4 ms·

>It just doesn’t make sense for the average person to start their own cooperative, especially in any competitive domain. What do you mean by 'competitive domai

>It just doesn’t make sense for the average person to start their own cooperative, especially in any competitive domain. What do you mean by 'competitive domain'? State of the art like Amazon or many competitors like Ben and Jerry's [1]? If it's competitive like Ben and Jerry's, wouldn't that be the best environment for a cooperative? You can use your network to assemble an initial team and then build something that the market wants because everybody already knows the market. You create one more offer that will find its niche on the market. Where else does an average person have enough domain knowledge to make a better investment? [1] https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-ben-and-jerrys-vs-amazon/ https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...

Gaessaki 4y ago
I’d qualify both scenarios as being competitive, though arguably the Ben and Jerry’s one is likely easier for the “average” person to break into with a cooperative. While the capital requirements are relatively lower to start a food processing business, they’re not non-existent. The founders will have to pony up most of the initial investment and take on a whole lot of risk early on, with only a very slim possibility of a large payout if the venture does exceedingly well. Most financial institutions (even cooperative ones) won’t lend to them, as it’s difficult to collateralize the initial equity put forth by the founders of a cooperative. Equity can’t be issued to investors, due to governance and legal restrictions. The capital pool is thus dramatically constrained vis-à-vis a traditional corporation. This is ignoring that cooperatives are harder to start in most jurisdictions due to a lack of legal resources. Our food delivery cooperative took 7 months and several letters and in-person meetings to legally incorporate (even though we started sales one month in) whereas our local competitors who formed corporations were able to incorporate within one day and online. During the early months of the pandemic, we actually had to get a derogation from the government to be the first cooperative in Canada to have our founding general assembly (a legal requirement to start a cooperative in Quebec) online, as the law said we all to physically meet in person to be able to incorporate! The very legal framework for cooperatives see much less use in most jurisdictions, meaning that when things go wrong, the venues for recourse are unclear due to a lack of precedent. A notable case of this is the hijacking/bankruptcy of Mountain Equipment Co-op in Vancouver, Canada, which was sold off to private equity without the consent of its members, all while following the law to the letter. Contrast this with starting a corporation, where the financing and governance playbook is known and if you want to bring in more people onto the team, you can just continue subdividing the equity to get something akin to a cooperative. A cooperative is just a corporation after all, just with a more equitable equity split. I think what you’re suggesting can still work in certain cultural and economic environments. The founders really have to sell the idea of buying into their cooperative, all while limiting their potential upside as they bring in members who have yet to contribute to the cooperative and yet will soon be eligible to take part in the proceeds and governance. If they can manage that and get over the initial legal and financial hurdles, they can totally be competitive. The initial constraints don’t make it attractive however.

Gaessaki 4y ago

I’d qualify both scenarios as being competitive, though arguably the Ben and Jerry’s one is likely easier for the “average” person to break into with a cooperative. While the capital requirements are relatively lower to start a food processing business, they’re not non-existent. The founders will have to pony up most of the initial investment and take on a whole lot of risk early on, with only a very slim possibility of a large payout if the venture does exceedingly well. Most financial institutions (even cooperative ones) won’t lend to them, as it’s difficult to collateralize the initial equity put forth by the founders of a cooperative. Equity can’t be issued to investors, due to governance and legal restrictions. The capital pool is thus dramatically constrained vis-à-vis a traditional corporation. This is ignoring that cooperatives are harder to start in most jurisdictions due to a lack of legal resources. Our food delivery cooperative took 7 months and several letters and in-person meetings to legally incorporate (even though we started sales one month in) whereas our local competitors who formed corporations were able to incorporate within one day and online. During the early months of the pandemic, we actually had to get a derogation from the government to be the first cooperative in Canada to have our founding general assembly (a legal requirement to start a cooperative in Quebec) online, as the law said we all to physically meet in person to be able to incorporate! The very legal framework for cooperatives see much less use in most jurisdictions, meaning that when things go wrong, the venues for recourse are unclear due to a lack of precedent. A notable case of this is the hijacking/bankruptcy of Mountain Equipment Co-op in Vancouver, Canada, which was sold off to private equity without the consent of its members, all while following the law to the letter. Contrast this with starting a corporation, where the financing and governance playbook is known and if you want to bring in more people onto the team, you can just continue subdividing the equity to get something akin to a cooperative. A cooperative is just a corporation after all, just with a more equitable equity split. I think what you’re suggesting can still work in certain cultural and economic environments. The founders really have to sell the idea of buying into their cooperative, all while limiting their potential upside as they bring in members who have yet to contribute to the cooperative and yet will soon be eligible to take part in the proceeds and governance. If they can manage that and get over the initial legal and financial hurdles, they can totally be competitive. The initial constraints don’t make it attractive however.