Cooperative Business Incubator

The problem:

Numerous business incubators have sprung up in the UK and around the world with their owners’ pockets bulging with cash ready to be invested in the next big thing. A lot of money is available for the right business idea, but comparatively of little attractiveness to venture capital is the coop structure. This is because even if the coop gets funded with loan money, the return is relatively small compared to the 10x, 20x exit ratios of potential return to investment of the regular business start-up. This prompts a number of questions that describe some of the money related problems our society faces:

  • What are people with money more concerned with: collecting more money, or investing it in the betterment of mankind?
  • What would the world look like now if the vaccine for polio was secured by patent? Would the disease be killed or merely controlled? What happens with most new drug discoveries if their development is controlled by big pharmaceutical companies?
  • When scientists create a new material, who has the resources to develop it further?
  • Which is more profitable: delivering new, disruptive technology early and cost effectively, or phasing out the old slowly?
  • What employment options are there for talented university graduates?
  • Where does the experienced, skilled professional go to make a good living for their family?

The opportunity:

In this post I wish to propose a solution that springs naturally from the cooperative values. The opportunity to expand the cooperative model in the UK is enormous given the size of the service sector. Because service in many cases requires mostly human resources rather than physical, it could be the best breeding ground for new worker cooperatives. Numerous people have organized into coops and more and more are joining, but what is worrying is that it usually happens only when the fate of the original company is at stake. When the venture stops being profitable, current owners pack up and only then, employees get together and save the day. This has been massively the case lately in Argentina where thousands of people were left without work, and is increasingly present in the UK. We’re all looking to the government for stimulus packages, or to corporations and individuals to create jobs. Those of us working for them that is. There are those of us that don’t wait and see that we can work together for our benefit and not corporate profit. The majority don’t have the will or feel need in the short term (“I have a secure job, why change any thing?” – mentality).

In addition, as mentioned in the bullet points above, new technologies or drugs get developed for profit. This happens because big corporations don’t have to wait for government funding, or create a marketing campaign like the non profits have to. Rarely also they need to borrow from the bank – because they have the cash reserves put aside for R&D. They know that innovation is key to securing their future profits. it is my belief that the coop movement has a great opportunity for providing a service to itself and mankind by running a similar venture, but with our values at the core of it – profit would not get in the way of helping a good cause.

The cooperative movement is doing all it can to promote and proliferate, but telling or even showing people how it’s done is not enough. We’re facing the challenge of a mass shift of mentality; one from being a subordinate within a secretive hierarchy to the free thinking cooperative. We need to step up the game and provide the coop movement with a springboard.

The proposed solution:

What I would like to propose for your kind consideration is a cooperative business incubator that would be self sustaining after the first venture takes off. And to aid that initial success – again I only propose – that we start within the service sector and create an alternative employment for professions such as recruitment, care, etc.

This would work in the same way as in a corporation – the incubator would do the market research and hire experienced staff to manage opening of the new venture. An example of this is a high street recruitment company opening a branch in a different town based on the demand it experienced from that area. This assumption is based on existing job openings for professionals who are experienced in opening new branches (click on the image to see the live current example):

reeduk_recruitment_manager

This job posting is not alone – in the past few months there have been similar postings on reed pointing towards recruitment companies expanding their market share. The details of this particular opportunity can be discussed in the next stage; for now, I attach the business model prototype for your consideration below (again, clicking the image will open the document in a new tab). This tool will be used as basis for discussing all 9 areas of the venture. As you can see in the right top corner – it is in iteration D01 – “Draft one”. This “canvass” allows for testing and modifying the business model as new information becomes available.

Coop Incubator - Business Model Canvas

Here are some of the benefits that I see from creating such a venture:

  • provide more alternative jobs for future graduates whose current option is mainly the corporate ladder rat race.
  • an organic means to build a cooperative of cooperatives – with the aim for growing of the “market share” of the cooperative movement in the UK
  • in case this idea takes off, more incubators will appear, with more cooperative groups forming.
  • provide a fast financing option for the right venture – spreading the risk over the entire group rather than between the lender and the entrepreneur (in case of taking the loan route)
  • benefit from the variety and sheer number of ideas generated by free-thinking coop members as opposed to the limited number of corporate leaders.
  • organic scalability of the fund depending on the number of the created ventures, the number of successful coops that join from the outside and the market forces present at the time.
  • with the increase in the size of the fund available, both the number and size of ventures will increase allowing for projects like sustainable permaculture farming as opposed to mass GM farming. Another idea is competition to companies like Siemens who are participating in large scale projects securing energy from the sun in the desert in Africa.
  • The leverage all of the smaller coops will have together in terms of purchasing power and political influence. This could be the biggest experiment in true democracy where internet enabled live polls among all members of the group could be used for decision making (regarding matters involving the entire group) rather than delegating decision making to representatives.

The opportunities are abound and although the project will start small, we can be adventurous in imagining how it could develop. One small coop will never have the means to compete with the big multinationals. Direct cooperation in the same project between many coops can make a difference. The Mondragon Cooperative started with five engineers and organically grew into an 80 000 – strong company with its own bank and social security. With today’s technology we can achieve their success in a fraction of the time.

The process:

To get there, however there needs to be work done at the basic level.

TO BE CONTINUED… (an unintentional cliffhanger)

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