Founders pour themselves and their resources and energy into building their startup like their own baby, but then, unlike a child, they sell it off to the highest bidders. A lot of founders would love to change the world for the better, right? But the usual endgame—the “exit”—for a successful startup is how many of their creations end up getting bought by bigger, old-world companies or going public on the grand-old establishmentarian casino, the stock market. Why do we even bother? Startups need a new story about what and who they are for. Exit to Community (E2C) is a strategy in the making. It’s a different kind of story, one that connects the founders, workers, users, investors, activists, and friends who have been trying to feel their way toward a better kind of startup. Its endgame is to be a long-term asset for its community, co-owned and co-governed by those who give it life. We are overdue for a better way. The usual startup story’s feedback loops are spinning out of control. Gig platforms offer a dystopian “future of work,” wiping away long-fought-for protections that anyone selling their labor should have. We think it would be far more excellent to make startups that spread wealth across communities. We think startups would be more usefully disruptive if they delivered their rewards to the people who make them valuable rather than to the already wealthy. Our technology could have more capacity for good if it were accountable to the people who use and build it. Startups that create active, loyal communities of workers and users should have the chance to exit to community— ensuring those communities meaningfully co-own the company and help to determine its fate. Real democracy should be at least as available as more oligarchy. When crises strike, we should be able to turn to our people, not just the faceless market.
For those working on the front lines of economic justice, E2C offers a preliminary map for how to transition these enterprises to shared ownership models—inspired by a long legacy of shared ownership among marginalized people. We hope it will catalyze conversations in neighborhoods, cities, and states as we embark on the necessary work of reimagining our economy.
Exit to Community is not a model or a template or a formula. It's not a one-size-fits-all silver bullet. Sorry! But then what is it? The words we’re using are open-ended. ”Exit” and “community” each evoke a lot of possibilities, and we like it that way. Are we talking about escapism, or solidarity? Do the words contradict each other? As fun as such questions are, we do have some pretty specific meanings in mind:
What does an E2C create?
It depends. Maybe it’s a...
- For-profit company, with distributed ownership and provisions for democratic governance
- Trust, which can hold part or all of a company according to specific instructions
- Cooperative, which is a business owned by some set of members who participate in it
- Nonprofit, which is a mission-centered public asset
- Policy tool, enabling both a defensive strategy to transform dangerous firms into accountable ones, as well as an offensive strategy that pursues more equitable investment at all levels
- Entity or method waiting for you to invent it
[ Add section on phases:
- startup - might be too early to tackle e2c, to spread risks over the community
- e2c - the real push
- after e2c
Where are you at]
Before a company can exit to community, it must define that community in concrete terms.
But what does community actually mean? Who are the specific people and groups in a company’s community? Are we referring to a geographical community? Or are we speaking about the people who interact directly with a company, such as the employees or the users of a platform? There is no easy answer. This will vary depending on the industry, product, service, and company.
Here’s a two-step approach that could help founders think about which groups a company may wish to “exit to.”
- Step 1:
- Think broadly about one essential question: Whose lives or rights are affected—or are likely to be impacted—by the company’s operations?
- These might be positive or negative impacts. The impact need not be direct, nor does it even need to materialize. Potential impacts are just as important. The main stakeholder groups that leaders in a company usually consider include shareholders, customers, employees, suppliers, and the neighbors around which they operate.
- However, there may be other potentially affected groups, some of whom may not be on a company’s radar or who may live very far away, such as end users of products contract workers in a supply chain or who might be affected by the environmental impacts of the company’s activities. The impacts they experience may not be obvious or immediately visible. Therefore, this first step requires founders to engage a meaningful process to map the range of potentially affected groups—groups that could unlock opportunities which might otherwise be hard to see. This process can help founders to think about who should have governing rights.
- Step 2:
- Recognize who within those groups is more vulnerable, whose human rights and livelihoods depend on what the company does.
- A company’s community may include people with different vulnerabilities, privileges, power, and needs. While a company may be accustomed to taking into account stakeholders who are more vocal or who have more power and voice—such as investors, large customers, and employees represented by a union—there are other stakeholders who may be less visible, such as migrant workers, disabled people, or children. Founders therefore need to be proactive and thoughtful in finding ways to identify vulnerable groups whose needs are not typically taken into account. Even if society does not often value these groups, inevitably their involvement and investment is critical to the company’s success. They might know a company’s inner workings better than its official leaders do.
- This second step facilitates deeper thinking about which groups founders might want to ensure have voice and rights (i.e., who needs this most?), and how important decisions happen. After doing this two-step analysis, founders might be able to identify more clearly who the communities are that they want to exit to. Who better to provide input and help to steer the direction of a company than those who have firsthand experience of the company’s impact? Once this mapping process has been done, founders can move to the next big task, which is to determine how a company’s community can be involved and represented, how to finance the transition, and what rights the new owners might hold.
We write here with the hope of a new normal—a set of decent expectations, so widespread and available that most of the time there’s no need to question them. The normal we want is one in which people can build toward, and with, community ownership. This shouldn’t have to be a special thing, a radical demand, an “alternative economy.” It should be simply the normal way that people build the organizations they want to see in the world.