It's a shame there's not a YC like incubator for tech worker coops, cut out the VCs and have milestone based funding in exchange for a percentage of future profits that would be reinvested in future projects.
It's inherent to the way a coop works that it's not possible to follow the same path. There is no 7% equity to be given, only the repayment of a loan. The coop model does not promote taking risk and hence have many fail, yet a few grow very quick.
Another problem is law. At this point it favors the common ownership forms of business. Starting a coop is hence much harder than it should be. This is what i think where the "it's a shame" make most sense. We should make w-coops easier to start and give them tax benefits as they are on the long run much more beneficial/ less detrimental to society.
A possible model is to divide your shares into ownership/control class shares (reserved only for workers) and profit shares which can be bought/sold by third parties. This gives workers ultimate control over the venture while allowing third-party investment. I don't know if this has been implemented anywhere, but it's a possibility. It's not going to fuel explosive growth like VC funds do, but TBH I'm finding as I get more experienced that those types of ventures generally end up being trash dumpsters once the honeymoon phase is over.
If you invest you want some control. The law is very clear (lots of preceding cases) on your power as an investor in case of equity investments. In case of w-coop investment constructions as you mention the law is very unclear. Hence usually they start with basic loans (sometimes that the initial workers bare some responsibility for) or gifts.
I agree with many VC-backed startups develop toxic behavior.
I'm not a finance person, but my understanding is that co-ops more often raise capital with traditional loans.
While I believe you are correct that co-ops are not a great fit for the growth business strategy that VCs make their bread and butter on, I believe that on many metrics co-ops tend to be more sustainable than the corporate alternatives[0]. This means they are more likely to be around tomorrow to pay off a loan.
All this to say, it would be great to see more capital for co-ops in the form of traditional loans with favourable interest rates.
Especially in Canada, where capital is tight and productivity is low, I think incentivizing co-ops is a great idea.
The Canadian gov't offers some grants for co-ops, but they are a pittance. Making debt cheaper for co-ops relative to corps (maybe via additional tax breaks on interest?) is, I think super important.
Quebec probably has the single best cooperative financing ecosystem in the world (1B+$). There’s a need for more risk-driven investment instruments in the sector however to seed early stage ventures. Most of the funds end up getting reinvested in existing cooperatives who can already access traditional funding.
Are there countries with legal structures more friendly to worker coops?
For example I know Germany has structures like works councils that are foreign to us in N. America (though this is not a worker coop structure). However these structures historically arise from labor movements, not from top-down planning from authorities or electoral politics, which takes more than thinking up a design for a better society without considering who and why it would be implemented
I suspect that be in the more socialist countries.
Cuba has many, but also usually are state initiated and somewhat state controlled. China, Vietnam and DPRK have many "not true worker coops" also due to state control.
Finland, Italy and Basque/Spain also score high, and we're talking about actual worker coops there.
Yeah I'd imagine it would have to be a single holding company that has members join, instead of investing for equity.
So as an example you could have hypothetical opensource.coop that funds open source projects like signoz or posthog, giving the team a year of runway in exchange for a cut of future profits, with follow on funding if certain milestones are reached.
Same could work for "indie hackers" or boostrappers, merge a few successful companies into a holding company that shares office space, accounting, legal and etc, and reinvests a fixed % of profits to seed new projects that apply to join.
In a Co-op you put up your own money to buy into a co-op. This is the opposite of VC where an external party joins your org with money.
So a co-op model would only help to serve the already wealthy.
However, maybe it would be interesting to have a co-op for developer resources for example. As in companies or startups can buy into the coop in return for cheaper rates and more vertically integrated team augmentation.
Imagine a indie hackers founders cooperative, you take a few successful bootstrapped founders and start a new holding company that shares an office space and has staff to handle legal, accounting and all the other stuff that most engineers hate to deal with.
You offer founders that apply a coworking space and a stipend that can get renewed each year if the members of the coop agree to keep funding it. In exchange the new member commits to giving up 10% of their future profits that get split into an investment budget and dividends.
If a company is failing the members can vote to stop funding them and set them free of the agreement.
If a company needs way more funds and VC route makes more sense you spin it out as a c corp, convert the 10% profit agreement into equity and let them raise funding like any other startup would.
Start.coop (https://www.start.coop/) comes to mind, but I know I've read about others as well. I don't recall what their exact model is, so it likely doesn't match perfectly with what you're describing.
