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If you're considering building an Uber-for-x, why not incorporate as a co-operative - a business model where there is either 1 worker 1 vote or 1 consumer 1 vot

If you're considering building an Uber-for-x, why not incorporate as a co-operative - a business model where there is either 1 worker 1 vote or 1 consumer 1 vote (as opposed to 30% of shares being a result as 30% of capital investment)? The reason for this is I think there's a lot of 'bullshit jobs' but this way at least people have ownership over what they are getting involved in and can elect a board etc. Could be a great experiment! There's also unique instruments for fundraising in this sector and opportunities for government funding. There's still a board of directors (elected) and a usual employee hierarchy stemming down from there. Founders can take all that they need to reasonably live on (and retire) in the form of some salary compensation package, with a legacy that creates a social enterprise and goodwill & a recession proof business model (when times are hard - co-opertives are more resilient because of this shared ownership & goodwill. When times are good, profits can be distributed - in addition to everyone's usual pay etc).

joeblau 9y ago
I'm sure you've already seen Juno's attempt at this experiment[1]. - 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-for-securities-fraud.html https://www.cnbc.com/2017/06/19/drivers-sue-uber-rival-juno-...
- will_brown 9y ago
  >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. 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.
- mhugo 9y ago
  It seems to me this example has nothing to do with the parent's comment. He is talking about co-ops. Companies that are owned by workers. It implies the company cannot be sold without a majority of workers to agree. 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.
  - joeblau 9y ago
    Juno was owned by the workers - They had equity in the company based on when they started. > 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-drivers-ride-hail-app-talmon-marco https://www.theverge.com/2016/3/29/11301076/juno-uber-driver... [2] - https://www.bloomberg.com/news/articles/2017-04-28/juno-sold-itself-as-the-anti-uber-that-didn-t-last-long https://www.bloomberg.com/news/articles/2017-04-28/juno-sold...
- valuearb 9y ago
  if it's impossible to dilute the worker, it's impossible to fund the business. 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.
feedjoelpie 9y ago
Co-ops aren't a new idea, and they certainly can survive. But in the two forms I've really seen them in action, they have been a mess. 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.
- eru 9y ago
  Vanguard might be a good role model? I'm not sure exactly how they are organized, but I think they are owned formally owned by their customers _and_ seem to be doing a good job at providing customer surplus. 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.)
  - feedjoelpie 9y ago
    Vanguard is owned by funds that are owned by shareholders. Essentially, it's customer-owned. That's a very different proposition.
sudhirj 9y ago
The incentives are perverse when a co op runs this way. An uber for x (or pretty much any company) succeeds when there's a maniacal focus on the customer, sometimes even at the expense of the contractors or employees used to service them. 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.
- boyce 9y ago
  Not necessarily E.g. the Cooperative Group in the UK which is owned by its membership (customers and staff)
EGreg 9y ago
Why not just let everyone set their own prices and have reputations? That leads to the right incentive structure! TaskRabbit and Upwork has that I think.
kryptiskt 9y ago
Who supplies the capital and what do they get out of it?
- icebraining 9y ago
  The same people that supply most capital: lenders. And they get interest out of it. Alternatively, you could pre-sell credit at a cheaper price, as a sort of crowdfunding.
otakucode 9y ago
Building any sort of standard organization around anything Uber-esque is inherently a short-term deal. Uber could be replaced tomorrow by a peer-to-peer app that needs no server farm, cutting Uber out of the loop completely. And the same holds true for any company that expects it is going to set itself up as a software-mediated middleman. Their only actual 'service' being provided is the servers, and servers are not necessary. (Some credit should be given to them for their marketing, though, as if a p2p app existed today it would face the problem of gaining widespread acknowledgement... although I imagine all the Uber drivers who would say 'hey, book through peerDrive next time and it'll take Ubers cut and let you keep half and let me keep the other half!' and that would unwind Ubers influence in a weekend.
- derrida 9y ago
  I think Uber has intangible assets and a fortress (it's competitive). It's more like a Coke. It's not a technology company, really. It's a highly competitive logistics company with intangible brand. But I can see how from the prism of hacker news and Silicon Valley it looks like a technology company. The technical part was their at conception but I think its innovation is more a style of business utilising precarious labour that is highly competitive & fierce (for better or for worse). It's like Toyota in its innovation in how to conduct business. For instance, I would say Google is clearly a technology company. But I think Uber has introduced a new style of business and organising labour, as Toyota did. So it's more an industrial innovation.

joeblau 9y ago

I'm sure you've already seen Juno's attempt at this experiment[1]. - 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-for-securities-fraud.html https://www.cnbc.com/2017/06/19/drivers-sue-uber-rival-juno-...

will_brown 9y ago
>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. 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.
mhugo 9y ago
It seems to me this example has nothing to do with the parent's comment. He is talking about co-ops. Companies that are owned by workers. It implies the company cannot be sold without a majority of workers to agree. 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.
- joeblau 9y ago
  Juno was owned by the workers - They had equity in the company based on when they started. > 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-drivers-ride-hail-app-talmon-marco https://www.theverge.com/2016/3/29/11301076/juno-uber-driver... [2] - https://www.bloomberg.com/news/articles/2017-04-28/juno-sold-itself-as-the-anti-uber-that-didn-t-last-long https://www.bloomberg.com/news/articles/2017-04-28/juno-sold...
valuearb 9y ago
if it's impossible to dilute the worker, it's impossible to fund the business. 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.

feedjoelpie 9y ago

Co-ops aren't a new idea, and they certainly can survive. But in the two forms I've really seen them in action, they have been a mess. 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.

eru 9y ago
Vanguard might be a good role model? I'm not sure exactly how they are organized, but I think they are owned formally owned by their customers _and_ seem to be doing a good job at providing customer surplus. 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.)
- feedjoelpie 9y ago
  Vanguard is owned by funds that are owned by shareholders. Essentially, it's customer-owned. That's a very different proposition.

sudhirj 9y ago

The incentives are perverse when a co op runs this way. An uber for x (or pretty much any company) succeeds when there's a maniacal focus on the customer, sometimes even at the expense of the contractors or employees used to service them. 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.

boyce 9y ago
Not necessarily E.g. the Cooperative Group in the UK which is owned by its membership (customers and staff)

EGreg 9y ago

Why not just let everyone set their own prices and have reputations? That leads to the right incentive structure! TaskRabbit and Upwork has that I think.

kryptiskt 9y ago

Who supplies the capital and what do they get out of it?

icebraining 9y ago
The same people that supply most capital: lenders. And they get interest out of it. Alternatively, you could pre-sell credit at a cheaper price, as a sort of crowdfunding.

otakucode 9y ago

Building any sort of standard organization around anything Uber-esque is inherently a short-term deal. Uber could be replaced tomorrow by a peer-to-peer app that needs no server farm, cutting Uber out of the loop completely. And the same holds true for any company that expects it is going to set itself up as a software-mediated middleman. Their only actual 'service' being provided is the servers, and servers are not necessary. (Some credit should be given to them for their marketing, though, as if a p2p app existed today it would face the problem of gaining widespread acknowledgement... although I imagine all the Uber drivers who would say 'hey, book through peerDrive next time and it'll take Ubers cut and let you keep half and let me keep the other half!' and that would unwind Ubers influence in a weekend.

derrida 9y ago
I think Uber has intangible assets and a fortress (it's competitive). It's more like a Coke. It's not a technology company, really. It's a highly competitive logistics company with intangible brand. But I can see how from the prism of hacker news and Silicon Valley it looks like a technology company. The technical part was their at conception but I think its innovation is more a style of business utilising precarious labour that is highly competitive & fierce (for better or for worse). It's like Toyota in its innovation in how to conduct business. For instance, I would say Google is clearly a technology company. But I think Uber has introduced a new style of business and organising labour, as Toyota did. So it's more an industrial innovation.