Hey folks, I’ve had a very fruitful exchange with Matt Feinstein from USFWC, who is very knowledgable about a lot of the practicalities for coops, especially in the US.
I learned that coops actually do have mechanisms for getting what one could call equity-like investments. Here is a summery synthesized by Claude:
Cooperatives across North America and Europe use several mechanisms to raise outside capital while preserving the one-member-one-vote principle. The core idea is the same everywhere: external investors get a financial return but no governance rights.
Preferred shares (US/Canada): Non-voting stock classes (typically “Class B”) sold to outside investors via direct public offerings or private placements. Fixed or capped dividends, no appreciation, no voting rights. Used by Equal Exchange, Namaste Solar, CERO Cooperative, and others.
Titres participatifs (France): Securities that count as equity but grant no voting rights and no capital stake. Minimum 7-year term, returns can be fixed or tied to performance. Available to SCOPs and SCICs through the CGSCOP/SCOPINVEST ecosystem or directly to outside investors.
Community shares (UK): Withdrawable, non-transferable shares issued by cooperatives and community benefit societies under FCA rules. One member one vote regardless of shareholding. Widely used by community energy, pub, and housing coops.
Member loans / obligations (EU generally): Subordinated debt instruments from members or supporters. Not equity, but often quasi-equity in practice — patient, unsecured, and flexible on repayment.
Cooperative certificates / parts sociales de commandite (Belgium, Italy, etc.): Various national instruments for non-member investment in cooperatives, typically with capped returns and no or limited governance participation.
In all cases, the pattern is the same: separate the financial return from the governance right, so capital can flow in without diluting democratic control.
I don’t know about you, but for me this is a game changer.
Having a majority of votes on the mutual side isn’t enough. You keep control technically but the investor holds the purse strings - and that gives power. Even with zero votes.
Thanks very much for this summary of instruments in various regions, very helpful indeed! Here in Sweden, the mechanism by which this is done is called a “förlagsinsats”, and I can’t seem to find a reliable translations anywhere, but it seems to be some sort of version of a “debenture”. (However, please don’t assume that the rule and regulations in your country regarding “debentures” apply to “förlagsinsatser” in Sweden.)
When we were structuring our cooperative, we made sure to add this option as a clause in our bylaws in case we would need to raise capital at a later date. Now that that later date has come, another funny element of the equation has come up: even though the mechanism exists as a legal possibility, it’s next to impossible to get any investors to actually invest (which I fully understand applies even for non-cooperative companies) since they’re only interested in profit maximization. I’ll also add, however, that I imagine that the story would be different if an already successful cooperative had been raising the money for whatever reason.
If an investor gets zero voting power after dropping the money, except the right for dividends allocated in a predetermined way over a predetermined schedule, how can they have power?
Thry are issued with a set interest rate over 5 years, and each Investor-Member gets exactly 1 vote, no matter how much money they invest, so the Worker-Member have the voting control.
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I did hear about one furniture-making co-op in London, that had problems with “some members are more equal than others”, due to the different amounts of cash that the members had put in to start the business, but the simplest way to deal with that problem is to pay back the unequal amounts of money ASAP, so that everyone has the same financial stake.
It’s also relevant to informal feelings of ownership which come from other kinds of investment, like the time/emotional energy often put into founding a co-op without payment. In those cases I like the idea of paying back the members for their initial time so that it can be mitigated, but I haven’t actually been in a co-op that has done this yet, to see it play out.
Well, if the investor deposits all the cash up front and has no rights to withdraw their shareholding or transfer to someone else, then they would indeed have little power. But raising money on those terms is very difficult. And even then they can put pressure by - for example - offering then withdrawing the prospect of next-stage funding. Most tech investors in my experience only release funds at a pace determined by them.
For me the key thing here is the nature of the offer and - as a consequence of that - the nature of the people who might be willing to put money in to the venture, and their motivation for doing so. I’ve been involved in a few community share issues in the UK (which by the way don’t separate financial return from governance right as the investor is explicitly given a vote, it’s just that it’s one vote regardless of the amount of money invested) and in all cases the overwhelming majority of investors do so because they want to see the initiative to succeed, not because they are seeking a financial return, or even expecting to get their capital back.
