We’re Converting Our Startup To A Cooperative. Here’s Why.

Last year, our team formed to build Ampled, an ethical web platform that allows music artists to be supported by their community with direct, recurring payments. The goal with Ampled is to help artists gain sustainable and predictable income in today’s streaming economy and give them ownership and control over a platform they rely on.

We initially incorporated as a public benefit corporation, inspired by Kickstrarter’s conversion in 2015. A public benefit corporation isn’t fundamentally different from a typical C-corp formation, but it does hold a distinct advantage: the ability to make decisions aligned with an organization’s mission, rather than be obligated by a fiduciary responsibility to make decisions considering only shareholder value.

Building Ampled, we knew we wanted our platform be as trusted and artist friendly as possible. This led us to an early question: Can we give artists some level of ownership and control in the platform? The underlying principle was that artists should be able to share in the economic rewards generated by their participation on a platform and have a say in how profits are generated from their art. In the end, the idea of an artist-owned platform was so compelling, it became central to our identity and mission.

In April, our commitment to artist ownership led us away from our incorporation as a public benefit corporation. Instead, the team rallied around another idea: becoming a cooperative—100% owned by our artists, workers, and community. 

Currently, we are in the process of making this transition—which has significant implications for our goals, growth, fundraising, and more. What we have found is that there are very few examples of cooperative platforms that we can use as a reference. As a result, we want to start a series of posts to openly share our progress and learnings in this process of transitioning to a co-op. 

The goal of these posts is to make it easier for other tech entrepreneurs to start businesses built on principles of broad-based, distributed ownership and democratic governance. Encouragingly, what we have found is that there are no significant technical or policy interventions needed for equitable user-owned platforms to exist—only a significant information gap that needs to be bridged. We hope to share not only our experiences, context, and reasoning behind our decisions—but also the artifacts generated by this process. We’ve decided to open-source our legal documents of fundraising terms, membership agreements, bylaws, fair privacy policies, and member onboarding literature—in hopes that it may help other organizations navigate the path to cooperative ownership.

WHY BECOME A CO-OP?

  1. It makes giving ownership to users easier

Due to the way tech companies typically structure themselves, raise money, and choose their legal entity, we observed that it’s often difficult or impossible for these platforms to give meaningful ownership to its users (especially after going through several rounds of institutional VC funding). We felt like it could be a potential opportunity and compelling positioning for us if we could figure out how to accomplish something these tech companies couldn’t do—have a platform owned and controlled by its users. The challenge is that taking this path requires us to be very thoughtful, considerate, and deliberate at the outset.

  1. We can help bridge the trust gap

As technology companies become increasingly deficient in public trust, the concept of trust in platforms becomes progressively more important. Uniquely, trust is a critical and valuable component to the success and growth of platforms, but can’t be bought. In Wired magazine (December 2017), Erin Griffith called this growing trust deficit “the other tech bubble.” As revenues continue to shift from people who make content to people who own monopolistic platforms—and as venture capital funding creates inherently misaligned interests—our view is that giving users a seat at the table and collective ownership of a platform could set a new standard for user trust and become a key differentiator.

  1. We wanted to be proud of what we’ve made

Ultimately, this is a philosophical question for all of us that helped start Ampled. Is our goal to get rich? Do we want Ampled to eat the world? What do we want it to feel like when we go into work? The path of creating a successful startup is going to be long and difficult no matter what we do, so we decided to prioritize building something we are proud of: a values driven and mission-forward platform built to make music more equitable for artists.

WHAT BEING A CO-OP MEANS

There are a number of implications of becoming a cooperative. It means that we are 100% owned by our users and workers, but it also affects our fundraising, growth, and overall goals.

  • Ownership is different

At a basic level, most startups are owned by founders and investors—while co-ops are owned by employees, customers, or both. In the context of a platform, this means that Ampled is owned by its users.

  • Our goals are different

Our goal is to serve our mission and create a permanent and sustainable vehicle for artist prosperity. We’ve positioned ourselves in stark contrast to Silicon Valley ethos through a commitment to radical transparency, democratic governance, and broad-based user ownership. We are not seeking an acquisition or an exit.

  • Fundraising is different

We still need investment to compete and grow and we still want to deliver returns to those that invest in Ampled. However, our commitment to artist ownership means that we are choosing not to raise money by selling equity which requires creative investment terms. Finding investment terms that suit our needs hasn’t been the easiest process. For example, the terms we are currently employing have more in common with the mining industry than a startup.

THE BOTTOM LINE

In short, we came to this conclusion as we thought it was better for both of our bottom lines—the financial success of Ampled and its social mission.

  • Aligned interests & telling the same story

In tech, it’s not uncommon to see a friction emerge between the interests of users and that of shareholders. Often, companies will tell one story to stakeholders and another to the constituency they claim to serve. By aligning interests, we can tell the same compelling, cohesive, and authentic story to everyone.

  • Differetiator and defensive positioning

From a practical business positioning, we are doing something larger and more traditional companies simply can’t do. Artist/user ownership is both a differentiator and a defensive moat.

  • Unique growth driver

This has yet to be proven out for us, but we expect a result of artist/ user ownership of Ampled to result in far lower artist acquisition costs and provide the opportunity of a much more bootstrapped and organic growth strategy. 

  • Reducing startup costs

We’ve been really fortunate to have a group of professional, organized, and talented developers invest significant effort into getting our working product off the ground. This is for two reasons. One, is that many developers don’t often work on projects they are personally passionate about, and we offer them a chance to do so. The other is that a cooperative model shifts incentives and motivations around a shared goal—not the idea of getting founder or investors exceedingly wealthy. Everyone working on Ampled gets personal value in being a part of something that can make an impact.

TO BE CONTINUED

We’re still in the beginning stages of this journey. Our product is quietly in beta and hasn’t officially launched yet (but will very soon). There are several unknown unknowns related to the mechanics of broad-based user ownership that we expect to encounter—as well as the normal growing pains of any startup. I hope you’ll stay tuned – and if you’re an artist interested in potentially joining our platform, please fill out this form.

For more information, go to ampled.com or email me: austin@ampled.com

Tagged with:

Leave a Reply

Your email address will not be published. Required fields are marked *

Feedback

Please select the type of feedback you'd like to give from the menu below.

Form is temporarily not available. Please visit our contact page.
X