“This Accelerator is Bringing the Co-op Model to Tech Startups:”

Rowan Walrath from the BOSTINNO writes about Start.coop’s program to help bring the co-op model to tech startups. See the article on BOSTINNO.

Rowan Writes:

A new Boston accelerator is kick-starting an old model: Collectively owned cooperatives.

Start.coop calls itself “the first accelerator program designed to help scale cooperatively-owned startups and cooperative tech platforms.” In essence, it’s operating as an accelerator that only accepts co-ops, a.k.a. companies that are owned entirely by their workers, users, or consumers.

“Cooperatively owned businesses are for-profit businesses that exist for the benefit of their members,” said Greg Brodsky, founder and director of Start.coop. “If you go to a traditional company, usually you have investors on one side, and all they’re contributing is capital. If someone puts in 51 percent of the money, they own 51 percent of the company. The only goal for most publicly traded companies is maximization of shareholder returns.”

A co-op, on the other hand, exists for the benefit of its members, who are by definition its employees, users, or consumers. Workers are stakeholders in the business’s financial success based on their labor contribution. They also are represented in the company’s management structure.

Start.coop counts five teams on its inaugural cohort: the Staffing Co-op, a staffing platform; Driver’s Seat Data Co-op, a data aggregation platform owned by gig drivers; Savvy Coop, a patient-owned health data platform; Expert Collective, which connects industry need to academic experts; and Arizmendi Roots & Returns, a real estate investment co-op building affordable housing.

The companies all have various sources of funding outside the accelerator. Savvy recently participated in MATTER, a healthtech incubator in Chicago, and has won prize money from a few pitch contests. But most of the startups are bootstrapping—”personal debt, friends and family,” Brodsky said. The next step is to find outside investors to help them scale.

The Democracy at Work Institute estimates there are about 300 worker-owned co-ops in the US, employing some 7,000 people and generating more than $400 million in annual revenues. But that’s just a sliver of the cooperative economy: The University of Wisconsin-Madison estimates there are some 64,000 co-ops across the country. And interest in co-op models is growing. A survey by the National Cooperative Business Association showed that 78 percent of consumers were more likely to purchase goods or services from a business they know is a cooperative.

Brodsky thinks the renewed interest is a product of attention to the wealth gap, the same force driving calls for a universal basic income and an overhaul of the tax code. A recent paper estimated the top 1 percent of Americans had 40 percent of the nation’s wealth in 2016.

But Start.coop wants to work a little bit more within the system, providing support to companies with one major change: who owns the companies?

“Changing the ownership is, in some ways, the most structural change we can make, right?” Brodsky said. “If you actually widen who are the owners of businesses in our economy, well, then you’re sharing the wealth of our collaborations in a very real way, and you’re also sharing the accountability of those organizations back to regular people.”

To that end, Start.coop provides four elements of support to the startups in its accelerator: mentorship, investment, curriculum, and platforms. The program has a community of 35 mentors around the country across sectors like public relations, finance, and marketing. And each team gets $10,000 from Start.coop. “It doesn’t get them as far as they need to go,” but the elements working in concert provide a solid baseline for the companies, Brodsky said.

Brodsky is no stranger to building up cooperatives. As a child, he watched his father, a carpet store owner in Manchester, New Hampshire, create a nationwide co-op of carpet store owners from the ground up. More recently, Brodsky himself helped found the Bike Cooperative, for independent bicycle store owners, and the Independent Brewers Alliance, for craft brewers. Now, he thinks it’s high time to apply the same model to startups.

“The tech space is fast and agile, but a lot of people see that it’s replicating the wealth consolidation and the extractive economy that we’ve seen in other sectors,” Brodsky said. “Our question is: How do we combine the best of both worlds? How do we take the excellent values and shared ownership of the co-op community and combine it with the agile, lean nature of tech startups? That’s been at the center of our approach.”

One of the teams in Start.coop’s inaugural cohort, Savvy, has taken that view to the rapidly expanding world of health tech. Founder Jen Horonjeff has come to that world from multiple angles: As a patient with multiple chronic illnesses, she said, she is necessarily producing medical data. But as a professional and an academic, she saw the ways in which the medical industry takes from patients rather than considering them stakeholders. “There’s a power imbalance,” Horonjeff said.

Horonjeff didn’t set out to create Savvy as a co-op. But the more research she did on different business models, the more she saw how the co-op model aligned with her end goal of ensuring patients could benefit from the labor they invested—in this case, their medical information.

“We make sure that patients have a voice,” Horonjeff said. “We advocate that they’re fairly valued and compensated for their expertise. That’s what matches so perfectly with the co-op model. As a co-op member, each patient has a vote and a voice in our organization, and then we fairly redistribute our profits back to patients. Once we saw that, we couldn’t even do a different model, because it seemed disingenuous to pick something and stand on a soapbox and say ‘value patients fairly and listen to them’ if we didn’t do so as an organization.”

Savvy and the teams are in San Francisco this week to present at conferences in the area. They all recently completed the 10-week accelerator; next they will “pay it forward” by reinvesting a percentage of their future revenue back into the accelerator to help future cooperatively owned startups.

“These tech companies want to be owned by our users as a way to say, ‘We want to be responsible to our users, not just to the investors,” Brodsky said. “It’s a question of where your incentives are and who you’re responsible to.”