From ff8da1e92e76b3e870e580db88722b7ca7c496ed Mon Sep 17 00:00:00 2001 From: Nathan Schneider Date: Mon, 16 Sep 2019 19:54:58 +0000 Subject: [PATCH] Update _posts/2019-09-16-exit-to-community.md, _posts/2019-09-05-colorado-sun-public-benefit-evaluation.md files --- ...colorado-sun-public-benefit-evaluation.md} | 0 _posts/2019-09-16-exit-to-community.md | 105 ++++++++++++++++++ 2 files changed, 105 insertions(+) rename _posts/{2019-09-05-Colorado-Sun-public-benefit-evaluation.md => 2019-09-05-colorado-sun-public-benefit-evaluation.md} (100%) create mode 100644 _posts/2019-09-16-exit-to-community.md diff --git a/_posts/2019-09-05-Colorado-Sun-public-benefit-evaluation.md b/_posts/2019-09-05-colorado-sun-public-benefit-evaluation.md similarity index 100% rename from _posts/2019-09-05-Colorado-Sun-public-benefit-evaluation.md rename to _posts/2019-09-05-colorado-sun-public-benefit-evaluation.md diff --git a/_posts/2019-09-16-exit-to-community.md b/_posts/2019-09-16-exit-to-community.md new file mode 100644 index 0000000..317cd91 --- /dev/null +++ b/_posts/2019-09-16-exit-to-community.md @@ -0,0 +1,105 @@ +--- +layout: post +author: Nathan Schneider +title: "Startups Need a New Option: Exit to Community" +summary: "Why are we building disposable companies?" +tags: [internet-of-ownership] +--- + +Founders create startups for all sorts of reasons. Often, the motivation +is a mix between the founders' desires to do well for themselves and to +do something worthwhile for others. Dreams of greatness might figure in +there too. Rarely, however, is the overriding reason to build a company +people want to get rid of. But that is what the startup pipeline is +designed to produce. + +When a startup company takes early investment, typically the expectation +is that everyone is working toward one of two "exit" events: selling the +company to a bigger company or selling to retail investors in an initial +public offering. In either case, the startup is a hot potato. One group +of investors buys in order to sell to another group of investors who buy +in to sell to the fools down the road. There's something sort of +pyramid-scheme-ish about all this. The exit event, also, is often the +beginning of the end of any positive social vision that the company +might have held. + +What if startups had the option to mature in a way that gets them out of +the investors' hamster wheel? + +In the coming months, I will be exploring strategies and stories that +could help create a new option for startups: Exit to community. In E2C, +the company would transition from investor ownership to ownership by the +people who rely on it most. Those people might be users, workers, +customers, participant organizations, or a combination of such +stakeholder groups. The mechanism for co-ownership might be a +cooperative, a trust, or even crypto-tokens. The community might own the +whole company when the process is over, or just a substantial-enough +part of it to make a difference. + +When a startup exits to community, founders should see enough of a +reward that they feel their risk and hard work was worth it. Investors +should see a fair return for their risk. Most importantly, the key +stakeholders should know the company is worthy of their trust and +ongoing investment because they co-own it. For a social-media company, +this might mean that users have a meaningful say in how their private +data is or isn't used. For a gig platform, it might mean that the gig +workers co-determine their working conditions and what is done with the +profits they produce. These kinds of outcomes could help prevent the +massive accountability crises that now beset today's most successful +venture-backed startups. + +One way to begin exploring E2C could be by identifying a subset of +startups in venture capital portfolios that lie in "zombie" +territory---somewhere between failure and exit-ready. Investor owners +would benefit from having a new way of liquidating investments that +would otherwise lie dormant. In some cases, the community might be in a +position to buy the company with cash on hand---especially if it came +back to them in later savings or profits. In other cases, E2C might be +financed externally on the expectation of future growth, as is generally +done for employee-ownership conversions using an Employee Stock +Ownership Plan. Startups might also plan ahead for E2C by identifying +particular guardrails that keep this option open as they negotiate their +early rounds of financing. As with the ESOP---and with [the venture +capital industry +itself](https://logicmag.io/scale/the-unicorn-hunters/)---a targeted +policy intervention may be necessary to make this kind of financing +attractive enough to be feasible. These possibilities and more are the +kinds of things I've been thinking about and would like to think about +with others. + +Why not, you might ask, just begin these startups under community +ownership? This is certainly an option, and it's one that I have +enthusiastically supported through the \#PlatformCoop community and +through co-founding the Start.coop accelerator. But getting going under +community ownership doesn't seem like the right approach in many cases. + +Ambitious startups are a risky endeavor, and it may not be fair to +distribute that risk with early-stage participants. Also, startups +usually need to make a few dramatic pivots early in their life, and +having a large community of co-owners would make those hard decisions +more difficult than if a small, high-trust group of founders is in +charge. Centralizing the risk and responsibility early on is a +reasonable strategy for startups. Later, once the company has found its +market and its footing, the transition to accountable community +ownership will better suit the nature of the business. With E2C, we get +the best of both worlds---the dynamic startup, then the accountable, +sustainable public asset. + +For me, this vision came together in conversations with social +enterprise lawyer [Jason Wiener](http://jrwiener.com/team/jason/) (who +has participated in some exits to community), along with sources of +inspiration that include [Zebras Unite](https://www.zebrasunite.com/), +[Louis +Kelso](https://osf.io/v7fe2/?view_only=2ffd750b4ba54001beb5a459d61faff0), +[platform cooperativism](https://platform.coop/), and the +[steward-ownership](http://steward-ownership.com/) network. Now it is +time to bring more people into the conversation. + +Our team at the [Media Enterprise Design +Lab](http://cmci.colorado.edu/medlab/) at the University of Colorado +Boulder is looking for collaborators on this work. This includes +entrepreneurs, activists, investors, policy advocates, researchers, and +more. Do you want to join us? [Let +](mailto:medlab@colorado.edu?subject=E2C)[us](mailto:medlab@colorado.edu?subject=E2C)[ +know](mailto:medlab@colorado.edu?subject=E2C) what you'd want your E2C +to look like. \ No newline at end of file