Startups Need a New Option: Exit to Community
Founders create startups for all sorts of reasons. Often, the motivation is a mix between the founders’ desires to do well for themselves and to do something worthwhile for others. Dreams of greatness might figure in there too. Rarely, however, is the overriding reason to build a company people want to get rid of. But that is what the startup pipeline is designed to produce.
When a startup company takes early investment, typically the expectation is that everyone is working toward one of two “exit” events: selling the company to a bigger company or selling to retail investors in an initial public offering. In either case, the startup is a hot potato. One group of investors buys in order to sell to another group of investors who buy in to sell to the fools down the road. There’s something sort of pyramid-scheme-ish about all this. The exit event, also, is often the beginning of the end of any positive social vision that the company might have held.
What if startups had the option to mature in a way that gets them out of the investors’ hamster wheel?
In the coming months, I will be exploring strategies and stories that could help create a new option for startups: Exit to community. In E2C, the company would transition from investor ownership to ownership by the people who rely on it most. Those people might be users, workers, customers, participant organizations, or a combination of such stakeholder groups. The mechanism for co-ownership might be a cooperative, a trust, or even crypto-tokens. The community might own the whole company when the process is over, or just a substantial-enough part of it to make a difference.