Matt Cropp 🌲🌲

While #coops aim to operated on a purely #patronage basis, many co-op statutes allow for paying a limited capital return (in Vermont, up to 6%, with no member allowed to own more than 10% of the equity) on the common shares.

What are #socialcoop folks' thoughts on using that mechanism for start-up funding, as opposed to member loan campaigns or preferred share offerings?

May 10, 2018 at 6:43pmWeb
Show threadMatt Cropp 🌲🌲May 10, 2018
In particular, for #consumercoops with fairly broad membership bases?
Show threadhMay 10, 2018
@mattcropp Is it difficult to structure things in such a way that #SocialCoop gets the benefit of both? Meaning, perhaps, allocating a number of shares in the traditional way to benefit the founders and early adopters for their continued support, but also enabling for a smaller experiment to explore alternative ways of funding, without putting the existing structure at risk of anything going wrong.
Show threadRobert BenjaminMay 10, 2018

@mattcropp from a start up perspective equity investment is preferable as it comes with less risk than debt.

From an investment perspective equity investment in a startup can be preferable if the return potential outweighs the risk.

Which is why % capped return offerings don’t work well for startups. Return multiplier caps (2.5x, 5x, etc.) or uncapped but tied to net profit split when applicable is a better way to go.

All this is doable with LCA (limited cooperative association) statutes.

Show threadZane SelvansMay 10, 2018
@mattcropp Personally I don't think there's anything wrong with co-ops renting capital and paying a return. Obviously there's a risk, if you can't pay it back, but it enables other startup models beyond the slow-growth bootstrapping, and I think in some cases that can make sense.
Show threadMatt NoyesMay 11, 2018
@mattcropp One of the purposes of social.coop is to model good coop practices, so I would favor a pretty classical approach: initial capital contribution, patronage allocation of anticipated/realized earnings, capital accounts...