This month I had the pleasure of attending this year’s Platform Co-op event at the New School in New York. Organizers Trevor Sholz, Camille Kerr, Palak Shah, and Nathan Schneider showcased many experts and businesses that are making platform co-ops a reality. The participants represented an almost overwhelming array of accomplishments.
But for all the innovation that these businesses are bringing to the world, the challenge of obtaining capital for co-ops is still real. Aaron Tanaka, director of Center for Economic Democracy, described the obstacles the Boston co-op, Cero, had to overcome to finance their co-op. They used the creative approach of a Direct Public Offering, which they paid for, and then needed nearly 100 investors to raise $350,000. This is a great success story, but it should be easier. Financing a co-op is still not understood by financial institutions, according to Elvezio Del Bianco from Vancity Credit Union in Vancouver.
Some presenters offered financial solutions. Brendan Martin from Working World discussed a cooperative network of shared funds called The Madeline System. Elvezio Del Bianco’s Vancity supports new cooperative enterprises. Christina Jennings represented The Shared Capital Cooperative, a national loan fund committed to investing in cooperative enterprises. Derek Razo offered innovative financing at Purpose Economy Ventures.
But Joseph Blasi caught my attention by suggesting that co-ops find funding via Employee Stock Ownership Plans (ESOPs). He says ESOPs should be a more utilized by co-ops for capital. ESOPs offer a vehicle for funding that is proven. I’ve considered ESOPs separate from co-ops. According to The Cooperative Development Institute (CDI) in Massachusetts, ESOPs can be hierarchical because they form a trust not necessarily owned by employees. But ESOP structures can vary, and could be setup to form an employee-owned business. It would appear ESOPs can be a solution. But they can also be expensive for small businesses mentioned in a report from the Democracy at Work Institute (PDF).
Financing co-ops can be a challenge, but this gathering of expertise offered encouragement.
One option not mentioned here is the VAWC and Arizmendi Assoc. models of co-ops funding co-ops. Personally, I think that has much to recommend it and is one we should be pursuing.