(2019-09-16) Schneider Startups Need A New Option Exit To Community

Nathan Schneider: Startups Need a New Option: Exit to Community. Founders create startups for all sorts of reasons. Often, the motivation is a mix between the founders’ desires to do well for themselves and to do something worthwhile for others. Dreams of greatness might figure in there too. Rarely, however, is the overriding reason to build a company people want to get rid of. But that is what the startup pipeline is designed to produce. (built to flip)

When a startup company takes early investment, typically the expectation is that everyone is working toward one of two “exit” events

What if startups had the option to mature in a way that gets them out of the investors’ hamster wheel?

In the coming months, I will be exploring strategies and stories that could help create a new option for startups: Exit to community. In E2C, the company would transition from investor ownership to ownership by the people who rely on it most. Those people might be users, workers, customers, participant organizations, or a combination of such stakeholder groups. The mechanism for co-ownership might be a cooperative, a trust, or even crypto-tokens.

One way to begin exploring E2C could be by identifying a subset of startups in venture capital portfolios that lie in “zombie” territory—somewhere between failure and exit-ready. Investor owners would benefit from having a new way of liquidating investments that would otherwise lie dormant. (zombie startup)

Why not, you might ask, just begin these startups under community ownership?

Ambitious startups are a risky endeavor, and it may not be fair to distribute that risk with early-stage participants. Also, startups usually need to make a few dramatic pivots early in their life, and having a large community of co-owners would make those hard decisions more difficult than if a small, high-trust group of founders is in charge.

Our team at the Media Enterprise Design Lab at the University of Colorado Boulder is looking for collaborators on this work. This includes entrepreneurs, activists, investors, policy advocates, researchers, and more. Do you want to join us? Let us know what you’d want your E2C to look like.