High Risk Venture Investment in Co-operative Start-ups
Graham
Public
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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?
Mark Simmonds (Co-op Culture) Mon 25 Feb 2019 10:24AM
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.
bob cannell Mon 25 Feb 2019 10:47AM
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
Austen Cordasco Mon 25 Feb 2019 12:10PM
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.
bob cannell Mon 25 Feb 2019 2:31PM
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.
Emma Thu 28 Feb 2019 8:35AM
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.
Austen Cordasco Thu 28 Feb 2019 10:25AM
I recently picked up from somewhere the idea that 'regenerative' is the new 'sustainable'. Fractal structures are totally compatible with that.
bob cannell Thu 28 Feb 2019 12:34PM
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.
Mark Simmonds (Co-op Culture) Thu 28 Feb 2019 5:51PM
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.
Austen Cordasco Thu 28 Feb 2019 6:17PM
Brilliant - thanks, Mark
Sion Whellens (Principle Six/Calverts) · Mon 25 Feb 2019 10:01AM
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.