Traditional startup roadmap
Investor ownership is the default for technology companies and startups. Typically, founders go from owning 100% of a company, to gradually selling more and more in sequential fundraising rounds. Often, investors will purchase 20-30% of a company in each round of funding. After several rounds of funding, investors are likely to own a vast majority of the business, many times over 80%.
It may look something like this.
Company raises a seed round by offering investment notes that convert to 10-15% ownership of the company.
Company raises 18 months of runway by selling another 20% of ownership to a collection of VC firms.
Company repeats cycle.
Series C, D, E (and beyond):
An alternative: User-owned platforms
There is an alternative. It may not be customary in Silicon Valley, but it’s possible to have platforms owned 100% by their users. How?
1. Cooperative ownership:
- Organization incorporated as a cooperative
- Fully member-owned
- Not created for an exit opportunity for investors
- 1 person 1 vote governance, not power weighted by stake
2. Labor organization:
- Organization and product built by users
- People contributing towards a shared vision
- Reliance on production capital, rather than financial capital
Investor ownership vs. user ownership
Here are what these differences look like:
|Investor Owned||User Owned|
|Value||extracted from users||captured by users|
|Economic Rewards||concentrated to few||shared by many|
|Motivation||financial maximization||service to members|
|Revenue Model||rent-seeking platform fee||commons contribution|
|Goal||exit event (transactional value)||sustainable independence (use case value)|
Would you rather be a user or an owner?