Cooperative Thinking

2019-08-16

A few years ago I did a bunch of research and thinking about alternative forms of organizational structure, focused especially on cooperatives (at the time I was thinking about setting up a co-op to run the Jabber.org messaging service). The approach I found most interesting was funding a co-op through something called a direct public offering. This can be done for much less money and with much greater control than VC funding or angel investing or whatever - it's basically a kind of more advanced crowdfunding. Companies that have done this include My Trail (an outdoor clothing company in Boulder, Colorado), Real Pickles (a food co-op in Massachusetts), and Equal Exchange (the original fair trade coffee company, also located in Massachusetts). Other co-ops I investigated are self-funded and haven't pursued the DPO route (e.g., Namasté Solar, Plausible Labs, and Isthmus Engineering)

My conclusion at the time was that it would be best to start out by self-financing the co-op - either alone or with a few partners who also put in sweat equity (i.e., a workers' cooperative) - and then pursue a DPO once you have a going concern. If I recall correctly, this might even be required depending on the state you're in. DPOs are regulated at the state level, which is how they avoid the expense of SEC compliance, but this also means that you can only solicit investors in that state. For example, MyTrail solicited investors only in Colorado. However, it's good to know that Colorado has something of a model legal structure for cooperatives.

I'm not sure if I'll ever do anything with the information I gathered, but a few folks have asked me about it over the years so I figured I'd at least make it available here for posterity.

FOR FURTHER EXPLORATION


Peter Saint-Andre > Journal