Ask HN: Examples of tech worker cooperatives?

144 points by jboynyc ↗ HN
Cooperatives are an intriguing business model for reasons addressed in a recent New York Times article [1] as well as a recent documentary film called Shift Change [2]. The discussion sparked by Thomas Piketty's Capital in the Twenty-First Century [3] provides further reasons for seeking out an alternative business model. Wikipedia has a good entry on the worker coop model [4].

I've come across Quilted [5] and Colab [6], two worker-owned and run cooperatives working in the tech space in the U.S. Both have a fairly impressive lineup of worker-owners and compelling portfolios, indicating that the model can really work.

Does anyone know of other examples of such coops, both in the U.S. and around the world?

1: http://www.nytimes.com/2014/03/30/magazine/who-needs-a-boss.html

2: http://shiftchange.org/about/

3: https://news.ycombinator.com/item?id=7618971

4: https://en.wikipedia.org/wiki/Worker_cooperative

5: http://quilted.coop/

6: http://www.colab.coop/about

98 comments

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from argentina: http://www.tecso.coop/
I don't want to draw out a tenuous claim: but in some ways most tech companies (and particularly early-stage startups) are more like cooperatives than has historically been the case in corporations. As Sam Altman's recent article on employee equity points to, being liberal with ownership is considered a virtue in technology companies. Long-gone are the days where you can build a technology company and keep all the ownership closely held (I'm sure there are other examples, but Bloomberg LP would be a prototypical example).
Ownership is one part of the model, and I think you have a point that it's more diffused in many startups. However, I'm not sure democratic control of the business is part of the startup model. Correct me if I'm wrong, but I think they tend to create a traditional management structure with CEOs, etc.
Co-Op is a very loose term and comes in many flavors.

It would be a bit naive to think that they are inherently better managed or more "democratic" (egalitarian?) than a regularly run business. Like any democracy, not only do they come in different flavors (ie, representative democracy vs "pure" democracy etc), but they come with their own quirks of implementation. In many democracies the individual voters have little actual power and organized and concetrated special interest groups game the system. And there are plenty of co-ops run by CEOs.

And most co-ops do not offer order-of-magnitude improvements in working conditions or pay. You are looking at a 10% type improvement, not a 10x one. The downside of a co-op is that it might have a 10% improvemnet in (potential) conditions, but a poor implenetation but will be -10% as productive due to inefficiencies and execution problems.Which basically runs the risk of zero net improvement for the typical person there.

All of which means that you really need to analyze any proposed or actual implementation. Broad-brush generalizations are often misleading in this context. Just something to keep in mind.

This is a pretty ridiculous thing to say.

90% for us 2, 10% for the rest of you!

Not at all what a co-op is about.

http://assemblymade.com could be considered a global software coop
I don't see any indication of that on that website that they're constituted as anything other than a straightforward for-profit company.
To me, the powerful idea of a co-op is that it brings together many people with skills that compliment each other, all contributing to something where sum is greater then the parts. The result, if they are successful, is they do generate profit and each contributor takes home their full share. This is what Assembly is trying to enable...but Assembly is really a platform for creating co-ops around software products.
When the new equity crowdfunding rules go into effect, I was thinking a more interesting model could involve equity. Every person in a "startup cooperative" could own a piece of everyone else's startup. It might help minimize the risk with doing a startup if you own a small piece of a number of other companies.
That's really quite a cool idea. Definitely do it! I'd be interested in helping to build it. The cooperative rules are, I think, quite different in the US and UK, but I'm reasonably familiar with it in the UK.
+1!!! We're following that model with our virtual incubator program for our tech co-op, Producia.
Most of the tech examples I know of in the US are small, boutique, often ephemeral consulting companies started among a few friends. Often the formal structure is a standard partnership or corporation with shares evenly divided. If the partners get along, are smart about things and the market is good, they often do quite well while they last. Many of the companies are kind of transitory - doing web page design and the like in the late 1990s, and then when the market dries up, the partners close the business and go their separate ways. Or sometimes one partner is hired by the company he is consulting for, another moves across the country following his girlfriend, and the remaining partners agree to wind down the business.
hah! I was just coming here to comment and mention Igalia, but you beat me to it. :)

Igalia is a great company, really wonderful people and they do fantastic work. I really love the model they've created for the company.

At ArtsPool we are in the process of building a cooperative of NYC arts nonprofits centered around a collectively-owned administrative agency. Part of this will involve building out a co-employment legal structure to create a fluid labor network that will effectively allow agency member-owners to "insource" employee time from their peers on an ad hoc basis. Eventually we want to white label our solutions and make them open source so that any nonprofit sector in any city can use them, but for now we are focusing on a the arts sector in NYC. It's all very preliminary and we are really wrestling with a fear of new ideas that is endemic in nonprofit culture, but we are taking a lot of inspiration from what is going on in the tech sector (where problems are things to be solved and not monsters under the bed). There's more on our co-employment approach on our nascent blog and in the Collective Insourcing concept paper that the project is based on (linked to in the post below). http://artspool.co/stronger-together/

I'm Max and I'm new to HN. My contact info is in the team section of our website if you want to chat further or get a copy of our fleshed-out business plan. I also need to hire a developer soon so... :-)

Not a direct response to OP's question, but I wanted to give some general background info on worker cooperatives and coops in general.

A cooperative is type of a business entity that does not have outside shareholders. Rather, its members are its owners.

So, in the case of a worker cooperative, the people who work for the business are its member-owners. (In the case of a consumer cooperative, its patrons are its member-owners.)

What are some benefits of cooperative businesses?

For one thing, because the business is not beholden to outside shareholders, who typically only have an interest in the financial health of the company, it can make decisions that a for-profit company might not be at liberty to make.

For instance, a for-profit bank, under shareholder pressure, might introduce sneaky hidden fees to increase its bottom line -- but at the expense of irritating its patrons. That just wouldn't happen with a credit union (a form of cooperative), because the investors and patrons are one in the same, and their interests are aligned.

Another big benefit, and this is especially true with tech companies, is that the member-owners are invested in the company's success in a way that mere employees are not -- and they have the decision-making power to actually influence how the company operates, because coops are democratically controlled. A lot of tech companies grant stock options and offer profit-sharing programs, but stock options can be a crap shoot (there are a lot of ways for them to end up being worthless, even when the company is profiting handsomely), and profit-sharing doesn't necessarily mean power-sharing.

There are two major downsides to operating a business as a coop, though. One is that you have to raise all of your capital from your members, rather than relying on outside investment. That can be really tough, especially when you're just starting out.

The other downside is regulatory. I'm not sure how it works in other countries, but in the U.S., there are a lot of restrictions and hoops you have to jump through. For instance, consumer cooperatives must restrict membership based on some type of common bond -- a geographic area or an alumni association, for instance. But some types of businesses just don't flourish unless you open them up to everyone. This is less of a problem, though, for worker cooperatives.

I'm a big fan of the cooperative movement, and the broader distributist movement (http://en.wikipedia.org/wiki/Distributism), and I wish more people knew about the benefits coops offer.

Thanks for the informative post. I'm new to the idea, and I have a question. You say that the decision making process is democratic. Couldn't that be dangerous?

The majority is not always right, or even informed enough to make a correct decision. An executive hierarchy puts this process in the hands of key decision makers, who are supposed to make the correct decisions to protect the company's interests based on their experience.

What happens when the decision made by the democratic majority is potentially harmful to the company? Is there a hierarchy in place to mitigate bad decisions?

Thanks for the informative post. I'm new to the idea, and I have a question. You say that the decision making process is democratic. Couldn't that be dangerous?

The majority is not always right, or even informed enough to make a correct decision. An executive hierarchy puts this process in the hands of key decision makers, who are supposed to make the correct decisions to protect the company's interests based on their experience.

What happens when the decision made by the democratic majority is potentially harmful to the company? Is there a hierarchy in place to mitigate bad decisions?

EDIT: jawns has clarified that the democratic process can be used to appoint an executive heirarchy. I was under the impression that every business decision was put to a vote by the entire cooperative. I understand now that key decision makers can be elected in order to mitigate decisions that may be harmful to the business.

I find it amusing that you think a hierarchy can solve the bad decision problem. You may be right, though not in the sense of mitigating a bad decision by having hierarchies, but that hierarchies have the uncanny ability of redefining a bad decision as a good one. At least that's been my experience.
Seems like it might be an appropriate place for representative democracy. Every year or so, everyone votes on a new CEO, etc.

There's probably a lot of decisions that could still be left up to workers, but I agree that having some clear direction is important, and there's lots of questions that just need a "no". The BDFL model of open source is a good example of how this can work without excessive hierarchy.

Well, remember that just because a company is democratically controlled does not mean that its member-owners cannot elect an executive hierarchy of its own. But when the votes are cast for that election, it will be the member-owners' interests that are being reflected, and not outside investors' interests.

To give an example that's more to do with worker cooperatives, suppose the member-owners are discussing whether to work 35- or 45-hour work weeks. The 35-hour work week might be good for work-life balance, but bad for the business itself, while the 45-hour work week might be the reverse. Nevertheless, the majority of members might vote in favor of the 35-hour work week, and whether or not that is bad for the business, it will be good for the majority of the workers.

Granted, the democratic process isn't perfect -- you need only look at U.S. politics if you need proof of that -- but when you compare it to its alternatives, it's not at the bottom of the pack.

How much is the shareholders voting on decisions in a democratic way different than the employees voting on decisions?
Every co-op is different. Co-ops in general value the "wisdom of the crowds" and may be more proactive in seeking opinions of every member, but there are still hierarchies in place that have final decision rights.

This is how a lot of co-op living arrangements work. Everyone has a say, but the final decision is made by someone whose job it is to manage the health of the house.

By the way even companies can adopt some of these ideals without being a full-blown co-op. I have worked in several organizations where decision-by-committee is highly popular, and in each case, there are processes to prevent deadlock or processes for override if something starts to go badly. Usually these processes are triggered by very senior level individuals who have decision rights, or by regulatory experts (e.g., someone in Legal).

> I was under the impression that every business decision was put to a vote by the entire cooperative.

Depends on the co-op.

I lived in a student co-op in college. Every Sunday night we had a group meeting. Every major decision was made by a consensus making process. Other decisions were delegated to committees or individuals in a particular position: food manager, garden manager etc.

I also worked at a student composting/waste disposal co-op that operated the same. Everyone has a voice in either the actual decision or in electing someone to make a decision.

This type of decision making basically requires lots of communication between members and usually at least one long meeting a week. It also demands that people have mutual respect for each other and the group decision making process.

In both instances it definitely helped me learn to relate with, communicate with and respect others and their opinions.

> One is that you have to raise all of your capital from your members, rather than relying on outside investment.

Actually, it is possible to raise outside capital. One way is a traditional bank loan, though that usually requires collateral. There's also "patient capital" available from some institutions.

https://en.wikipedia.org/wiki/Patient_capital

http://coopcapital.coop/coopcapital

We also have a National Cooperative Bank in the US, created by an act of Congress and later privatized (as a co-op, naturally), that specializes in banking services and loans for cooperative enterprises. They may not be completely up-to-speed on worker cooperatives, however.

https://en.wikipedia.org/wiki/National_Cooperative_Bank

A really interesting option is a direct public offering, where you can sell non-voting shares to individuals while avoiding most of the legal implications of an IPO, as long as you comply with various restrictions and raise a limited amount of money. There's a case study about a pickle company that transitioned to a worker co-op by buying out the previous owners that way:

http://www.buylocalfood.org/real-pickles-financing-case-stud...

Surely there must be some difference between a co-op and a private company without shareholders (i.e. funding can't be the only difference)
All private companies have shareholders. The shares they own are just not publicly traded shares. "Shareholders" is, in this context, the same as "owners," and all private companies have owners.

So, what's the difference between a coop and a private, for-profit company in which everyone who works for the company owns the same portion of the company and gets an equal say in decision making? Not much practical difference, really, although with a coop, those things are enshrined, whereas with a private company, they're optional.

> So, what's the difference between a coop and a private, for-profit company in which everyone who works for the company owns the same portion of the company and gets an equal say in decision making?

Initially that would be effectively the same, but in a coop the equal ownership by all employees (and only employees) is also supposed to stay that way through employment changes: if a person quits the company, they don't take an equity share with them, or they'd become an outside investor. Instead the company is equally owned at all times by the current employees.

It might be possible to write up a complex contract that does that with regular shares, forcing people to hand them in if they quit the company (and prohibiting sales), but since regular shares are considered property there are a lot of pitfalls around making that work (if it's even possible), along with opportunity for shareholders to challenge the structure. A coop structure avoids that issue by not having regular equity shares in the first place.

I have no particular experience with this, but it seems like another drawback is that you're missing the outside view? If all shareholders are "true believers" with a vested interest in the company doing well, then that makes it hard to set a fair price for shares when someone enters or leaves.
> There are two major downsides to operating a business as a coop, though. One is that you have to raise all of your capital from your members, rather than relying on outside investment.

That's only true of equity, which isn't the only form of capital financing. But, yes, its an important limitation.

I seem to recall Panter (http://panter.ch) being a co-op (perhaps mostly a co-op). They're a great bunch of guys.
I'm on a Tech-Coop mailing list:

http://npogroups.org/lists/info/tech-coop

They're a friendly, cooperative bunch. Join and introduce yourself, or read the archives. It seems like most of them have thought really hard about what they're doing, and it's pretty solid.

This list seems to have spawned the site techworkers.coop mentioned by audionerd. Good to see there's a space where people have been having this important conversation.
I have thought about this a lot lately, but couldn't find anything in Munich, Germany where I'm based.

If anyone's interested, it would be nice to have a chat.

I just took a look in the Genossenschaftsregister (GnR) for Munich and came across a few coops in the IT sector (e.g., http://www.7-it.de/genossenschaft/mitglied-werden.html).

Not sure if they fit your profile, but it might be worth taking a look: https://www.handelsregister.de/rp_web/mask.do

Thanks, didn't know there was such a public database. Seems hard to search though, there are no tags or categories or something.
Searching for "IT" turned up some results.