JC:

Thanks. And let me just begin by saying: this is an incredibly hard thing to do and I would not wish it on anyone. [Laughs.] Let’s also just start there.

JC:

Right, we went for a holding company with industry groups, each of which is composed of underlying operating companies. Our strategy is to align each industry group’s resources and systems — which vary greatly — to benefit their companies.

It is the overall holding company which is owned by all the workers of all the companies rather than the conventional co-op model of workers owning their individual companies. So you have the possibility of moving from one business to another.

JC:

Yeah, I guess. Somebody recently called us “a socialist PE firm”! We’re just saying: take the best from both worlds, and not the worst.

JC:

So although we’re a co-op, we’re not a federation, although there are vestiges of local control in our operating companies. And in this model you have questions around subsidiarity. Our operating companies are not free to over-lever themselves, for example.

And around worker rights and responsibilities in one business versus the same questions in a conglomerate. We have a lot to learn about executing on some of our core democratic processes, of course. And we’ve learned from lots of people, including non-co-op folks, including M & A practitioners. I’m a recent Start.coop graduate and I read people like Yale prof A.J. Wasserstein. Another influence is Tim Huet, founder of the Arizmendi Association, whom I consider a mentor.

JC:

Right, and that led to our first interesting failure: our construction business. Staffing took a big hit during the pandemic — the one thing people didn’t want was more people. We had staffed construction before so we felt we understood the business model and those were the kinds of jobs we knew people were looking for. That was the germ of our idea when we did our first acquisition.

JC:

Well first, the business we bought was too small. And also: we didn’t install a replacement CEO at the outset to work with the owner for the 3-year period before exit. We learned it’s better on Day One to have an entrepreneur sitting beside the CEO than to try to elevate the current CEO.

JC:

In addition to the construction company, we bought properties and raised $1 million to do renovation work. So we ended up in construction, property management, and asset management: three businesses we’re trying to handle at same time. Luckily employees got some financial relief from a fund raised by Seed Commons, with whom we’re working.

JC:

We knew if we truly wanted to become a rhizomatic entity [Editor’s note: rhizomatic meaning, “replicating ourselves and growing up from multiple roots”], there would be times we failed.

And yes, acquiring the first company taught us an incredible amount. About corporate finance, legal structures, M & A, about our capacity to execute in all these areas.

JC:

Right. It’s intended to be a kind of shared learning experience in entrepreneurship for other members in Obran. We advertised at top schools, got lots of applicants, and ended up with 21 viable candidates, the majority of which were MBA graduates or working on one. Six people made it to the final round of interviews and we chose one as our new search coordinator or vertical lead.

JC:

Correct. It was Adam who literally just found us on the web and then called us up. He had a thesis in mind and we asked him to present it to our board and management team. It was fantastic. We saw what he was describing as a model for replication which could take us into new markets where we could find new members. Keep in mind: we see the workplace as a pathway for membership.

JC:

Yes. And we are supported by Kaiser Permanente and a good relationship with Kaiser’s foundation and their impact spending team. We want to leverage the anchor institution strategy here in which you educate their vendor base about employee ownership. And they understand that we can help them ensure their spending is staying in the local economy, that they’re impacting the social determinants of health there, etc.

JC:

Right. We have partnered with Project Equity which typically looks at helping a company take an ESOP route or a worker-owned trust route. We’re offering a new option: join a co-op conglomerate as part of a legacy play.

JC:

All kinds. We’re looking at security companies, window washing, call centers, construction firms, HVAC companies, insurance. The target needs to have a minimum spend of about $1 million, and a certain number of employees.

JC:

Our dry powder will be a new $30 million acquisition fund — we’re about halfway there and we’re working with Mission Driven Finance, who will host the fund, and with Seed Commons.

JC:

We look for around 9% annual return with a fund lifetime of 10 years.

JC:

We are recruiting now for the next cohort in mid- or late September, looking for possibly two more search people.

JC:

Thanks!