Ello is a real business. Building something as wonderful as Ello is shaping out to be, even in its early beta state, certainly costs substantial money. Even with founders equity, folks need to make a living and the cloud isn't a public service. It's been pointed out that Ello is VC seed funded and so can't ever live up to the founder's mission. In practice, this investment enforces an eventual "exit" whereby future usership will be sold to the Vermont outfit that has already "bought-out" Ello's founders with the force of its $500m holdings.
It's more likely and accurate to say that the VC's have purchased unpriced debt in Ello to earn a discount on a future fundraising round for writing the first check. It sounds technical but it's meaningful in the context of considering the state of the project and the company today and who controls it now. The founders are (still) calling the shots and it's too early to tell what's going to happen with Ello and whether or not they can uphold their mission.
The problem with insisting that idealist things can't be funded by VCs is to adopt a narrow view of the relationship between finance and invention. To decry venture capital as inherently corrupt, without proposing a viable alternative to create major organizations from nothing seems as naive as any idealism about it — that social software can be built without real money. Ello and its investors asks a favor of its users, to trust in their idealism. Maybe, just maybe, a group from Colorado and Vermont got together to do something different, something that no one expects?