

(Pic: Matt Biddulph)