Ownership Matters|Issue 6
What is a Co-op Holding Company?
This issue:
- Editorial: What Is Our Job Here?
- Fund Profile: Obran Cooperative
- Greg Brodsky on How to Invest in Co-ops (Part 2)
- July 23 Webinar: Co-ops and Childcare
- Apis & Heritage Capital Raise
- Felipe Witchger’s Fund for New Leadership Fellowship
- The Cooperative Way Podcast
Not yet a subscriber? Sign up — it’s free.
Editorial
share this segment by right‑clicking icon to copy linkWhat Is Our Job Here?
I spent quite a few years living and working in Chicago, a city I still love despite everything. Even after this July 4 weekend’s 95 shootings there. (Nationwide more than 540 shootings were reported for the weekend.)
Chicago, which two decades ago still felt like a comfortably middle-class metropolis (if you were white and employed), now resembles most if not all other major cities in its bifurcation. On the one hand, there’s the Lakefront / Michigan Avenue playground, the Northside, booming Pilsen, the Hyde Park / University of Chicago enclave . . . and then there’s miles and miles of everything else.
We know much more now about why and how this bifurcation occurred. It turns out Chicago played an important role in creating the 1% economy, if you think about the Chicago School economists and their impact on neoliberalism as well as the extreme financialization of the U.S. economy. The world’s two largest futures exchanges — where financial derivatives were invented — were located in the city’s downtown. (I worked for a time for one of them.)
In addition to what we know about this macro history of rising inequality, we also know more now about the history of structural racism, thanks to books like The Color of Law, which lays out clearly that structure as it was built into neighborhoods of the city of Chicago. In this case, we’re speaking of structures of law, real estate codes and covenants, operating at all levels of government.
Then for us promoters and builders of economic democracy, what’s our job here?
First to learn from each other as we try to build new structures within the old ones. Personally, I also learn from authors such as Naomi Klein, Marjorie Kelly, Anand Giridharadas, Jessica Gordon Nembhard, Steve Dubb, Nathan Schneider, and Isabel Wilkerson, among many others. We are also fortunate to have committed organizational leaders like Melissa Hoover, Doug O’Brien, Esteban Kelly, Sonja Novkovic, Paul Bradley, and numerous others.
And second, our job is to hold up each other’s work in solidarity on this vast building site of the economy we need. We are in a creative moment like the early days of the Internet except that our project is not to invent an industry: it is to reinvent an entire economy, as well as the thinking and the way of life around it.
As we’re tempted to wonder at times whether we’re succeeding at this work, the writer Arundhati Roy’s oft-quoted line comes to mind: “Another world is not only possible, she is on her way. On a quiet day, I can hear her breathing.”
— Elias Crim
share this segment by right‑clicking icon to copy linkFund Profile: Obran Cooperative
A conversation with the co-founder of Obran Cooperative, Joseph Cureton, following on our June 15 webinar (co-hosted by Zebras Unite) on “Co-op Strategies for Reclaiming Human-Centered Healthcare”, at which Adam Rose, Obran’s COO, spoke.
OM: |
Let me begin by saying this is a pretty amazing business you’ve got underway here. Obran is a co-op holding company with current or planned acquisitions in five verticals — health, construction, staffing, tech, media. |
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. |
OM: |
OK, understood! You mentioned in another interview that the germ of Obran began in Baltimore in late 2018 with CORE Staffing, a worker-owned cooperative which placed workers in temp positions around the area. It was originally built by and for returning citizens who continue to face barriers to being hired. This co-op approach then inspired a different kind of business, a digital creative agency called Tribe Works for which you were also a co-founder. So two very different businesses with members from different social worlds, you might say. Looking to unite them, you looked at models of co-op collaboration: Mondragon, Evergreen Coops in Cleveland, the Arizmendi Association of Coops in the Bay Area. But you and your team chose to go a different route. |
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. |
OM: |
So Obran is what you get when you cross a worker co-op and a private equity fund! |
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. |
OM: |
Say a bit more about the holding company model, please. |
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. |
OM: |
Your entry point in this work was a staffing company, which gave you a window to look into other types of businesses. |
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. |
share this segment by right‑clicking icon to copy linkHow to Invest in Cooperatives (Part 2)
Greg Brodsky
Different ownership creates different incentives
As we talked about in Part 1, while the need for financing in a cooperatively owned business is very much the same as a traditional business, investment can look really different.
When investing in a cooperative, the biggest difference is that investor repayment generally has to happen out of company revenue or profit, not an increase in the share price. To understand why, we need to look more closely at what has to happen to make a share appreciate in price and why it often isn’t the right fit for cooperative ownership.
In any business, there are generally only three ways for investors or lenders earn a return on their investment:
- The company’s share price goes up
- The company pays back investors out of revenue
- The company pays back investors out of profit or dividends
(To keep things simple, we’re ignoring refinancing which can function as another source of investor repayment.)
People are generally most familiar with #1, because that’s how the stock market works and where gains in a typical retail investor’s portfolio come from. You buy a share of stock in a publicly listed company and then later sell that stock to someone else. In doing so, you are exiting your position, in what is called a secondary market, such as the New York Stock Exchange or NASDAQ.
Investors, like angel investors and venture capital funds, who typically invest in early-stage, non-public companies, also hope the value of their investment — the position they take in the company — will increase. However, very few secondary markets exist for companies that are not publicly traded. So these investors are looking to exit via slightly different strategies: a) the company goes public, b) the company is acquired, or c) the shares can be resold to another investor.
“Who can I sell this company to?”
Early-stage investors want to make sure they can get their money back by selling or liquidating their share. So right from the very start when they evaluate an investment opportunity, they are asking themselves “who can I sell my share of company ownership to?” And some of these investors — specifically equity funds — need to harvest returns within the 10-year period of most funds, in order to repay their investors within the agreed upon timeline. As a result, there is immense pressure on the companies backed by these investors to go fast, go big, and sell the company or IPO within 10 years of the initial investment.
Who benefits financially in this scenario? The small group of people who invested early (and who had the economic privilege to invest in the first place).
Now, consider, on the other hand, the very different financial incentives of cooperatives, who are explicitly trying to create long-term ownership and wealth within a much broader community, whether that community be workers, or Black farmers, or musicians.
Upcoming
share this segment by right‑clicking icon to copy linkJuly 23 Webinar: Co-ops and Childcare
Ownership Matters recently co-sponsored a webinar with Zebras Unite called “Co-op Strategies for Reclaiming Human-Centered Healthcare.” That topic is one dimension of a larger subject: the general crisis in caregiving in this economy.
Consider the fact that over half of U.S. families live in child care deserts — i.e., with no local options for public preschool, Head Start, or private child care centers.
Then there’s the precarious status of the more than 1 million home childcare providers, only about half of whom are “on the books.” Exactly as we discussed in the case of home care workers, child care workers endure low pay, little support, and low respect. So what might ideas of shared ownership offer to this critical sector of our society?
We were familiar with the important work of the ideas lab Capita and its co-founder Joe Waters. We asked him to convene and moderate a panel on this question, co-hosted by Zebras Unite, at noon ET on July 23. Here are the panelists:
- Leslie Borell is the founder of Carefully, a collaborative platform for sharing care, organizing pods, co-ops, and mutual aid.
- Emma Rubin is a Senior Cooperative Developer at the ICA Group, which supports the development of worker cooperative child care centers and cooperative networks of home-based child care providers.
- Teresa Mansell is a founding mother of Childspace, a worker-cooperative child care business in Philadelphia.
- Jessica Mason is the co-director of Start.coop, a business accelerator developing the next generation of co-operative entrepreneurs.
You can register to join the July 23 Co-ops and Child Care Crowdcast event here.
share this segment by right‑clicking icon to copy linkApis & Heritage Announces First Close of $30 Million
If their plan succeeds, Apis & Heritage Capital Partners (A & H), the BIPOC-led private equity fund offering an innovative ELBO (employee-led buyout) strategy, will be converting 500 employees to owners over the next five years.
With a First Close on their Legacy Fund I at $30 million on June 23, the first building blocks are in place for A & H to acquire and convert at least eight closely-held companies from retiring founders in that timeframe.
Target companies will have $1–4M of EBITDA with at least 40 employees and a workforce at least one-third Black, Indigenous, or People of Color (BIPOC), in manufacturing and essential service sectors such as maintenance, landscaping, mechanical trades, cleaning, home healthcare, food processing, logistics and other services.
Moreover, A & H expects an average worker who benefits from an A & H-assisted buyout to accrue retirement savings of $70,000–$120,000 each — a potentially life changing amount. We’ll be watching developments for this exciting firm, headed up by partners Todd Leverette and Philip Reeves.
share this segment by right‑clicking icon to copy linkFelipe Witchger Selected as Fellow of the Fund for New Leadership
It’s great to see our Ownership Matters publisher Felipe Witchger in this year’s cohort of fellows of the Fund for New Leadership. He’s the founder of the Community Purchasing Alliance Cooperative which has helped dozens of religious and educational institutions shift more than $13 million in facility contracts to local Black, Latino and women-owned businesses.
His new project is the Francesco Collaborative, inspired by Pope Francis’ “Economy of Francesco” event in 2020, and aimed at building the strategic capacity of the cooperative and employee ownership movements within the larger solidarity economy.
If you haven’t seen Felipe in action, check out this 3-minute video he did to highlight the work of Start.coop co-founder Greg Brodsky (see Greg’s article elsewhere in this issue), MSI-Ingregrity’s founder Amelia Evans, and Center for Common Ground’s Andrea Miller. (Here’s a link to Felipe’s fantastic conversation with Andrea about co-ops and her idea for Democracy Centers.)
share this segment by right‑clicking icon to copy linkNew podcast: The Cooperative Way
Many readers were first introduced to the world of cooperativism some years ago through Jobs of Our Own, written by the Australian politician and social theorist Race Mathews. Along with topics such as Christian socialism, distributism, and Mondragon, the rich history of the Australian co-op movement comes up in the book.
Now there’s a new and very astute podcast from Down Under, hosted by veteran cooperator Antony McMullen. Here’s their description:
“The Cooperative Way is an Australian-based and outward-looking podcast featuring news and analysis focusing on the co-operative and mutual enterprises and the broader social / solidarity economy.”
Patreon subscriptions to the podcast are available for a modest $2/mo. here.
Coming in Issue 7, July 27
- Fund Profile: Cooperative Fund of New England (CFNE) with Micha Josephy
- Rebecca Fisher-McGinty on Mondragon’s Sovereignty of Labor
Article ideas? Submissions? Helpful suggestions?
Contact the editor: ecrim@ownershipmatters.net.
Masthead
- Elias Crim, Editor
founder, Solidarity Hall; former business journalist and publishing consultant
- Júlia Martins Rodrigues, Contributing Editor
attorney (Brazil); visiting scholar, law, University of Colorado Boulder; PhD candidate, civil and constitutional law, University of Camerino
- Daniel Fireside, Contributing Editor
founder, Uncommon Capital Solutions; board member, Namaste Solar; capital coordinator, Downtown Crenshaw Rising
- Zoe Crim, Editorial Assistant
B.A., linguistics, Indiana University Bloomington; co-founder Fair Trade group
- Paul Bowman, Design / Content Mgr.
Advisory Board
- Jessica Mason, Start.coop
- Stephanie Swepson-Twitty, Eagle Market Streets Development Corp.
- Nathan Schneider, University of Colorado Boulder
Disclaimer: The content of Ownership Matters is for informational purposes only. Such information should not be construed as legal, tax, investment, financial, or other advice. Nothing contained in these materials constitutes a solicitation, recommendation, or offer to buy, or a solicitation of an offer to sell, any securities. Subscribers / readers agree not to hold the authors, their affiliates or any third party service provider liable for any possible claim for damages arising from any decision made based on information published here.