I went through and set up the usual LLC, but was curious about how I could set it up to be a member or worker-owned company. Has anyone done anything like that from the beginning? Should I just worry about this later?
With licensing, the typical model has been to make your core permissive, and keep the hosting / billing application private. Has anyone made even that part of their SaaS open? I know that would make is really easy to fork the business, but was thinking something like a time-gated Functional Source License (FSL) might work?
I'm open to ideas. I don't see this discussed commonly on HN, so figured it was a good topic.
https://www.usworker.coop/programs/peer-networks/
They will probably have ideas. Good luck!
PS an LLC is definitely a good way to go, but some states (e.g. NY, MA, CA, MN, etc) have dedicated worker coop company types you can create.
They also published a magazine explaining their thinking behind the setup, etc. – you can find out more on their website: https://subvert.fm/
Could be interesting to check out, even if just for inspiration or fun.
My only regret is that I spent a lot of money on legal fees and the company ended up not being profitable so a lot of the work went to waste. But now I can re-use the structure again if I wish to create a new venture.
I was a part of a startup that offered profit sharing interests. When I joined the profit was X and left it was Y. I received a check for my percentage of the growth in profit. It felt pretty fair.
There was a relatively direct incentive to impact the company bottom line and I didn’t have to wait for the company to exit to get compensated.
You do this if the founder is not trying to hyper grow and sell the company but is rather content with dividend producing asset.
But what you described truly is the most direct way to align the interests of stakeholders/users with the direction of the company/product. A downside I think in this case is that it becomes even more imperative to know who your “customers” are, as pivoting will be quite difficult.
I definitely think there is a way to make this viable at small scale in a tech/SaaS context. But to survive and grow to larger scale, I think you basically have to ensure your business following this model is not "too profitable" or else someone will want to crush and replace you, and hoard the profits for themselves.
It's kind of forgotten about now, but it's a bit of a minor miracle that Vanguard's unusual structure survived the early days, then grew to become an investing behemoth. I suppose the reason nobody tried to kill Vanguard to steal their customers is because the business model was pretty boring and profits were unsexy enough that others just let them do their thing (I mean, low cost index funds, and the boring type of customers attracted to them? Talk about a ceiling on profits, compared to what a more adventurous fund manager could make elsewhere selling a typical 2-and-20 deal to greedier customers...).
While People change, companies change even more as "good people" may leave and even "good owners" may sell the company, in additionally to changing themselves
The main advantage to this is that it gives customers incentive to support the business financially, not just take the assets. You can still have cashflows in way that don't exist in open source models, and around products that can't be open sourced (like loafs of bread, pints of milk, as per the Co-op model).
As far as I know this is how places like REI or some groceries work. They are essentially customer owned. I'm not an expert in this, which is why I was asking for advice.
However I believe the board nomination process used to be open, but now only board members can nominate people for a board seat
Given that customers often want to avoid lock-in on any purchasing decision, it seems hard to build a service that has a larger up front psychological and legal commitment. I love the idea of getting bonus points in life for building structures with collaborative ownership, but realistically most people and businesses only want a simple “buy a service that I can cancel” relationship.
That said, I'd love to see someone try it! I think it could work well in a niche environment, or something like a Kickstarter where people feel they helped bring something into being.
I buy shares in the farm per my needs. The CSA takes my money and buys seeds, fertilizer, etc. I get discounted (100% :-) products from them throughout the growing season. They also sell their goods at farmers' markets, do deliveries, etc. My CSA has been growing for years. They're a part of a larger co-op org that spans the NE US, IIUC.
So yes, the "beautiful vision" can be, and is, implemented. Even in tech; I'm sure you've heard of neighbors getting together and building their own local networks because the local ISP won't service them.
https://news.ycombinator.com/item?id=42748956
I wouldn't say they work well, though, given the state of REI and grocery customer cooperatives.
For example, I’d love to have a local alternative to Uber/Doordash that was a co-op owned by the drivers and the customers together. 95% of my taxi trips and food delivery are within my home town. I’d love to support a company owned by the drivers who live here, instead of a massive multinational.
Co-ops are pretty successful in many European countries. In Finland, both the largest bank and largest grocery store chain are national co-ops owned by customers. It’s a model that can scale far, even though the big co-ops do develop internal politics very similar to any traditional corporation.
Drivers often need firing. How would a co-op approach that?
Do they? The taxi companies in my small tourist town don't seem to have problems with reliable drivers. Makes me think that there is a retention problem with Uber-style work environments more than an inherent problem with people who drive for a living.
With advent of ubiquitous GPS navigation came a wave of some the dumbest most functionally inept people I have ever encountered. There was a time when you had to be able to read a map and plan routes. But as soon as GPS showed up, anyone who could drive and enter and address in their phone was good to go making way more than other high school dropout work.
The biggest issue though is drug addicts. Lots and lots of drug addicts. It's an easy money job that you can smoke up/snort up/shoot up while doing. These guys are shameless and will be high off their ass driving around.
This is wishful thinking. They might reduce the amount of firings needed, but you can't spot in advance all the people who will slack off or cause problems given the chance. Not unless you're a literal god.
You still need a mechanism for dealing with workers that e.g. just don't show up. You also need that mechanism for co-owners of an LLC, and so on.
It’s also not a competition about who can win the argument: I think we’re both making our points and it seems like you have a more pessimistic (realistic?) idea of who the workers are. My experience with co-ops is anecdotal, of course.
When I order an Uber, I want it now. I won't be waiting 1hr for it.
Also, what good products do any of these groups make (besides credit unions which are superior to traditional banks)? Sure I can go to winco for cheap groceries, but REI isn't exactly the bastion of quality that its buyers pretend it is (their stuff is cheap crap).
The sad reality is that if you, the customer, want a good product, you want the company who makes it to exploit its workers. This is also the real reason why unions died in America. All the US car companies are unionized and that famously caused US company workers circa the late 70s and 80s to be literally drunk/high on the job all the time (see https://en.wikipedia.org/wiki/Fremont_Assembly) Meanwhile most Japanese car factories aren't unionized, and you get literally the most reliable and best fit/finish in the industry from doing it.
https://www.businessinsider.com/co-ops-business-plan-2011-10
I'll also add that if the excess profits are going to shareholders than I do not care about the labor savings a company gets by exploiting their workers.
The key thing was to keep the SaaS-y bit as boring as possible, which meant a corporation. This is in Europe but the equivalent would be Delaware C corp.
Shares in the corporation were then given to the wrapping organization (in my case the foundation, but this could be more-or-less any legal structure that can have assets). Downside is two sets of accounts, upsides are that M&A gets a ton easier later on, and taking on employees is simple and not colored by the legal quirks of the parent organization. The potential complexity of SaaS accounting (revenue recognition, R&D credits, etc) is also kept inside a simple, normal corporation which every CPA is super-familiar with, so you're not consulting niche experts every time something new comes up.
I advise a quick consult with a tax lawyer before doing anything, because it's easy to say you'll deal with this later but some changes have unforeseen implications if not done at the outset. (I punted on some of the setup for a year while I focused on finding product/market fit, and that turned out to be a mistake that the lawyers had to fix at some cost. A year more and it might have become unfixable.)
No two cooperatives operate exactly the same and you should think about it more like a family than a business. It’s not a purely transactional thing I’m not keeping track of inflows and outflows because I don’t have anybody else to report to other than my cofounder and we treat it like a family business.
Really the only thing you have to keep in mind is that the single thing that makes you cooperative is that there is no distinction between worker and owner.
Depending on your state there are some obscure tax codes that make your org legally a “cooperative” but that doesn’t really mean anything because you’ll be taxed on revenue like everyone else
So you could set it up as an LLC and then within that LLC you run it as equal distribution based on whatever the cooperative agreement is between all the parties.
In our case there is no equity, there’s no assignment of shares, there’s nothing to cash out. Revenue comes in and is used for operations and then distributed to whomever did the work.
For a SaaS because capex is low you have a ton of options, but again if people join your org who want to make money or get rich, then the cooperative will eventually just turn into another company.
One of our new marketing efforts is: we have a brief weekly ops call that we’re just sharing only two so far: https://open.spotify.com/show/4jekdwCcjWKYJd7NSh6KlA?si=eFEI...
At the end of the day a cooperative is about creating an alternative and equitable social group of mutually supportive people, and the way you sustain it is secondary but important
If you start it as a money making enterprise then you will eventually turn into fully into a money making enterprise
However if you start as a social group that has a reason for existence more deeply rooted than financial gain, then you might actually have something that survives.
Glad you're still doing cool things :)
Read the Docs is pretty much all open source, including the billing code (https://github.com/readthedocs/readthedocs.org/blob/main/rea...), but we are structured like a normal company, with some custom bylaws that protect the OSS codebase if ownership changes hands. We haven't found anyone else setting up a competing instance or anything, but that might also be because the product is kind of niche.
I kinda love the idea of having people in the community that use the service have some kind of ownership over the platform. It would likely lead to longer term loyalty of the userbase, which would help keep the project sustainable and avoid the enshittification cycle.
We've played around with sharing ad revenue that we generate on documentation pages split with the projects, which is partially a win/win way of sharing in the upside of success.
Anyway, I don't have a great answer here, but wanted to say hi, and give a bit of context from our place in the world.
PS: You might also talk with the folks here: https://zebrasunite.coop/ -- they are structured like a co-op and mostly come from the tech/design community.
That's good to know that at least I'm not crazy for also open sourcing the billing code. I feel less worried.
The main idea was to make a service covering people's "workspace" needs (comms, documents, collaboration etc) which would place things like data governance under end user control, mostly on the assumption that given the choice, people would never agree to having their data mined by eg, Google.
In practice I wasn't really ready for it, but doing this kind of thing as a co-operative society with worker or member ownership is a fabulous idea and one I'd love to see come to fruition.
A lot of the pitfalls I've seen from surveying not just my own attempt but other people's is that getting your initial collaborators on board is hard, and keeping a culture that promotes change rather than stagnation is even harder. Lots of coops in the email and hosting space show this: they'll sweat hardware way past when it is economical or sensible to do so, and are generally averse to raising cash to invest in the business. Customers go to them and pay a premium because they want something "ethical", which lets them off the hook for being uncompetitive. The spiral continues, tightening until the service is so poor and prices so high that literally nobody wants it anymore. My suggestion is whatever you do, avoid that situation: investment starvation kills coops.
Shifting to worker cooperatives and innovation on the business ownership side.
Imagine Amazon as a coop?
The hard parts are:
1. capitalization - once you have investors who have more say than employees, it's no longer very cooperative
2. legal - the structures for for-profit or hierarchical non-profits are well defined and there are any number of experienced law firms that can help structure a business, while for a cooperative not so much
3. structural - there are a thousand books published every year about for-profit businesses. There are comparatively few about starting and running a cooperative. Although the latter have more signal than the noise of the former.
These aren't insurmountable problems, though. They've been solved before.
| Amazon as a coop
A cooperative Amazon would probably work best as a federation of cooperatives.
We have about 18,000 owners, everyone had to work a 4 hour shift every month, and we did something like $50MM in annual revenue competing directly with whole foods.
We would also provide training, startup capital and member labor to people who wanted to start their own coop.
I always felt like a well organized group could take over the PSFC and create a new tech model and then scale from within the existing democratic infrastructure.
The good option I've seen which allows to grant some commercial interests to folks without letting them to interfere with shareholder rights is Phantom Shares or creating a separate company (SPV) where everyone has shares and which by operating agreement is voting as the founder, in this case it makes it harder for them to mess with your company.
In any case, be very mindful of lawyers you choose, many of them would operate with default assumptions which in US often means C-Corp in Delaware, designed to raise some venture capital and hence protect such investors, if your goals are different - make sure to talk them through.
Co-ops are one member one vote. Google ICA cooperative principles to read up and get a base foundation. I second also going to the US Federation of Worker Cooperatives to learn more.
It can be a complex process to build a business enterprise that is equally owned by workers and even more challenging to try to keep it a going concern. Good luck!
Co-ops are one member one vote. Google ICA cooperative principles to read up and get a base foundation. I second also going to the US Federation of Worker Cooperatives to learn more.
It can be a complex process to build a business enterprise that is equally owned by workers and even more challenging to try to keep it a going concern. Good luck!
Before suggesting anything, it would be useful to understand your goals with a co-op structure. What are you trying to improve over the status quo delaware c corp that stripe atlas will setup? Are you planning to take investment?
In terms of solutions, Flexile is an implementation I don't see mentioned yet: https://flexile.com
It seems to be geared towards software companies that might not need everyone as a full-time worker. Not sure how many of these there are. It's by the Gumroad founder.
https://museapp.com/podcast/4-partnership-freedom-responsibi...
[Outpost](https://outpost.pub)
We work with pubs like 404Media and Platformer
Incorporated in California.
Happy to answer questions
A banker at a major Australian bank once suggested I take a coop model, so I am sure it is on the radar.
I think it is a great idea to have tech coops, and wish you well.
That aside, I think it's important to codify into the incorporation charter or a company as well as share holder agreements that the company will never go public. Or perhaps have a clause that forces dissolution of the company and sell of assets if an IPO ever went through. It makes sense for some companies to be publicly traded but if your intent with a company is to do the public, your employees or customers good, instead of a pure profit play, then even the possibility of an IPO is cancerous.
I've also made and worked on some fully open source projects where the entire stack was open. I don't believe in those source avaliable licenses because you either believe in your abilities on the business side or you don't; if someone can take the exact same product and market it way better, then you honestly deserve to go out of business.
When was the last time you asked a Uber employee for their phone number?
A lot of people user Uber everyday. Not everyone uses Upwork more than once.
I'm happy to share more - I'll send you an email.
There is also https://opencollective.com/ which provides a platform for collective ownership of an online business.
I don't think Open Collective "provides a platform for collective ownership", unless I missed something on their website and they've recently introduced some new offering.
As I understand it, they sidestep much of the legal process through the use of fiscal hosts to collect and disburse money.
i wish there was stripe atlas for coops if anybody would like to start a new cooperative. i emailed the stripe PM asking for this and they said it's not on their roadmap. businesses in america are designed to be organized as capitalist enterprises so there are some extra things a coop needs to do which takes time and money.
would be cool to make an open source "stripe atlas for coops" project and help other coops start up. i'm too busy right now but could do the project if i had some collaborators. email me [email protected] if you're interested in a project like this.
and the work of nathan schneider: https://nathanschneider.info/
and anybody talking about "platform socialism"
https://github.com/batteries-included/batteries-included https://www.batteriesincl.com/ https://www.batteriesincl.com/LICENSE-1.0
I started the company because I wanted to give the infrastructure team that FAANG companies have to smaller enterprises. Most of the best infrastructure is open source but too complicated to use or maintain. So we've built a full platform that will run on any Kubernetes cluster, giving a company a push-button infrastructure with everything built on open source. So you get Heroku with single sign-on and no CLI needed. Or you get a full RAG stack with model hosting on your EKS cluster.
Since most of the services and projects we're building on top of are open source, we wanted to give the code to the world while being sustainable in the long term as a team. I had also been a part of Cloudera, and I had seen the havoc that open core had on the long-term success of Hadoop. So, I wanted something different for licensing. We ended up with a license that somewhat resembles the FSL but fixes its major (in my opinion) problem. We don't use the competing use clause instead opting for a total install size requirement.
I'm happy to chat with anyone about this, my email is in my profile. Good Luck nd I hope it works for you.
Once challenge with equity is that equity is the thing that is left over after you've distributed income and benefits. I've seen so many startups (some up-close) where those in charge are not working for equity, they are extracting all the value in the form of benefits and salary/bonus. The equity then ends up just a carrot for those at the bottom being leveraged to keep the cycle going.
Other misaligned incentives I've seen is company management paying low salaries but having a host of family/friends placed into figurehead wishy-washy roles in the company (again, extracting value misaligned with employees.)
I've also seen doctors practices where the doctor owns the facility and extracts above-market rents from the practice, leaving less for workers.
Once a company is in hyper-growth it is easier to find well-aligned incentives. However, before that, you really dont know unless you can see the salary/benefits of everyone (which obviously doesnt typically happen.)
Why not just not be greedy af?
Is it really that hard to not raise VC, bootstrap, pay a fair salary, and then give bonuses?
You’d probably get a lot more done as the benevolent dictator (you’re the CEO) and ensure that while you run the business you’re doing something “nice”.
Even if you take VC money you really aren’t fucking anyone over. People join your company voluntarily. You take the biggest risk as the founder early on. Employees stand to make 1x to 50x on their options depending on when they joined and if you’re successful.
Even if you’re not, at least you paid them and it was all voluntary.
Let me know if I’ve totally missed the point. From my pov all this co op stuff is just noise and only works for something like a consultancy.
If your only goal as a founder is to eventually sell out and make yourself a billionaire, this is fine. If you want to build something of long lasting quality/consistency, then exploring other business models isn't just noise.
When you're free of outside influence you're enabled to perfect your business offerings, or at least be consistent in what you offer, without worrying about greater and greater shareholder returns.
It's no coincidence that Craigslist looks the same as it did 20 years ago, Arizona Ice Tea is still 99 cents, and Chicfila has the best fast food customer service.
There are consumer-owner / member-owned co-ops where the people that purchase the service (say in a yearly subscription) end up as owners.
https://graham-boyd.biz/fairshare-commons/
Coop is historically a two interest cooperative structure (business+customer/employee/producer)
This model generalizes two to N and formalizes it.