Loomio
Mon 18 Feb 2019

High Risk Venture Investment in Co-operative Start-ups

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Graham Public Seen by 214

I'm always being told that there is no shortage of available finance for new co-operatives. And yet what I see on the ground is that while there are some ways to access some limited grant support for early stage projects some of the time (and if the project happens to meet the criteria of the funder), and no shortage of fairly pricey debt finance for those that are in a position to repay, there doesn't yet seem to be anything around that might offer something akin to what we might in the private sector call angel investment. I'm thinking about relatively high risk investment in new-start cooperatives, with the potential for a high return over time. Where a VC would take a hefty equity stake and be looking for a high value early exit, I'm thinking instead of a repayment curve where the investor could potentially still get a hefty return, but over a much longer timeframe, giving the co-op a good long runway to build a sustainable business model. The payments come out of profits rather than revenue. And of course the investor doesn't have to demand a 3x or 5x return: many of the people that put their money into ICOF weren't interested in a return, they just wanted to see good things happen.

A couple of examples of investment firms that are doing this sort of thing already that I've come across are: https://earnestcapital.com/ and http://purpose.capital/en/ If you look at the companies that Purpose ventures has supported, you'll see at least three that - in my view - are really close to the co-operative economy in terms of their values and ethos: Open Collective, Sharetribe, and Coliga.

I would be really interested in your thoughts on this idea. Is there a gap in the market. Is the paucity of new co-op startups in part as a result of the lack of early stage risk capital?

NB(

Nathan Brown (Co-op Culture) Mon 18 Feb 2019

I would have thought if that was the case we would see a bunch of non co-op start-ups saying "This is why we couldn't be a co-op, even though we wanted to be". I see far more people with ideas that aren't businesses or have no recognisable market so would not be worth investing in. To attract Venture Capital you have to pass a much higher threshold of proving the market potential with evidence or research, which I am afraid to say is a common weakness among coop start-ups (despite advice telling them to address this!). Might be worth talking to CCF to see if they have evidence of demand for this sort of finance?

SW(

Think you're absolutely right. Cold we design a tapered version of the kind of loanstock/fixed term bond (debt behaving like equity) that the RR network uses for co-housing coops? Obvs a worker coop starter is more risky but it's still unsecured debt and people seem quite willing to take returns of between 0 and 2% early on.

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Graham Mon 18 Feb 2019

I think my point is that you never see or hear from the people who would create these co-ops because there is no financing model that suits their business ideas - they've ruled out the co-operative model long before they might ever talk to you.

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Graham Mon 18 Feb 2019

Think about a new platform co-op start-up: the founding group have a killer business idea, but don't have software development expertise or money. They approach a group like CoTech, and get a 6 -figure estimate for the development cost for their digital platform. then there's the marketing budget required to reach and onboard all the platform participants. Could easily be looking at another £100K. ICOF bless 'em have little in-house tech expertise (I don't know whether this is the case or not, I'm merely setting out a scenario), and although the spreadsheets are telling them that there are healthy profits to be had in year 3 and beyond, are very shy to put their toe in the water, and in any event they want repayments to kick in after just 12 months, which is right when the plan suggests that cashflow will be at it tightest. The founders have got just £20K between them to put on the table. Where are they going to get their £200K from and avoid selling out to a VC?

MS(

I would be seriously considering a pioneer share offer to fund the development costs - aimed at co-operators and potential users of the platform.

MS(

Nothing to prevent a cocktail finance approach with a mixture of bonds, shares and even grant.

MS(

I think that what you are suggesting @graham2 is a legal vehicle where the investor invests in the primary vehicle to create a fund available to invest in projects that may not yet exist. I'm not sure of the regulation around this. I think that Rootstock (which has done this for years) may be amending its setup to account for this regulation. Maybe @andrewwoodcock would have useful stuff to add to this discussion.

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Graham Tue 19 Feb 2019

@leosammallahti - how would/could Coop Exchange fit into this type of thing?

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Graham Tue 19 Feb 2019

I guess I was thinking that Platform 6 could be this entity, or perhaps a wholly owned subsidiary of P6. I've not idea what the regs might be around this whole issue - merely looking at it as a way of getting more risk investment in place in order to grow the co-operative economy.

AW

Alex Worrad-Andrews Tue 19 Feb 2019

Common Knowledge (the cooperative I am a founder member of) is currently approaching this problem.

We have an MVP, or a set of MVPs we are pretty happy with, a solid vision and a decent set of internal processes. Now we need to fund the ongoing proper development work. We are not adverse to taking VC per sae if the investor understood the project and prospective business model. We do have a few problems with our legal formation to give share options to potential funders, but might be able to take on the debt in another manner.

This conversation is therefore highly relevant to us so I could not be more all ears! We are basically in this position right now, with the difference that we do have developers on board (indeed a whole team) but don't have the resources right now to go full time on it and certainly not to scale.

PC

Pat Conaty Tue 19 Feb 2019

The Community Development Finance movement in the USA has led work on the development of Community Development Venture Capital. A few CDFIs have emerged in the UK with an equity provision focus. For example, CAF Venturesome designed with a team of us the National CLT Fund and provided the risk capital part of four stage co-financing model. Robert Owen Community Banking Fund here in Wales is a CDFI that has developed a system like this for community energy co-ops. Problems though arose when the FITs were cut and has restricted applications. Big Issue Invest could be interested as they are a community development venture capital fund essentially. Many CDVCs provide quasi-equity that they structured as deeply subordinated debt with no repayment before 5-7 years. So this provides the patient capital function for those social enterprises and co-ops able to convince the social investors.

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Graham Tue 19 Feb 2019

Some context: I know the resource available for co-operative development is small, but I continue to wonder - with some amazement - at just how small the start-up rate for co-ops is compared to non-coop companies. The number from Co-operatives UK suggests that less than 200 new co-ops were set up in 2018. This compares - or rather it doesn't - with the number of new companies set up in the UK in the same period. I've seen one new report stating 660,000 new companies registered! The CIC regulator reports that 231 CICs were registered in Jan 2019 alone. Yes, co-operatives may be niche, but I would argue that by any reasonable measure the co-operative movement is failing pretty badly to build its own future. Even if we were to say that 99% of new company formations are one-person and their dog operations and to discount them on that basis, that still means that 1%, or 6,600 are valid in terms of a comparison, which means that co-op start-ups are about 3% of the market.

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Graham Tue 19 Feb 2019

Hi @alexworradandrews - thanks very much for pitching in. Highly relevant.

PC

Pat Conaty Tue 19 Feb 2019

A great question Graham. In our recent report for Co-ops UK and the Co-op College, Working Together, we showed ways and means to tackle this lack of appropriate financing mechanisms. Public policy does matter and since the early 1990s has not favoured co-ops but social enterprises and employee ownership. When this policy shift happened there were about 3000 worker co-ops and the decline in number since then has been continuous. As you mention, ICOF had an endowment in the 1970s to get going and other public sector endowments have seed funded more CDFIs under the Phoenix Fund. In Italy in the early 1990s there were about 3000 worker and social co-ops. Now there are 23,000 but public policy supportive frameworks have given tax reliefs, helped support the development of mutual guarantee societies to pool co-operatively enterprise risk insurance. The MGS system enables co-ops to access lower cost capital from the 400 co-op banks in Italy. Also these banks and worker co-ops have co-developed a hybrid product, an equity loan that is patient in quality and by design to be so.
Money and banking for investor ownership enterprises are complex and adapted. We need a co-op financing eco-system that is similarly complex and adapted to be fit for purpose. We have three huge gaps: no mutual guarantee society system for risk insurance, no co-op equity bespoke products and services and no co-op banking system that wants to move to solve this democratic financing deficit. Alex Bird and I are involved in the work in Wales on a regional co-op bank for Wales. We have joined the CSBA working on other regional co-op banks in London, Bristol and the South West. There is also keen interested in Greater Manchester. This work could help address the gap.

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Graham Tue 19 Feb 2019

Thanks Pat. It would be great to understand more about this new wave of co-op regional banks. I'd like to see something like this happening in Kirklees/West Yorkshire.

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Graham Tue 19 Feb 2019

@cathcornerstone

BC

bob cannell Tue 19 Feb 2019

absolutely Graham. the issue is not available funding or coop friendly laws but awareness.

awareness of the coop option and solution to social needs has fallen to next to zero in the UK.

part of this i think is the fallout from old style coops which are unattractive to modern people.

and part is a failure to get to the kind of people who started 3000 worker coops in the late 70s and early 80s. who are the modern equivalent? why are they not hammering on our doors demanding help to start their coops?

this is a UK problem I believe.

Bob

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Emma Tue 19 Feb 2019

Everything on this thread is both true & relevant.
Do you know this conversation is going on...? https://www.nesta.org.uk/event/platform-co-ops-solving-capital-conundrum/
Some exciting announcements in the offing being developed by Co-ops UK, Nesta & OSF.

Not to mention the main exciting thing being our upcoming Pioneer share offer!

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Emma Tue 19 Feb 2019

I think (I might be wrong) that this event may also be related to the 'Funding Spark' conversation that we raised some support for at Congress 2018 as part of the Unfound programme.

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Graham Tue 19 Feb 2019

Yes, the announcement at this event shortly will be interesting. I'm sort of expecting anOSF supported project that will perhaps create anew funding stream, or the beginnings of one, that could be at least in part an option for this perceived need for high risk investment in coop start-ups. Shame I can't be there.

JM

John Merritt Tue 19 Feb 2019

I have argued (and been been argued against) for a few years that Coop finance and Coop and Credit Union banking are key issues for Cooperative and Community Economic Development. I have been touting Cuso-UK and a campaign for growing the Solidarity Economy for a few years and have been incredibly unsuccessful at getting any finance or buy in to it. Of course our Credit Union movement is small and Cuso legislation different but the United Stated equivalent of Cuso-UK https://www.nacuso.org is a huge cooperative enabling investment in Cuso's (owned by Credit Unions in the US) and business with a solidarity agenda. Also, Credit Unions both lend and donate many $millions to Cooperative Development in the US, Canada and around the world. Some patient cooperative capital for this would be great. Director loans have kept it alive including sponsorship of the national Credit award for the best Credit Union collaboration with other Cooperative businesses.
The few remaining Directors and members agree Cuso-UK is a really good idea that needs some decent investment (for an on-line trading marketplace and some initial core cost investment) , and anything that could help us realise this would be very welcome.

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Graham Tue 19 Feb 2019

Hi @johnmerritt - I'm sorry to say that having just checked out the cuso-uk.coop website I still don't understand exactly what the organisation does. Can you explain, to a lay person? Ta.

SC

Simon Carter Tue 19 Feb 2019

I can only report my own experience. For whatever reason I decided I wanted my business to be a coop, which as Graham has explained puts me in a very small minority. You would think the sector would have been all over me like a rash, or an endangered species, which the figures would indicate I am, but to be honest it has felt more like I am trying to join some kind of secret society. These Loomio threads are dominated by folk who have been around the scene for a long time who obviously know each other well & enjoy chewing the cud. It's more reminiscent of a private member's club. I really do feel like I'm intruding.
I tried to get my business off the ground by getting a developer to join with a promise of return on investment. By the way, it really is 'my business'. It's really difficult for a loan entrepreneur, which describes the majority of startups, to choose the coop model. Sadly he was all promise & no delivery, costing me getting on for a year.
So now I have invested the relatively small sum of £5000 of my own money, which I will of course lose if unsuccessful, with a Wordpress web designer. I'm unconvinced Wordpress can provide me with what I need. Time will tell. The point is I'm someone with a startup who despite all the fine words & hand-wringing has felt pretty much invisible.
Just recently I declined Coop UK's invite to renew my membership, not because I don't need help, but because I considered it a waste of money. I paid previously for an upgraded membership & got one question answered badly. I really got the impression that as an organisation it's far more focused on fees to support it, than what it does with those fees.
To repeat, just my experience. The response, if any, may be that I am being unfair, but that won't help me or the sector, which is prone to hypersensitivity, but maybe does need a wake-up call.

JM

John Merritt Wed 20 Feb 2019

Hi Graham, that is an issue for a lot of people. (Did you look at the US NACUSO? and did that make sence?) I will try this: Cuso uk is a multi-stakeholder cooperative of Credit Unions, Credit Union (and Credit Union member) service providers and movement supporters, which facilitates trade (through an online market place) between Credit Union and their product and service providers providing benefits to all. eg Accountancy services, Banking platforms, CU training, investment services, I.T. Web services, ABCUL, Coop Energy, Coop Electrical, Coop Wealth and many others have been asked to join
It is not a Trade Body for Credit Unions and we have invited UK Credit Union trade bodies to join as supporter or trading members.
The advantage to all involved is time saving in research time, market awareness, access to CU membership and a stronger sector. For Credit Unions, bulk buying discounts, improved services to members and a cooperative business approach moves away from the Poor Mans bank image it has in the UK.
The business is expected to get income from membership fees, marketing fee charges and event income. We have also been promoting business lending to Coop and Social Enterprises, Credit Union Development worker networks and we are currently trying to get support for the growth of credit union member service businesses (in the US these are owned by Credit Unions and are a major part of their business model as the NACUSO video explains).
This is an ambitious Cooperative and not easy for many in the Brtian to understand, because of our poor history with Cooeprative Banking and Credit unions. Currently we are trying to engage with a sector which accounts for perhaps £5 billion in the UK economy. But it could and should be huge. 25% of the international cooperative movement members are Credit Union members (over 250,000,000) and the economic value of this sector (with Coop Banking) is a higher percentage. Hope this gives a better insight.
Perhaps when I get the business model and market more clear it will spark the interest we think it deserves in the UK (and Europe).

JM

John Merritt Wed 20 Feb 2019

Hi Simon, thank you for this. It clarifies a thought I have not really formulated in thius way. How much does it cost to set up a good business? If you get business advice, accountancy advice, marketing advice, etc and the equipment and tech it is at least £10's of thousands. most start ups dont do this (which is one reason we have over 50% failure rate of small businesses). For coops, it is at least as much and probably more, because the training, advice and support is not to one person but to a group of people. I am a relative new comer - just under 10 years but it is worth the perseverance. Coops survive better and sadly for the worker, the additional support people get from Cooperators far outstrips the private sector business advice services (many of which get huge amounts of public money). I hope you will find an appropriate co-operator from the broad church of Cooperative development and perhaps they are here in one of these loomio threads

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Graham Wed 20 Feb 2019

Thanks @johnmerritt - that chimes with what I sort of gleaned from your website, less so from the US site but I guess they are much more preaching to the converted. If I might say so, I think your online pitch could benefit from a fresh eye, as I - looking at it admittedly with the eye of a CU noob, but also as someone with a pretty good understanding of the co-op sector - found it fairly confusing and thought that the benefits weren't sufficiently clear.

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Graham Wed 20 Feb 2019

I do think you make some valid points Simon. Part of my rationale for posting the numbers comparing start-up rates is to open up a debate about what I think may be an issue for the sector - lack of ambition. There's probably a neat psychological term for it, but I'm talking about that thing when you are the underdog, and rather than fighting to break out of that situation, you instead, perhaps unconsciously, reinforce it. Characterised by "it's better to be a big fish in a small pond than...".

Having said that, I do think it's perhaps telling, that after some considerable time during which you've been engaging with the co-operative community and spreading word of your proposals for just.coop, that you appear to be a co-op of one person. Where are the others? I know you've fallen out with your tech person, but that aside I would hope and expect that after a year or so of promoting your ideas at least on local level that you would have established a group of people able to cooperate to push the project forward and share that challenging early work. This, for me at least, is a critically important first step in getting any sort of collaborative project off the ground. Maybe you've achieved that and I'm simply uninformed, in which case more power to you. If not, then that's where I encourage you to invest your energy.

You say that you are spending your money on a Wordpress website and yet you aren' t sure if it's actually what you need. That sounds like a pretty expensive way to find out. Again, if you were not a "lone entrepreneur", but a member and co-leader of a group that shared the vision, you would be able to test, validate and refine your ideas before spending limited financial resources.
I've started a few co-ops in my time, not always successfully, and in every case it begins by 'finding the others'. If you know of any co-op development orgs or support groups in your locality, that might be a good place to begin.

SC

Simon Carter Thu 21 Feb 2019

Let's hope you are wrong John. I have £5000 & zero help from the coop sector, although Platform 6 shows promise.

SC

Simon Carter Thu 21 Feb 2019

We've established that the coop sector remains small, especially if we take out the retail element in the UK. Meanwhile, knowledge & awareness is significantly smaller. Starting a business is tough enough as it is, but you're telling me that if someone wants it to be a coop they must add in a whole added layer of finding others from day one. Is this perhaps why so few startups are coops?. I did as you have indicated & found two others in order to get Just Cooperate registered with the FCA as a worker coop, having paid all the fee for advice from Coop Futures in Gloucester myself, because I knew the other two did not share my willingness to accept risk. And now the other two have drifted off, one in Eastbourne, the other in Aylesbury & it is indeed just me. Is that a good reason to quit?. Can I not continue for the moment at least, effectively with a sole trader mentality?. Does that mentality by definition exclude a startup from the cooperative model?. By the way, I didn't fall out with the developer. It's simply that he works full time, has two young children & is a dedicated triathlete. He simply could not find the time, although clearly he also did not share my determination to make it happen.
The likelihood of three or more people coming together who share a passion for an idea is slim at best. There is a reason why so many coops are limited to vegan restaurants & book shops as those are communities where like-minded people will tend to congregate.
There is talk in this thread of tens, even hundreds of thousands to start a cooperative. I have £5000. The vast majority of startups have my kind of budget, & are nine times out of ten down to one person. Should we be excluded from the coop sector, or should we accept a whole bunch of additional hoops to jump through?. Surely cooperation is a mindset, whether you are one or one hundred & one?. I want to start, & then recruit. The prospective website is vital not least of all as a recruitment tool. Should I involve just anybody meantime before I can get going?. I'm prepared to risk 5K. Ultimately I feel I have no choice, other than to give up. I'm sure if I did Coop UK wouldn't notice.
I should say I have lots of support lined up, mostly as a consequence of my involvement with the local Labour/Coop Party & I can imagine one or two of them in time actually becoming employees of Just Cooperate, but for the moment it's my business, my vision. Is that so wrong?. In fact, more to the point isn't it the most likely scenario?.
Going back to your first point, & the lack of ambition within the sector, I might argue that my experience is telling. I would describe it as almost some kind of schizophrenia. Coops, much like the Cooperative Party which has the same problem, continue to swim in the capitalist pond. Only when both communicate an entirely different vision will they truly start to thrive. God knows people are ready for it. It's up to us to communicate that alternative vision. As such our ambition should be boundless.

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Graham Thu 21 Feb 2019

To be clear, I'm not saying that you have to find others from day one. What I am saying is that if you do have a group of people that are committed to the project, it quickly becomes a whole lot easier. It's all about sharing the risk, and the reward. Of course you can build a business as a lone entrepreneur, but it will be harder and you'll be shouldering all of the risk. And when you bring other people into the business at some later stage, you'll be the de facto 'senior partner' and you'll have to address that. I'm struggling to see the benefit of the lone wolf model.
If you have a great idea for your business then you should be able to find others that share that vision and are willing to help make it real. If you can't then I'd worry that maybe you have a product that has no customers. For me (and this is all just my opinion) it's a key part of the validation of the business model.
In terms of financing, I've never had the luxury of having even 5 grand in my pocket to help get something started. The example I was putting forward was purely to illustrate that if we are serious about growing the co-operative economy, we need to be able to fund start-ups to that have need for large chunks of risk money. The overwhelming majority of startups are one-person operations, and as we know from the data, lots and lots and lots of these fail early on. If you have a group of people involved your chance of getting through the early years is drastically improved.
There's nothing at all wrong with your approach, and I wish you every success. All I'm saying is that having others involved early is really helpful and will improve your survivability.
As a niche sector in a much larger capitalist economy, cooperatives need to be able to survive and thrive in that context. Many are content to do so, but equally many co-ops that I know of are in existence to change the world, to challenge the status quo and to be a part of a post-capitalist world.

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Simon Carter Fri 22 Feb 2019

I'm glad you have taken the time to reflect upon this Graham. not really surprising since you pondered the original question, 'why are there so few coop startups?'.

I can only return to my own experience. I decided as a 'one man band' that I wanted it to be a cooperative, & from that moment until now it's been a battle. Pretty much everyone outside of the cooperative sector advised against it. When I took some interest in what these folk had to offer https://www.startandgrowenterprise.uk/ I had to actually ring them up & ask them to add coop to the dropdown box, 'what is your business structure?'

Meanwhile, those within have to a degree at least been largely dismissive, as if it can't be done. It really doesn't matter whether I succeed or fail. I'm sure I'm far from unique. Put simply one man bands apparently don't start coops.

And yet as we have established the vast majority of startups are one man band businesses, with or without the expectation of recruiting, but there is absolutely no provision at that outset for all these businesses to think in medium to long term cooperative terms. As such they are lost to the sector from day one.

We hear about legacy businesses as a target for cooperative conversion, but how about all those business failures you refer to where both the employer & employees all pay the price. Very often a weird dynamic develops where those employees become friends, but ultimately they remain human capital to the owner, which creates a tension, & very often resentment. Then, of course, many employers have the experience of investing in staff, only for them to leave, taking their experience, & very often the businesses clients, & set up in competition. I have met numerous folk over the years who have started on their own, gone on to employ with all the associated headaches, only to ultimately go back to being a one-man band again, battered & bruised by the experience. These are all good reasons to start as one person, with the intention of building a cooperative.

Equally, I have known business people for whom their ruination was choosing the wrong business partner as some kind of comfort blanket. Going into business is not something to be rushed in to, going into business with someone else especially so.

My business needs a pilot scheme. I can do that on my own which is the plan. I have lots of support for that, but that does not mean any of those people need to be members of the coop from the beginning, but nonetheless, the assumption is one person cannot start a cooperative, both from outside the sector & from within. If that alone were to change, if the challenges of employing were explained as part of startup advice to those who have every intention of expanding & that starting as a coop is a very good option, then maybe there would be a lot more of them around.

SF

Shaun Fensom Fri 22 Feb 2019

Two related issues I think here:

a) The problems of shoe-horning a conventional capital asset-focused investment/ROI model inherited from the Victorians, into modern, ‘agile’ (sorry), ideas-focused business models. In other words the problem of VC meets digital, incompatibility of collaboration and IP protection etc.

b) The old nut about risk capital vs limited co-operative returns.

I would have thought the answer lies in some combination of:

Recognising that the risk taken now is often just time and finding a way to reward it
Using the cooperative model to pool and hence mitigate risk

MS(

I really do recommend reading at least page 26 onwards of the NESTA report - interesting use of withdrawable shares within a co-operative society where withdrawal of investor members shares is funded by the reinvested divi of the growing no. of transactional members.

The report does focus on replacing the lots of money needed up front replacement for a VC model - the focus of this thread. I would also recommend a twin-track approach - looking at growing from a Minimum Viable Product (MVP) that uses existing low-cost platform tools which can be further developed using the reinvested profits - the permaculture principle that truly sustainable solutions are often small and slow.

MS(

I'm interested to know what the co-op sector could/should have done differently in the case of Just Cooperate?

SW(

The report talks about this ‘mutual shares’ model being asset locked. Does that mean they’re thinking of using a bencom rather than coop model? Suspect this has been blurred pending outcome of lobbying for statutory asset lock option in coops.

SC

Simon Carter Mon 25 Feb 2019

That's simple Mark as from my own experience there is a glaring weakness, Put me to one side for a moment. Suppose neither me or my business has anything to offer the sector. It's my circumstances that are of relevance. There is no 'coop culture' in my part of the world, no vibrancy, no momentum, which has left me feeling very isolated. I have tried very hard to engage over a protracted period of time, & I haven't given up, far from it. Meanwhile, my business concept has continued to evolve, & I am more committed to the coop model than ever. I had to find two semi-committed individuals to get my business registered & have met every single business expense myself thus far, including paying for my first year accounts recently, even though Just Cooperate has yet to trade. Despite all of that, if I threw in the towel, drifted off, or turned my business into a for-profit venture or CIC, would anyone within the coop world notice?. To repeat, this is not about me. The point is when the sector professes to want to grow so much, can it afford to be such a leaky bucket?. I cannot believe mine is an isolated experience.
That's the problem as I see it. My solution would be a simple pro-active mentoring structure. Every business startup benefits from a sounding board, & everybody knows someone with some level of business experience, but mention of coops draws blank looks from even the most seasoned business person. If they have anything to say it will most likely be, don't do it. How many I wonder are being talked out of structuring their startup as a coop right now?.
A pro-active mentoring element would not need to be too arduous or too demanding but from my own experience the opportunity for a one on one chat just once a month say for an hour would have been invaluable. I've been self-employed for decades, but I only became aware of the coop sector a few years ago. It still remains a strange & impenetrable world on occasion. This mentoring service should be structured, with a presumtion that the receiver should promise to join the mentoring team when the time is right & they can share how their business became a success.
The assumption seems to be that coops are only initiated when three or more people come together who share an idea, but how often is that reflected in the wider startup world?. It's nearly always one person, which arguably eliminates nine out of ten startups from the coop option from the outset at the very least.
At the end of the day, people start & grow businesses. There is a whole 'culture' around that, which is, people start businesses to make money, & that is how success is measured. That involves a million conversations every day about what it is to be in business. The primary conclusion is that competition defines business, which by definition drowns out the cooperative option, & yet it has so much to offer. If we want its voice to be heard then people who 'discover it', who are then lost to the sector, should perhaps be it's biggest concern.

MS(

It has to be a co-op society model (as used by case study eccoo) as it relies on payment of dividend on trade, not possible with a Ben. Com. So I think you are right @sionwhellens that it assumes the extension of a statutory asset lock to co-op societies.

BC

bob cannell Mon 25 Feb 2019

Start small and grow. Organic growth or fractal growth (the future giant is merely a multiplication of the original seedling) is a proven successful cooperative strategy.

Whether it is in one enterprise like Suma (which is essentially a bigger and more varied version of the back room 1977 opoeration in Leeds) or autonomous coops voluntarily working together in vast and powerful consortia, like the Italian social coops or Mondragon's network of autonomous coops which we see, wrongly, as one huge group. They see it as a voluntary association of autonomous coops which sometimes decide to leave.

This voluntary association of coops is also analogous (similar internal relationships between entities) with the basic ICA definition of a coop as a voluntary association of persons. It's fractal.

This is an option available to coops but not to capital owned businesses who must ensure a hierarchical ownership relationship with their subsidiaries to extract surplus value from them.

These huge combines become impossible to manage and are forever collapsing. The error of gigantism. Consumer coops made this error. For some reason we in the UK are especially vulnerable to it.

Coops can and do combine as autonomous entities in voluntary networks which are gigantic. Indeed CECOP/CICOPA have long cited horizontal integration as a key success factor for national cooperative development strategy.

CoTech is an example of it. The 1970s wholefood coops (still the most successful sector of the 'new' coops) didnt and their growth has undoubtedly been hindered while their vulnerability as small and medium businesses is as precarious now as it was decades ago.

If this cooperative networking is such a key element of success for coop growth, how can we use it in platform coops and other internet based coops? Instead of trying make the capitalist way work for us, which is like using the wrong sort of screwdriver on a screw. Silly.

Answers on a postcard please.

ciao

Bob

PC

Pat Conaty Mon 25 Feb 2019

Simon I think you raise such a key point here. You are not alone in feeling this way I am sure. The recent work and reports Alex Bird, Cilla Ross and Philip Ross and I have done on co-op and trade union solutions for the self-employed highlights that both the co-op movement and the trade union movement have not got to grips with the diverse needs of self-employed workers. The facts though are that since 2010 as we show, two thirds of all new work is being created by freelancers of one sort or another and in a plethora of trades. Smart in Belgium is now a co-op for these workers and has 85,000 freelancers it is supporting from Deliveroo and Uber drivers to film makers and tech workers. Mondragon co-ops got going in the 1950s by bringing together the self-employed and helping them form worker co-ops. Smart is meeting the needs of the self-employed and could support and spin out worker co-ops. This is a generative possibility in my view. Union Co-ops in the USA are joining up local trade union branches to support worker and multi-stakeholder development in this way. You attended the Manchester launch of the Working Together report last March and in recent months we have attracted 8 trade unions and other co-op organisations to work on this. We are planning with John Atherton and Sion on this Loomio list workshops on all this at the Co-op Congress and CECOP conference in June in Manchester.

G

Graham Mon 25 Feb 2019

Is all of this work with TU's happening behind closed doors? Whilst I accept there may be sensitivities it would be great to be able to understand more about what's happening, and maybe even contribute?

Also, is there scope to get you to talk about this at the Ways Forward conference on April 5 in Manchester?

PC

Pat Conaty Mon 25 Feb 2019

Work is via an initial steering group that was catered by the two page Union Co-ops UK concept paper. Bob Cannell is on the steering group and this group has now met twice. The focus of the group is to plan three workshop or slightly longer events this year to generate TU and co-op movement dialogue and joint working. The June events I mentioned at Co-op Congress are the first two we are seeking to run. Then we hope one at the Miners Gala in Durham in July and a longer event at the Co-op College centenary conference in late November in Manchester.

PC

Pat Conaty Mon 25 Feb 2019

A quick PS, Graham. If you and CBC wanted a session on Union Co-ops at the Ways Forward conference, I am coming so happy to discuss this. I attach for others the Union Coops concept paper that has attracted the TU interest and engagement with this practical idea.

AC

Austen Cordasco Mon 25 Feb 2019

I love the idea of co-ops having a fractal structure, that really resonates with me. It's also compatible with sociocracy - circles made of circles that are made of circles... I wish I'd thought of that.

BC

bob cannell Mon 25 Feb 2019

i didnt think of it (fractal coop development) either Austen. i think it was the italians . its also a theme in VSM. and in mondragon and radical routes style blueprinting of new coops. its one of those things that make sense from a cooperative viewpoint.but is nonsense from an extractive capitalist one.

SW(

I think the Friday afternoon CECOP GA session in Manchester is where some of this will be discussed. For the open Saturday morning session, which will effectively be part of the programming for Congress, we are thinking of 'Cooperative organising in a time of social and political crisis' as an overarching theme. What we could fit under that umbrella is almost endless, but we need to make it relevant and intelligible for the sector across countries.

Re freelance/independent contractor coops, I sense that with the ever-tightening tax policy of HMRC it will make less and less sense to form them as business consortia in the future; it will conversely make more sense for them to provide employment status and employee rights. Back to worker coops.

SF

Shaun Fensom Mon 25 Feb 2019

In the case of CBN (and some other freelance coops I suspect), it was never about HMRC and tax but about the dynamic nature of the work, moving between different projects and clients, working together in different groups, sometimes through the coop, sometimes not.

LS

Leo Sammallahti Mon 25 Feb 2019

Interesting discussion, few quite random thoughts about this:

Sometimes investment where the investors make a profit is seen as ethically questionable, and for a good reason. Cooperatives are and should be alternatives and challengers to investor owned firms. However, its obvious that if we can't give investors a return, we receive less investment. Here's two basic approaches on how to get outside investment to risky cooperative start ups:

Have investment from big traditional cooperatives with massive financial resources

I fully agree and support this, but can also understand why big traditional coops have been reluctant to do so. A recent report on governance of big cooperatives gave two recommendations based on research: not to pursue projects that don't benefit the members in a very direct way, and be careful when expanding abroad. The most revolutionary aspect of platform cooperatives in my opinion are coops like Resonate and Weco, that allow anyone in the world to join them. It's however understandable that a cooperative like Nationwide or Co-operative Group don't want to put their members money into a high risk investment to a music streaming app or a discussion board. Rather, I would think funding from big traditional cooperatives could happen in two ways:
* Developing platform cooperatives that serve a specific big traditional coops existing membership (a food delivery coop for the Co-operative Group owned by the couriers or a an electric car sharing app to save parking space for those taking a Nationwide mortgage for their houses)
* Having big and old coops contract their IT work to tech coops, that use their surpluses to invest in high risk platform coops (OP Financial Group, a coop that is the biggest bank in Finland spends 400 million euros a year to digital development)

Having traditional cooperatives and other big actors donate or make low return investments into high risk platform cooperatives is important and something I fully support, but unfortunately don't think will be able to attract enough investment to fully harness the potential of innovative platform cooperativism. Perhaps it will lead into formation of critical mass of large enough number of large enough platform cooperatives that can then support other high risk platform cooperatives from their surpluses.

Have a large pool of people make small investments

The approach from Coop Exchange is quite different and complimentary. Our idea is to enable as many people as possible to invest in cooperatives as easily as possible, with few clicks in their smartphones. Coop Exchange is a global stock exchange owned as a cooperative by the investors, enabling coops to enlist there by issuing investor shares that give a dividend of the profits but no voting rights . The question "Why isn’t there more investment in high risk platform cooperatives?" is very closely associated with the question "If I have 20£ and want to invest in high risk platform cooperatives, how easy is it for me to do so?". The answer currently is: not very easy. I think equity crowdfunding fits the ethos of cooperativism well, especially when it happens through a platform cooperative like Coop Exchange.



Investor shares can also make cooperatives more appealing model to many people that are launching a start up, as it enables the founders who put a lot of initial effort to get a larger share of the profits (“sweat equity”) while still making sure the members have full democratic ownership of the coop. It also makes getting investment easier. 

This approach alone isn’t enough either. We need both a large number of small investors and large investments from big cooperatives, alongside awareness of platform cooperatives so that theres simply more platform cooperatives to invest in.

Im using the term platform cooperative and high risk cooperative somewhat synonymously, my apologies.

G

Graham Mon 25 Feb 2019

I think @bobcan is in part pointing in the right direction by talking about associations/federations/alliances. This chimes with the work that @shaunfensom and I did a decade or more ago when looking at this very same issue, albeit from a slightly different perspective (a bit more on that here). If we assume that the only way for co-ops to happen is to "start small and grow slowly" I would argue that this precludes co-ops from a lot of market opportunities where capturing market share early on is critical to success, and relegates co-ops to niche and me-too market positions.

The argument that Shaun and I put forward is essentially that digital networks enable us to operate in a post-Coasian approach. Teams can quickly coalesce around projects and opportunities, deliver a programme of work and move on, dispersing to re-form, perhaps in a different configuration, around other opportunities. We no longer need the overhead and the admin burden of setting up a new legal entity in order to pursue a new business opportunity. Time was that this stuff was crucial, to keep transaction costs down and protect ideas. But surely, as experienced cooperators, practised in the arts of collaborative working, skilled in the use of cutting edge collaborative tech, and comfortable working in an open source commons-oriented paradigm, we can now move beyond these 19th century constraints to enable us to innovate and build new businesses at ultra low cost?

Our concept of the innovation cooperative, of a multiplex dynamic co-operative framework designed to provide a fluid trusted space within which new ideas could be floated, tested, refined, funded and brought to market by a collective including all of the key skills needed, spreading risk and reward is one that I think remains compelling a decade on. This is the sort of approach that I'm continuing to advocate and build on through co-ops like The Digital Life Collective and Platform 6. Enspiral may be another example. Creating a suitably broad and enabling framework/umbrella wherein already established businesses, co-op and not, could find a home, some shared values, a community of interest and/or practice, and space to collaborate on innovative stuff and bring new ideas to market quickly and cheaply, lowering the risk and the price tag for early stage investors, improving the odds, and optimising for success.

SC

Simon Carter Mon 25 Feb 2019

I have to be honest Pat, I'm disappointed in so much research & proposal work that is being done as it continues to be stuck in the battle for capital to treat labour more fairly. Capital's very nature is exploitative & that will never change, hence the battle metaphor. Everybody continues to search for re-invented ways to extract their piece of the pie, & despite protestations to the contrary, have a vested interest in defending the pie, & wanting it to grow. Everyone has to work for a living & everyone must pay their way. Most of us find it too intoxicating not to crave more capital, a bigger house, pension, car, funded trips to conference. Nothing seems to fundamentally challenge that presumption or to fundamentally challenge the underlying rules of the game.
The 20th Century was a battle between markets & state controlled capitalism. Behind all the confrontational rhetoric, the capitalists understood this. For them it was win win. They invested either way & made loans at interest, but nothing challenged the fundemental dominance of capital.
My interest is rooted in something different, which is to be found in a fusion of the coop & commons movements & is ultimately intended to hollow out capitalism with a post-capitalist vision. The question is what does a post-capitalist business look like, & how does it compete in a capitalist environment?. Indeed is business & post-capitalist in the same sentence an oxymoron, regardless of whether it is corporate, freelance, or anything in between, including nearly all coops?. I wonder does such a question enter into your work?. The truth is if we were to find answers, far from securing fair & decent work for millions of people, it would in fact put millions out of work, & that would be a good thing if we all increasingly could rely upon commons, cooperation & sharing to meet needs & not markets, competition & self-centred extraction.

SW(

Sure, but many if the groups I’ve worked with recently have basically been looking to retain the freelance lifestyle while actually getting more (or all) their work through the coop.

SF

Shaun Fensom Tue 26 Feb 2019

Ah yes, and the fabulous lifestyle! True that I get most of my work through CBN at the moment but that can change quickly.

PC

Pat Conaty Tue 26 Feb 2019

A couple of things to say Simon. You are right about the need for Co-op and Commons solutions. I have been working with the P2P Foundation since 2013 as then they were unaware of the history of the Co-op Commonwealth movements that crop up whenever we get a period of industrial capitalism failing. This was the case before World War I when workplace democracy and co-ops often aligned with trade unions took off. Clause 4 in the Labour constitution was inserted to recognise all this but also that common ownership could be a diverse range of public and co-op forms of ownership. Commons activists fought for the NHS. Then all this faded post war but was revived with the Industrial democracy movements erupting in the mid 1970s but then rolled back when the GLC, other county councils and local authorities were repressed in the second half of the 1980s. But the growing interest over the past four years in Co-ops and trade unions coming together gives us another chance. The work also on Mutual credit happening in Birmingham and in the Loomio group the Open Co-op and Low Impact.org have kicked off is working on co-op money solutions. All this is hopeful and practical and can be done. The challenge is to horizontally integrate these economic democracy tools for conviviality and for Ways Forward. Smart as a co-op for freelancers uses tech creatively but also has introduced the French co-op movement of Business and Employment Co-ops like CoopaName to extend to freelance workers via the co-op a range of back office services for tax, invoicing, debt collection, access to equipment, workspace, prepayment of invoices (within seven days), collective advocacy and most importantly worker rights and social rights. Here the Musicians Union and Musicians Co-ops as is the case for Equity and the Actor Co-ops are concerned about HMRC and the negative view of umbrella company solutions. But a Union Co-op movement could campaign to make Smart legal here. Why the hell not if it is working in other EU countries?

TC

Tim Coomer Tue 26 Feb 2019

Hi All
I have been on leave this past week so come in late to the conversation.

Getting back to the original start to the thread 'High Risk Venture Investment in Co-operative Start-ups'. I do think feel there is a real need but the gap is for Worker Co-ops; especially in tech but also a range of sectors. We have seen increased enquirers for Vegan cafes for example and Health and Social care. Often they are just too high risk for us and our funds.
CCF do have a range of fund options with different appetites to risk but still can struggle to lend to some start-up groups. We have previously been involved in projects such as the Village Core (Community Shop fund) and Just Growth (supporting alternative Food & Farming initiatives) however these have been linked to community shares alongside 'de-risking' grants as they have fallen into the 'Community Business' definition/ category. In fact there are a range of finance packages for Community Businesses across many sectors and social enterprise; as already mentioned the CAF Veturesome Pre Development Housing Fund and more recent fund launched in Wales by WCVA the Community Asset Development Fund but there are also sector specific funds such as More than a Pub we are involved with and other CDFI lenders who have risk funds supported by grants through Big Society Capital et al for Charities and Community Interest Companies. But all these are for asset locked organisations with limitations on distribution of surplus and specific charitable objectives in many cases. Worker Co-ops have been left out in the cold.

This issue came up at the recent Future Co-ops Conference and I in actual fact pledged to explore options. I see the need for either a small loan fund that is fully underwritten for losses or as discussed some kind of high risk patient debt or equity product - it needs to be simple though and I'm sure CCF could manage and deliver something but its finding the capital. I think SolidFund has some role in this also as I see Solidfund as providing the at risk pre development/ seed capital which would be followed by the new product. This could be at a Sub £25k level and could help encourage more young co-op start-ups. The key is attracting them to the co-op model before they go down the CiC route but this means a seismic change in the way Co-ops are perceived and understood and the business support network as a whole has some idea what a co-op is. That's the big challenge but a risk fund could be a useful hook.

I think there could also be the demand for rapid growth capital but I feel this would need to be developed by the particular sector group e.g. tech/ platform.

Where next? CCF happy to be in the conversation and designing an appropriate fund but where the capital could come from is the challenge.

TC

Tim Coomer Tue 26 Feb 2019

I just saw today an article from Civil Society that there are plans to create a new Tech Equity Venture Fund with support from DCMS. 'The Social Tech Trust plans to launch a new £30m fund to address challenges around the sector's access to technology, which were outlined in the Civil Society Strategy last year.' I can't seem to post the link but should be at www.civilsociety.co.uk

PC

Pat Conaty Tue 26 Feb 2019

Great points Tim and superb to get the on the ground view from CCF. Thanks so much. As I mentioned earlier, both CDFIs and some social and co-op banks have developed affiliate community development venture capital or social venture capital funds. As you say, commonly this overlooks and excludes worker co-ops. The Welsh Co-op and Mutuals Commission report called for a dedicated Co-operative Capital investment fund. Alex Bird, myself, the Wales Co-op Centre and others in the Peoples Bank for Wales action group are making headway on setting up a regional co-op banks for Wales and we now have banking from Welsh government. Co-op banks in Italy make equity loans that can be patient but risks are pooled via mutual guarantee societies. We need these here. Portugal established these by running a pilot with the risk underwritten for the pilot period. In this solution, enterprises need to subscribe to MGS shares. So similar to the Solid Fund but for mutual insurance that is pooled. This lowers the risk for co-op banks for smaller scale equity loans that are repaid slowly via worker co-op member payroll deductions.

E

Emma Thu 28 Feb 2019

Makes total sense from co-op perspective, with sociocracy as a useful operating model - option for fractal co-ops to fully incorporate or to continue working as an autonomous group with the larger co-op.

AC

Austen Cordasco Thu 28 Feb 2019

I recently picked up from somewhere the idea that 'regenerative' is the new 'sustainable'. Fractal structures are totally compatible with that.

BC

bob cannell Thu 28 Feb 2019

love it 'regenerative is the new sustainable' of course.we used to describe this as self reproducing, eg if capitalism is self reproducing how can we make cooperativism be also.

MS(

In this case regenerative (rather than sustainable) generally
means repairing the damage done to people and planet by most of
the human enterprise to date.

Based on an interesting multiplicity of capitals and one of the
key conclusions is that no enterprise can be in and of itself
regenerative, but it can be part of an economy that is.

Check out http://www.regenterprise.com/ - book is worth a read.
Lots of interest in permaculture circles.

AC

Austen Cordasco Thu 28 Feb 2019

Brilliant - thanks, Mark

AL

Alex Lawrie Sun 3 Mar 2019

Some excellent stuff on this thread; however, I am surprised that no one has mentioned the mechanism that already exists and is shockingly underused. Ten, twelve years ago it was noted that the FCA had no problem with worker co-ops issuing shares with capped voting rights to non-user investor members; and Seed Enterprise Investment Scheme tax relief has for many years rewarded investments like this with a 50% tax relief.
Couple this with the increasingly well developed platforms like Ethex and Crowfunder and we are in business. The only fly in the ointment is that ideally there would be regional SEIS funds helping investors to spread their risk and reducing the cost of each investment promotion - I think credit unions should take on this role, but I would have to acknowledge it would be a big step for them. Alternatively I'd like to see Platform 6 pick this up and run with it on a UK wide scale, but there would be some regulatory issues for them unless they became a credit union!

AL

Alex Lawrie Sun 3 Mar 2019

A separate but related issue is whether early stage investors should get some kind of advantage over later investors who are taking less risk, analogous to the way that venture capitalists sell their shares with capital gains. This could be achieved by making the first SEIS share 'special purpose' withdrawable shares that have a interest rate with minimum level, and a guaranteed multipler (say 4 x) of the highest interest rate any other shares might have in the future. So the workers co-op can issue £5M EIS shares at 5% later on when its business model is proven, but if it does so it must give the holders of the £150k of SEIS shares 20% (necessary to attract and retain...).

CMI

Not sure how relevant this is for really big investments, but definitely for riskier investments than CDFIs are able to make:
Info on Co-op Investment Clubs in the States - to enable individuals to club together to invest in co-ops, including self-teaching loan assessment skills:
Minnesota: http://thecp.coop/

Boston: https://community-wealth.org/content/boston-cooperative-investment-club and https://www.facebook.com/boston.cooperative.investment.club
and of course Nathan Schneider's trying to get it going in Colorado:
https://coloradocoops.info/events/co-co-op-investment-club-intro-meeting/

NB(

Nathan Brown (Co-op Culture) Mon 4 Mar 2019

I read the NESTA report earlier and I don't think I saw the word statutory with asset lock (sorry If I'm wrong!). Common ownership is a Members asset lock . It just lacks the protection of statute to prevent members removing it. A common ownership Co-op Society as is would fit the bill. I personally don't believe statutory protection is as strong as a strong membership/community. A statutory asset lock can be gamed and cheated if the membership are not sufficiently engaged/active/empowered to resist it.

BC

bob cannell Mon 4 Mar 2019

Quite right, statutory asset locks are gamed in CICs and social enterprises and, to some extent, consumer societies by excessive top level salaries and a range of payments to directors

BC

bob cannell Mon 4 Mar 2019

statutory asset locks dont work when the coop is driven into insolvency. when private interests can gain member and publicly funded capital assets at a knockdown price eg Hastings Pier and Unity Works. there is nothing to stop senior executives and directors benefiting from assets purchase from administrators.

until member and public capital is protected (eg grants to charities usually stipulate that the funder has a right to capital assets if the charity ceases) coops will always be vulnerable.

coop members are treated the same as investors. it is acceptable for investors to lose everything because they invest at risk to get a big profit. it should not be acceptable for members to lose all when they have accepted an inflation level interest if anything.

i wrote a stir article on this. there is some interest in campaigning for a change in insolvency law.

R(

Rory (FSA) Tue 5 Mar 2019

Https://coop.exchange - the support system is coming, and it will be a global FairShares Company owned by the cooperatives that join the exchange. All investment shares held by non-participating members will be non-voting. We presented this to the ICA Think Tank last November and will present to the United Nations in May/June closer to the launch.

G

Graham Tue 5 Mar 2019

I'd say "a support system may be coming". Looking forward to seeing any detail about this. Loving Steve Gill's energy and ambition, but right now this is vapourware.

AW

A Waterhouse Wed 6 Mar 2019

Can IT mediated Global networks be a authenic cooperative community? Traditionally coops are associated with federal relationships, subsidiarty, more local, avoiding huge scale corporate structures. Are there pitfalls? The doing , if ever realised at any scale or and destiny will show up the pros and cons. Is there a degree of IT utopianism blinding the enthusiasts.?

G

Graham Wed 6 Mar 2019

I think that global digital networks clearly have an important role to play. They can be really useful in many ways. However if we go down the road of large scale global cooperatives without strong local 'nodes' or appropriate federation protocols, I fear that we'll get nowhere fast. History tells us that there is an inverse relationship between scale and what you've called "authentic" cooperation. Big co-ops are prone to management capture and loss of authentic cooperative identity. The big failure of the consumer co-op movement in the last century was the move to consolidation in the face of adverse market conditions. A resilient and complex network of human scale nodes connected via a cooperative mycelium moving resources at the speed of light to wherever they are needed creates a powerful engine for change that can't easily be co-opted or broken by malign interests.

AW

A Waterhouse Wed 6 Mar 2019

A good answer, thanks. I worry about SF and P6 going global as opposed to building up inter local/ regional and international federation mediated through secondary shared coop instruments. I suppose these might be the nodes that
you mention.
If these relationships can be set up there will need to be a period of testing and tweaking.

Instead of going Global SF and P6 can be international. Nest people from outside the UK but encourage them to build a viable group within their country or region and when doing so and meeting the norms of coops then give sone
seed funding. The link between these nodes could be mediated through a shared secondary solidarity fund, which is fed by the commitment to hand over lets us say 5% of the take
The point of worry, can a proper cooperative / democratic relationship be done at a distance tending to being abstract.

Get Outlook for iOS ( https://aka.ms/o0ukef )

SG

Steve Gill Thu 7 Mar 2019

Its vapourware because we're basically building a brand new co-operative London Stock Exchange, as a fintech app That means there are £££ millions of investment required to pass all the regulatory requirements, so I have always said this is for the long term, to ensure eventually the majority of new enterprises are co-ops, if that means it takes a few years to get live, but once live its right - so be it. Because of this I'm more reserved than Rory (hence not posting about it solving problems - yet) but I'm absolutely dedicated to it, and there are various things happening in the background I'm not allowed to even talk about yet (but are very positive). I've personally spent over £1 million on this so far, and a good example of the problem is the steps I am going through before being able to allow others to put in money to help. I lost 6 months last year because the regulatory authority in Malta initially refused me the name Coop Exchange as a FairShares limited company. tl/dr; we choose the difficult path deliberately, for the long term advantages to the movement.

R(

Rory (FSA) Thu 7 Mar 2019

The app is built - seen it working - the reason it is not available is for the regulatory issues that Steve outlines. Usually, the problem is the other way around - coop exists, but no usable product created by it. I’m sympathetic to the regulatory issues described as I’ve been through them myself getting regulatory acceptance for FairShares in the UK (which took 9 months) and have published rssearch on others’ struggles to adapt to regulatory differences in the US (and it was the same for Resonate in Ireland). All this reinforces my understanding of the poor regulatory support (yet growing enthusiasm) for multistakeholder cooperatives. But, we got there and Steve will too. We are in it for the long haul.

The enthusiasm on the ground from dozens (nay, hundreds) of both new and existing ventures shows this is the next juggernaut whose time will come (hopefully in my lifetime). Once SEi’s roadshow starts, we’ll be looking at thousands not hundreds.

R(

Rory (FSA) Thu 7 Mar 2019

Yes - good answer. My view is that there will language communities that adopt particular coops, not necessarily regional communities. The digital platform medium does not stop at physical boundaries (but other cultural/social ones). For example, Uber is not big everywhere. In southern Europe MyTaxi is much bigger than Uber.

Within a language community, a common understand of an issue and course of action can be effectively pursued if it can be translated into a digital platform that facilitates that course of action. The success come from the common cause and software aligning (Loomio is a great example)

G

Graham Thu 7 Mar 2019

I assumed as much @stevegill - please don't consider my use of the term vapourware as derogatory. Simply making the point that right now any detail about what you're up to is rather thin on the ground. Very much looking forward to learning more as and when.

E

Emma Fri 8 Mar 2019

This sounds amazing! We are using Ethex for our pioneer offer but would this app run community share offers once it's launched?

AW

Alex Worrad-Andrews Sat 9 Mar 2019

This is a really interesting contribution. Thank you.

AW

Alex Worrad-Andrews Sat 9 Mar 2019

Your point about scale is well met. Want to reflect how core your point is about consolidation under hostile market conditions as well. In these situations, coops appear to cleave to the radical critique levelled against them, which is that, after all is said and done, the market dictates their ultimate shape. Under stress, they default to its "best practice" and that is the best practices are those of any corporation coping with the same circumstances.

However, might there be counter-veiling strategies available insomuch as cooperatives are not formally in competition with one another that can plan around this? For example, how about the pooling of resources between coops - in slower times, coops employ one another, or better draw upon a solidarity fund shared between coops to keep them afloat. Rather than them consolidate in a way that dilutes their values?

After all the whole purpose of cooperatives from their initialisation was mutual aid to in part to prevent against the turmoil of market conditions. How might we remember this with a little planning ahead for when it gets rough?

AW

Alex Worrad-Andrews Sat 9 Mar 2019

PS @graham2 is there a literature on the phenomena you highlight. Might be interesting to read.

MS(

@leosammallahti has written an article on the NESTA/Co-operatives UK report on capital for platform co-ops On Capital Conundrum And Preston Model For Platform Cooperatives

JR

Jeff Regino Tue 21 May 2019

"Is there a gap in the market. Is the paucity of new co-op startups in part as a result of the lack of early stage risk capital?" @graham2 There is definitely a huge gap in the market, more so for coops and related for-purpose structures (social enterprise, etc.).

Based on my observation and experience so far, paucity is due to:
1. Lack of widespread awareness and formal education about the cooperative structure. Imagine a few drops or rain of coops in an ocean of capitalism/typical structures -- I think this isn't an exaggeration. Like Simon, I became aware of for-purpose structures like co-ops only recently.
2. Perceived (although quite accurate) low/no returns from coops and similar structures vs "unicorns"/traditional companies
3. Ownership structure of coops et. al. are a turn-off for capitalist investors, hence they prefer to invest elsewhere and support traditional companies
4. Scalability. Generally, most coops are localized or don't scale/scale well. Big money is attracted to companies that scale and scale fast (investors want big and/or fast returns on their investment)
5. Lack of favorable corporate/coop laws in countries. Current laws are outdated, not so supportive, or non-existent. In the Philippines, there's a moratorium on the creation of worker coops.
6. Lack of responsive government regulations and policies

Funding is definitely a huge obstacle to coop development, or for any for-purpose ventures. What they say is true: fundraising can be a full-time job. I'm so frustrated and disappointed that I've planned to set up a for-purpose venture fund (like Purpose Ventures or Earnest Capital) once PlatformX becomes stable or sustainable.

I think, even if we set up ten Platform 6s and 10 Coop Exchanges, it still won't be enough. And not fast enough (meanwhile, new venture capital funds are formed every month/year). That's how large the demand is. If we don't support this demand now (and massively ramp up coop awareness), coop development would remain low for at least another decade.