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This is a great opportunity to expose folks to different types of ownership structures for corporations - something that I think gets missed by most folks outsi

This is a great opportunity to expose folks to different types of ownership structures for corporations - something that I think gets missed by most folks outside of (decent) MBA programs. As one anecdote/example: a close friend of mine is an actuary for a mutual insurance company, which is an ownership structure for an insurance firm such that the corporation is exclusively "owned" by the contract / policy holders. I remember having a fun debate over beers on why more companies / startups couldn't operate in that manner.

RcouF1uZ4gsC 7y ago
> I remember having a fun debate over beers on why more companies / startups couldn't operate in that manner. Because it would complicate having multi-billion dollar exits. The VC's don't care about creating sustainable businesses that create value for their users. They care about creating runaway hits that they can make billions of dollars on when they IPO.
- bigiain 7y ago
  Which just moves the question to "why more companies / startups couldn't avoid the toxic VC influence on their business"...
  - RcouF1uZ4gsC 7y ago
    Because access to capital matters. If you are a non-VC funded business, you need to generate a profit. How do you compete when a VC-funded business comes in and starts selling a competing product at a loss?
    - tw04 7y ago
      That is in theory where the government steps in. It’s exactly why standard oil was broken up. Selling at a loss to try to create a monopoly completely breaks capitalism. I invite the folks downvoting to explain how capitalism works with a market monopoly. Since pointing out government exists to prevent just such a situation is apparently an unpopular opinion.
      - roenxi 7y ago
        In theory the company selling at a loss goes bankrupt and the people lending them money to burn lose all their money. However post-2008 world is one where (1) the government will probably step in and rescue the people who were lending the money and (2) there are lunatic low-interest policies that encourage lending to anyone with a pulse over all forms of sane weighing up of risk. So why not fund businesses that burn money? The problem in the story isn't antitrust, it is low interest rate policies that excessively favour borrow-and-spend tactics.
      - mdorazio 7y ago
        Not sure why you're getting downvoted. I guess a lot of HN voters are against the idea of regulation that would prevent a lot of startups from gaining traction ("why can't I sell my stuff at a loss to get new customers?"). In reality, regulation extending anti-dumping laws to startup-type products/services is a possible solution to this issue, it's just one that would be difficult to implement and enforce. Ex. where do you draw the line on dumping vs. acceptable marketing and how do you calculate it for something like SaaS that usually has really high margins?
        bigiain 7y ago
        I suspect a lot of down voters have got their nosed wedged firmly in the "VC backed attempt at a monopoly" business model money/equity trough...
      - brycehamrick 7y ago
        This only applies if it’s anti-competitive, meaning if the intent is to undercut and harm a competing business. Funded startups routinely operate at losses, the point is that for many business models it isn’t possible to operate profitably from the start-making alternative ownership structures challenging.
  - marcinzm 7y ago
    Why do you say it's toxic? The owners of most startups want roughly the same thing the VCs want. A big exit that puts lots of money in their pockets.
    - toast0 7y ago
      A big exit that puts lots of money in the pockets of VCs and founders is great for them, but may or may not be great for employees and customers. The whole build a product, attract users, (big) exit, incredible journey cycle can feel pretty toxic at times.
      - bigiain 7y ago
        Exactly. In the context of the original post I was responding to talking about Mutual companies, founders and VCs aiming for 100x exits by shafting customers and employees and society - is "toxic"...
    - RcouF1uZ4gsC 7y ago
      > The owners of most startups want roughly the same thing the VCs want. I am not so sure. The VC's want you to either have a billion dollar exit, or fail quickly. Most owners would be pretty happy with a multi-million dollar a year sustainable business.
      - marcinzm 7y ago
        The ones I knew would definitely prefer a $100 million exit where they made $20 million to a lifestyle business.
        bigiain 7y ago
        Where "lifestyle business" is pretty much VC industry pejorative/derogatory jargon for "long term economically sustainable and ethical company" - as though any of that is a bad thing.
- JumpCrisscross 7y ago
  > Because it would complicate having multi-billion dollar exits This is a flippant response to a deep question. Mutuals work well for utilities because they're not required to invest for the long term, require public support and largely operate on existing physical capital. External capital is, to date, the best system for sponsoring disruptors and for building out new capital. Just as private ownership isn't the solution for everything, it isn't anathema for everything. Presuming so is falling for the same mental shortcuts that produced PG&E.
  - DaiPlusPlus 7y ago
    > Mutuals work well for utilities because they're not required to invest for the long term ...uhm, shouldn't utilities be required to invest for the long-term?
    - JumpCrisscross 7y ago
      > ...uhm, shouldn't utilities be required to invest for the long-term? The different between should and did are incentives. Utilities have no incentive to invest. (They do have an incentive to spend, which if enabled by politicians, generally yields pricey, useless contracts for cronies.) A good case study is in wireless providers in the U.S. and EU. American providers are private; European ones are more utilities. The utilities are cheaper; their CAPEX (and executive compensation) is lower. American cities thus end up with--on average--faster, more-expensive service than European cities. There isn't a better solution, just different ones for different goals.
      - icebraining 7y ago
        > A good case study is in wireless providers in the U.S. and EU. American providers are private; European ones are more utilities. European wireless internet providers are not private? That's news to me, can you give me some examples? I don't think that would even be permitted under EU competition law, which forces member states to create markets in those areas.
  - gumby 7y ago
- denkmoon 7y ago
  VC is not the only way of funding your company though. If your goal is to produce a long term viable business that genuinely creates value, VC is probably not the way to go.
- wpietri 7y ago
  I think you have part of that backwards. I agree VCs don't care about creating sustainable businesses as long as they get fat exits. But I think the reason we don't have more non-VC startups is that VCs are willing to spend a lot of money to create monopoly or oligopoly players. E.g., Super Pumped makes it clear that Uber was very active in trying to strangle all competition in the cradle.
- dickeytk 7y ago
  Is SoftBank looking to invest in PG&E?
scythe 7y ago
>I remember having a fun debate over beers on why more companies / startups couldn't operate in that manner. Typically cooperative ownership structures have trouble making big changes all at once — pivoting. When power is distributed hierarchically, it’s easier for a new idea to flow from bottom to top, top to everywhere. The tradeoff is that hierarchies can only do this if most people are mostly honest, while democratic structures do a better job of smoothing out competing incentives. (I learned this, originally, from a contrast between Lenin’s NEP syndicalism and Stalin’s command economy. Centralization in the latter permitted big movements towards education and energy generation.)
AcerbicZero 7y ago
I do sometimes wonder if these complicated financial instruments have abstracted important aspects of corporate ownership to the point where its just abuse of the system. If an individual can't use those same financial instruments, why should a corporation be allowed to use them?
bcheung 7y ago
I have a mutual whole life policy myself and it is amazing how my interests as a policy holder and my interests as an investor in the company are aligned so well. There really isn't any conflict of interest that I can think of and it's a great win/win structure. That being said, having lived in countries with state run utility companies I don't trust the government to provide the best customer experience to put it mildly.
js2 7y ago
Vanguard is similarly owned by its customers. However, its day-to-day customer service is only so so compare to Fidelity.
205guy 7y ago
https://www.touchstoneenergy.com https://www.touchstoneenergy.com "Touchstone Energy Cooperatives represents a nationwide alliance of member-owned electric co-ops, including yours. Collectively, it delivers power and energy solutions to more than 750 unified local electric cooperatives across 46 states, forming the largest electric utility in the country."

RcouF1uZ4gsC 7y ago

> I remember having a fun debate over beers on why more companies / startups couldn't operate in that manner. Because it would complicate having multi-billion dollar exits. The VC's don't care about creating sustainable businesses that create value for their users. They care about creating runaway hits that they can make billions of dollars on when they IPO.

bigiain 7y ago
Which just moves the question to "why more companies / startups couldn't avoid the toxic VC influence on their business"...
- RcouF1uZ4gsC 7y ago
  Because access to capital matters. If you are a non-VC funded business, you need to generate a profit. How do you compete when a VC-funded business comes in and starts selling a competing product at a loss?
  - tw04 7y ago
    That is in theory where the government steps in. It’s exactly why standard oil was broken up. Selling at a loss to try to create a monopoly completely breaks capitalism. I invite the folks downvoting to explain how capitalism works with a market monopoly. Since pointing out government exists to prevent just such a situation is apparently an unpopular opinion.
    - roenxi 7y ago
      In theory the company selling at a loss goes bankrupt and the people lending them money to burn lose all their money. However post-2008 world is one where (1) the government will probably step in and rescue the people who were lending the money and (2) there are lunatic low-interest policies that encourage lending to anyone with a pulse over all forms of sane weighing up of risk. So why not fund businesses that burn money? The problem in the story isn't antitrust, it is low interest rate policies that excessively favour borrow-and-spend tactics.
    - mdorazio 7y ago
      Not sure why you're getting downvoted. I guess a lot of HN voters are against the idea of regulation that would prevent a lot of startups from gaining traction ("why can't I sell my stuff at a loss to get new customers?"). In reality, regulation extending anti-dumping laws to startup-type products/services is a possible solution to this issue, it's just one that would be difficult to implement and enforce. Ex. where do you draw the line on dumping vs. acceptable marketing and how do you calculate it for something like SaaS that usually has really high margins?
      - bigiain 7y ago
        I suspect a lot of down voters have got their nosed wedged firmly in the "VC backed attempt at a monopoly" business model money/equity trough...
    - brycehamrick 7y ago
      This only applies if it’s anti-competitive, meaning if the intent is to undercut and harm a competing business. Funded startups routinely operate at losses, the point is that for many business models it isn’t possible to operate profitably from the start-making alternative ownership structures challenging.
- marcinzm 7y ago
  Why do you say it's toxic? The owners of most startups want roughly the same thing the VCs want. A big exit that puts lots of money in their pockets.
  - toast0 7y ago
    A big exit that puts lots of money in the pockets of VCs and founders is great for them, but may or may not be great for employees and customers. The whole build a product, attract users, (big) exit, incredible journey cycle can feel pretty toxic at times.
    - bigiain 7y ago
      Exactly. In the context of the original post I was responding to talking about Mutual companies, founders and VCs aiming for 100x exits by shafting customers and employees and society - is "toxic"...
  - RcouF1uZ4gsC 7y ago
    > The owners of most startups want roughly the same thing the VCs want. I am not so sure. The VC's want you to either have a billion dollar exit, or fail quickly. Most owners would be pretty happy with a multi-million dollar a year sustainable business.
    - marcinzm 7y ago
      The ones I knew would definitely prefer a $100 million exit where they made $20 million to a lifestyle business.
      - bigiain 7y ago
        Where "lifestyle business" is pretty much VC industry pejorative/derogatory jargon for "long term economically sustainable and ethical company" - as though any of that is a bad thing.
JumpCrisscross 7y ago
> Because it would complicate having multi-billion dollar exits This is a flippant response to a deep question. Mutuals work well for utilities because they're not required to invest for the long term, require public support and largely operate on existing physical capital. External capital is, to date, the best system for sponsoring disruptors and for building out new capital. Just as private ownership isn't the solution for everything, it isn't anathema for everything. Presuming so is falling for the same mental shortcuts that produced PG&E.
- DaiPlusPlus 7y ago
  > Mutuals work well for utilities because they're not required to invest for the long term ...uhm, shouldn't utilities be required to invest for the long-term?
  - JumpCrisscross 7y ago
    > ...uhm, shouldn't utilities be required to invest for the long-term? The different between should and did are incentives. Utilities have no incentive to invest. (They do have an incentive to spend, which if enabled by politicians, generally yields pricey, useless contracts for cronies.) A good case study is in wireless providers in the U.S. and EU. American providers are private; European ones are more utilities. The utilities are cheaper; their CAPEX (and executive compensation) is lower. American cities thus end up with--on average--faster, more-expensive service than European cities. There isn't a better solution, just different ones for different goals.
    - icebraining 7y ago
      > A good case study is in wireless providers in the U.S. and EU. American providers are private; European ones are more utilities. European wireless internet providers are not private? That's news to me, can you give me some examples? I don't think that would even be permitted under EU competition law, which forces member states to create markets in those areas.
- gumby 7y ago
denkmoon 7y ago
VC is not the only way of funding your company though. If your goal is to produce a long term viable business that genuinely creates value, VC is probably not the way to go.
wpietri 7y ago
I think you have part of that backwards. I agree VCs don't care about creating sustainable businesses as long as they get fat exits. But I think the reason we don't have more non-VC startups is that VCs are willing to spend a lot of money to create monopoly or oligopoly players. E.g., Super Pumped makes it clear that Uber was very active in trying to strangle all competition in the cradle.
dickeytk 7y ago
Is SoftBank looking to invest in PG&E?

scythe 7y ago

>I remember having a fun debate over beers on why more companies / startups couldn't operate in that manner. Typically cooperative ownership structures have trouble making big changes all at once — pivoting. When power is distributed hierarchically, it’s easier for a new idea to flow from bottom to top, top to everywhere. The tradeoff is that hierarchies can only do this if most people are mostly honest, while democratic structures do a better job of smoothing out competing incentives. (I learned this, originally, from a contrast between Lenin’s NEP syndicalism and Stalin’s command economy. Centralization in the latter permitted big movements towards education and energy generation.)

AcerbicZero 7y ago

I do sometimes wonder if these complicated financial instruments have abstracted important aspects of corporate ownership to the point where its just abuse of the system. If an individual can't use those same financial instruments, why should a corporation be allowed to use them?

bcheung 7y ago

I have a mutual whole life policy myself and it is amazing how my interests as a policy holder and my interests as an investor in the company are aligned so well. There really isn't any conflict of interest that I can think of and it's a great win/win structure. That being said, having lived in countries with state run utility companies I don't trust the government to provide the best customer experience to put it mildly.

js2 7y ago

Vanguard is similarly owned by its customers. However, its day-to-day customer service is only so so compare to Fidelity.

205guy 7y ago

https://www.touchstoneenergy.com https://www.touchstoneenergy.com "Touchstone Energy Cooperatives represents a nationwide alliance of member-owned electric co-ops, including yours. Collectively, it delivers power and energy solutions to more than 750 unified local electric cooperatives across 46 states, forming the largest electric utility in the country."