Form 1: Freelance designer and coder co-op. Top players were continually dissatisfied with performance of their peers and the bargain-basement rates that would result. And their only remedy was to go join a normal company.
Form 2: An employee-owned taxi company with a 100-person board whose response to Uber was, "Oh, we just need an app." However, they couldn't agree to change any of their practices, resulting in people still not being guaranteed service when booking through the app. And no customer feedback or punitive mechanisms for drivers not following through. The system is: Cabbie clicks in on the radio and says "I'll take that fare." After that, if they see an easier-made buck on the way, they divert and grab that instead. The customer doesn't get service.
This is not to say that any given co-op is doomed, but consider this: A community, of which the customer is not part, making decisions in a mostly democratic fashion, will frequently devolve into each member acting and voting in self-preservation within the organization. And with no one to wield a hammer on behalf of the customer, eventually killing the entire organization with a thousand paper cuts.
Were I to attempt something approaching a co-op today, from the ground up, I would want to think very hard about how to create a governance structure that could prevent the organization from cannibalizing itself. Can it be done? I'd like to think so, but I also think it would be very difficult. And dangerous to get wrong.
Of course, in the end it's competition that's keeping businesses customer focused. (Or rather competition provides for the survivorship bias so that mostly customer focused businesses survive.)
In practice you still get principle-agent conflict. But so far they are still doing well by their customers in practice.
I've been pushing to get our data exposed via API for developers to build apps and one of them I'd like to see built is a delivery service for owners to use.
Y'all have a good thing going. I just don't think the co-op model necessarily translates to that many scenarios. Park Slope Food Co-Op depends a lot upon volunteer hours, and operators are customers. I think that's been the distinction in every co-op or co-op-like that anyone has cited as successful. They're customer-owned as much as they're employee-owned.
All of our owners also must work 2.75 hours a month, and you can't shop at our coop without being an owner.
I have seen some other coops where they have separate pricing for owners vs. members vs. regular folk, but I don't know how successful they are.
About half the reason I joined the coop was to get a look under the hood of how a coop like this works - so far I've been fascinated and learned a lot about human psychology and politics.
In some sense, Uber drivers are also customers, in that they are buying the leads and software from Uber corporate.
I also think if there are ways to have customers also be owners that can be a really great set up.
- Drivers said they joined Juno on the premise that they would receive equity from the company. - Gett acquired Juno for $200 million and the equity program was done away with. - Drivers are suing for breach of contract, false advertising and securities fraud.
In order for that structure to work, the company would need a new fund structure that would make it both scalable and impossible to dilute the worker. From my limited knowledge, most of the funding power goes to investors and since these types of businesses generally rely network effects, it seems difficult to kick this system off. I'm not saying it's impossible, I'm just not smart enough to figure out how to get the ball rolling.
[1] - https://www.cnbc.com/2017/06/19/drivers-sue-uber-rival-juno-...
Why not make it a non-profit corporation, then there is no ownership (stock) and the company can't be sold.
Basic structure: You have members (drivers), they vote the board and in turn the board votes the officers who run the operations (corporate compliance). There would obviously be salaries for the officers, but they wouldn't/couldn't exactly get out of control because they would be set/approved by the Board, and if the Board would be put in check (voted out) by the members (drivers). And that is just the default, you can get far more creative with the actual business agreements and corporate governance documentation to ensure no funny business for the get go.
But you're right the funding scheme would be more challenging. But if the service sold is of very good quality, it may work. And the "not for private investors" model may also be something good to promote for (some) consumers.
> But the icing on the cake is Juno's equity offering: 1 billion of the company's founding shares reserved just for the drivers. [1]
It was all stripped away when the company was sold off to Gett because of liquidation preference because now.
> But drivers were soon informed by emails from Juno that the stock plan was void. They could instead receive cash payouts amounting to less than what they could make in a day of driving. [2]
[1] - https://www.theverge.com/2016/3/29/11301076/juno-uber-driver...
[2] - https://www.bloomberg.com/news/articles/2017-04-28/juno-sold...
Lets say your startup sells 20% to an investor (round A), keeps 50% for founders/direct employees, and allocates the remaining 30% to "workers", i.e. drivers, employees. Now you run low on money and go out for round B.
Where is the equity for the round B investors? Say they want 50%, who takes the dilution? Just the round A investors and founders, taking them down to 6% and 14% respectively so workers can stay at 30%? Thats never going to happen, the B round investors aren't going to give funding to see founder incentives massively reduced (unless they plan to replace founders). They want the people they think are most likely to make their investment successful to have the most skin in the game, and that's very unlikely to be workers/drivers.
Also when an investor gives a management team and workers a big round of financing, they typically expect preference in future rounds. Especially if you don't achieve your promised objectives, your A round investor doesn't want to take the same amount of punishment as you will.
Whether you are an employee or a driver, you will almost always get common stock. Investors will get preferred stock. Preferred stock can have all sorts of negotiated rights, but almost always it means that they will get their investment back before common shareholders get a dime. This kind of structure actually makes venture capital possible, the vast majority of investments fail and being able to recover some of their investment from many of them instead of a huge smoking crater keeps funds going until they finally book a big winner. So if your company takes $200M in funding and then sells for $200M, the only payout employees can hope for are retention bonuses for key players.
What Juno did looks really sleazy, given they supposedly only raise $30M and sold for $200M liquidation preferences should have nothing to do with it. And drivers got restricted stock grants, not options for common shares. The difference is options are worthless until the option price is reached. RSUs are typically structured so you always get value, you don't have to reach any exercise price. No idea how they could only end up with 2 cents per share unless Juno had 20 billion shares, which is ridiculous.
Coops on the other hand exist to serve themselves, not their customers. That's why small scale communes and cults work better. They enable self sufficiency and owner happiness, which may be mutually exclusive with good customer service.
E.g. the Cooperative Group in the UK which is owned by its membership (customers and staff)
That leads to the right incentive structure!
TaskRabbit and Upwork has that I think.
Alternatively, you could pre-sell credit at a cheaper price, as a sort of crowdfunding.