If Everyblock had been funded by VC money when it was sold to MSNBC in August for an undisclosed amount, the investors would have seen a return on their investment. But Adrian Holovaty’s startup was funded through the $25 million Knight News Challenge — and the only requirement was that code developed through the $1.1 million two-year grant be published as open source.. That’s about to change, program director Gary Kebbel told attendees at a how-to-get-a-grant session during the Online News Association conference in San Francisco: “Are we thinking about how to do that in the future? Yes. It’s a safe bet grant applications are going to change a bit.”
How to make it work? Kebbel said Knight is considering creating another non-profit that would receive that money either for further development of open source software or possibly for community news. He explained a little more after the session. The changes are coming for the 2010 cycle of grants and any money collected from “commercialized’ companies — startups that are sold, not startups that make money — will not go back to the Knight Foundation. The rest is still under discussion.
Everyblock may be the first News Challenge winner to sell but it’s not likely to be the last. The 2010 contest announcement includes the sale as a sign of “the market potential for innovative community information projects.” There should be a way for Knight to get some money back from a sale and put it back into seeding startups or encouraging other innovation.