Ownership Matters|Issue 10
Mission Driven Finance; Co-op Stories on Film; Argentina's Cooperatives
- Editorial: In Search of Solidarity Infrastructure
- Two Great Documentaries about Co-ops
- Fund Profile: Mission Driven Finance
- Cooperatives in Argentina’s Time of Need
- A Worker-Owned Conversion Alternative
- Vermont’s Investment Club for Cooperatives
- Abello’s Bottom Line
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In Search of Solidarity Infrastructure
Even if you weren’t around at the time, you can probably imagine the early years of the P. C. revolution, around the late 1980s or so. Hundreds of small startups (some in garages, just like Steve and Woz supposedly were) were tinkering with code, playing with motherboards, all driven by a shared sense that something much bigger was coming together.
If you’re looking at all the innovation happening around the solidarity economy today, most of it unheralded thus far, it resembles that earlier period. Just consider a few examples, not meant to be comprehensive:
- The private equity model is being turned upside down in order to distribute equity and earnings to employees of businesses newly converted to co-ops (Main Street Phoenix Project)
- The real estate investment trust (REIT) model is being re-engineered to make place-based ownership available to owners of child care centers (Mission Driven Finance)
- The holding company model is being reinvented to allow multiple worker-owned businesses to leverage the advantages of operating under single structure (Obran)
- The incubator / accelerator model is being converted to one which founds businesses focused on worker equity and well-being (The Industrial Commons)
It’s dizzying to watch the amount of creativity being poured into creating a new social / financial infrastructure across the economy today, in this country and beyond.
But in the greater world of business and finance, these innovations are still basically invisible. Again, it’s almost like the early years of the P. C. revolution, when you could read only a few (printed!) newsletters, there was no P. C. Magazine or Wired, no giant annual Comdex trade show — all that came later.
Similarly, the new “middleware” (as Zebras Unite’s Astrid Scholz has dubbed this emergent financial infrastructure) is still coming together and is not well understood by most of the larger business culture.
That’s why Ownership Matters has some ideas to pass by you, our readers. In coming issues, we will outline a new program that will combine 1) greater reader engagement with 2) a grassroots business research project focused on creating sustainable business models.
Our hope is that this new program — maybe we’ll call it the Solidarity Infrastructure Project — will offer a valuable new resource for building up the social / solidarity economy generally. Back to you soon on all this.
Two Documentaries about Cooperatives That You Ought to See
Daniel Wortel-London, PhD (follow: @dlondonnyu) is an urbanist and policy researcher based in New York City whose work focuses on city planning and economic development. His resume and writings can be found at publicspaced.com.
Filmed documentaries on the solidarity economy are relatively rare. This is unfortunate. A good documentary can convey the look and feel of a cooperative, and the emotions of their worker-owners, in a way that a post or podcast (or online newsletter!) alone cannot. A well-edited documentary can weave together many such stories into a whole greater than the sum of its parts. As such, documentaries can play an important role in spreading knowledge of and passion for the solidarity economy.
Mondragon, a Basque Cooperative, produced by the Dutch documentary company VPRO in 2012, investigates the people, culture, and community of the Mondragon cooperative. Filmed entirely within the town, the film delves into the institutional ecosystem that contributes to and benefits from the company’s success: cooperative schools, cooperative business incubators, town halls, and even the local church.
Mondragon is shown to be a triumph of both communitarianism and cosmopolitanism. The cooperative is firmly embedded in the traditions and culture of the Basque people, but most of its products are marketed towards a global audience. Mondragon’s region dates to the middle ages, but Mondragon’s products are modernist and functional in design. Cooperative worker-owners are embedded in thick ties of mutuality and trust, but the company is unapologetically organized around efficiency and a commitment to economies of scale.
The dominant theme through the film, however, is the importance of two values in making the cooperative function. The first is solidarity. Worker-owners discuss the company with pride and a sense of ownership. Profits are important, but only insofar as they are recycled back into the cooperative and community.
Solidarity is complemented by another value: autonomy. This is most obvious in the desire of individual workers to be treated with dignity and respect. A desire for political autonomy, however, is equally vital to the success of Mondragon. Again and again, we see Mondragon worker-owners and officials trying together their commitment to their cooperative with their commitment to a transformative political project: independence and self-determination for the Basque people. Economic autonomy is a means toward greater political autonomy more generally. There is a lesson here.
Fund Profile: Mission Driven Finance
A conversation with Mission Driven Finance’s co-founder and CEO, David Lynn, and Lauren Grattan, co-founder and Chief Community Officer. Mission Driven Finance (MDF) is a San Diego-based community investment fund manager founded in 2016 to fill the gap between philanthropy and traditional investment, a field now often referred to as “impact investing.”
Mission Driven Finance
San Diego, Californiamissiondrivenfinance.com
contact : info [ at ] missiondrivenfinance.com
Total assets under management
Assets under administration
- private debt — absolute return / notes
- real estate
- private equity
Areas of focus
- health & wellness
- small / medium business development
Great to connect with you both, David and Lauren. Mission Driven Finance is doing lots of interesting work and I know you have some updates to offer. To begin, we might take notice of our common focus — building more shared ownership, right?
Yes, I subscribe to your newsletter and shared ownership is one of our core areas of investment and support. It’s part of our overall goal of mobilizing capital to increase inclusive and equitable access to education, health, and wealth. And that last one is where we think about shared ownership structures in the broadest sense, as a way of creating wealth and voice for people that don't normally have it.
So how do we create that form of asset ownership that can break intergenerational cycles of poverty, whether that's business ownership, asset ownership, or property ownership? Although we are not solely a shared ownership firm, shared ownership intersects with education, immigrants, refugees, and New Americans, which we also invest in.
We have a number of partners to whom we provide services, such as Obran, Apis & Heritage Capital Partners, and Project Equity. We are also looking at a shared asset project, a community real estate investment trust (or cREIT) to finance quality facilities for early education providers and to enable real estate ownership in that space, especially for women of color.
We have strong beliefs that capital can move differently than it has. We have been operating under a worldview for the last few centuries based on private ownership, the kind that combines both economic and governance control. We believe there are alternative models that allow us to bring deep values to our work, as well as our understanding of the nuances of finance.
At Mission Driven Finance, we have a very interesting mix of backgrounds on our team that allows us to work with a variety of kinds of investors. I call David a financial engineer because his brain works very differently than mine. He sees possibilities and solutions for how the financial structures can work.
But we all work in service of community. We understand what a donor-advised fund is looking for, what a community foundation investment committee needs to see, what private foundations need for a program related investment, as well as more traditional sources of capital like high net worth individuals, family offices, Community Reinvestment Act money. We understand how those work, and we are committed to unlocking them in service of community.
And that community dimension is exactly why Lauren’s here, trying to close the gaps in the system, trying to make markets and move money where it normally doesn’t go.
I think our readership is very attuned to that vision so they’ll be interested to hear how exactly MDF is a bit different from some of the other players in this space.
Yes, what we’re doing is a bit different from an Obran or a Project Equity. For example, I am not the best person to walk you through cooperative governance structures; there are better people for that. But what I can do is understand the financial mechanics, and the interpersonal motivations of investors to allow for money to move into a cooperative or worker ownership structure.
What’s different about the MDF Capital Partners Fund is that it’s based on something we recognize structurally in the investment space: there are absurdly high minimum investment sizes from institutional capital, much too large to go into what I call community-sized impact. There are wonderful funds targeting between $2 million and $20 million, because that’s what their community needs and what their community can absorb in a reasonable period of time. You might see some stretching up to $30 million — like Apis & Heritage, which just had their first close. But unless you’re really targeting $50 million for your first fund — which is a big leap to take for a new offering — institutional investors’ minimums are effectively a hurdle that is stopping capital from flowing into shared ownership structures.
We’re working to be the platform and the fund administrator for these smaller entities, taking out a lot of the operator risk so that we can help facilitate more capital to flow into these projects. We do that by bundling community funds and projects in a way that allows for institutional investors to meet their $1 million or $10 million minimum check sizes but have that spread across a variety of impact initiatives, so they don’t have to take too much of any one underlying portfolio and become over-weighted. It allows them to be more distributed for that deep impact they want but only need to do one round of due diligence.
South America Report
Cooperatives in Argentina’s Time of Need
Beginning with immigrants from Europe at the end of the 19th century, cooperativism has a long history in Argentina as a sector which has repeatedly proven its economic viability amidst adverse conditions. This country’s historical 10-year boom and bust cycles were also times when cooperatives performed well as strategies for coping. The multiple crises of the last two years in Argentina have been yet another test of these enterprises.
In 2019, towards the end of the administration of former President Mauricio Macri, Argentina was once again in an economic collapse marked by peso devaluation, accelerating inflation, an increase in energy tariffs and a consequent fall in real wages. This government had demonstrated a dislike of cooperatives in general and Argentina’s famous empresas recuperadas (recovered businesses, many of them factories) in particular, probably because they seemed to constitute an alternative to neoliberal capitalism.
So in 2020, when Covid-19 finally hit this part of the world, the situation was already delicate. In addition to the thousands and thousands of closures of SMEs and businesses caused by the economic crisis — an alarming 10% contraction in the overall economy — there was the confinement of the population and the total closure of existing businesses due to the increase in contagion and preventive policies. In March of that year, the IMF declared Argentina’s debt unsustainable and advised deferred payments for foreign currency until 2024.
The new government of Alberto Fernández arrived as four out of ten Argentines were living below the poverty line. Remarkably, this administration was pro-cooperative, offering the sector support in the form of subsidies, preferential credit, tax relief and a national register of the recovered businesses.
Perhaps more remarkable was the fact that 10% of Argentina's GDP in 2020 was produced by the cooperative sector, which now amounts to some 20,000+ businesses.
English speakers may be familiar with some of the cooperatives which have emerged from the recovered factories movement, dating back to the 2002 crash and documented in the film The Take (2004). The movement resulted in over 300 recovered businesses, mostly centered in Buenos Aires.
Long-Haul Success with Staged Conversion
Over on the blog of the law firm Jason Wiener P.C., veteran co-op attorney Linda Phillips offers a different way to think about converting a company to worker-owned. It involves creating a separate worker cooperative and selling portions of the business to the cooperative over a period of time, say 3 to 10 years or more. This strategy can allow a CEO to remain in charge for a longer period, buy time in order to accommodate multiple transactions, or give employees additional time for training as owners or entrepreneurs.
When We Invest Together
Shareable has put up a great profile of the history and activities of the Vermont Solidarity Investment Club — whose 27 members, since its founding in 2016, have invested $60,000 in various cooperatives.
Abello’s Bottom Line
Next City’s senior economics correspondent, Oscar Perry Abello, produces a free, 3x-weekly email newsletter called “The Bottom Line,” in conjunction with a larger publication project of the same name. He covers financial topics including cooperatives, CDFIs, opportunity zones, the public pensions, anchor institution procurement, and those aspects of zoning that determine where jobs can be located in cities.
Coming in Issue 11, September 21
- Nathan Schneider revisits his Everything for Everyone
- Rodney North on his new podcast
- Part two of our conversation with NPQ's Steve Dubb
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