Investor Members

Hi all!

I’ve been spending the last many months researching platform cooperatives and how they could be applied to maintaining open-source digital infrastructure. I’m really interested in this concept of “investor members” and how to frame the value proposition of membership instead of direct purchase of services. A couple of my personal questions to start the discussion are:

  1. If a co-operative has an “investor member” type, how does the size of investment impact services received, membership power, etc?
  2. I’ve seen the Somerset Rules mentioned here quite a few times. When investors are granted membership in return for payment, how do we calculate the weight of their member votes versus others? (For instance, how do we decided if Investor Members receive 30% control vs 40% control).
  3. I’m interested in hearing thoughts as to whether investor members are even a good idea for having a sustainable co-operatives? Is there a real worry for tension between funding members and working members?

Please feel free to let me know if I am maybe asking the wrong questions here. I would love to hear anecdotes from cooperatives who have had investor members and their interactions with them.


As far as I’m aware Webarchitects Co-operative is the only multi-stakeholder co-operative which is a member of CoTech and we do use a version of the Somerset Rules.

However most of our members, who might otherwise be considered investor members (due to their share holdings being in the hundreds or thousands of shares rather than tens), are mostly classed as workers members (as they are employed by the co-operative) or user members as the co-operative provides a service to them.

We don’t currently have any active investor members (we have in the past had a couple who were on our management committee), so I’m not sure how useful any anecdotes might be.

When we initially agreed the version of the Somerset rules that we adopted we envisaged that we would be able to attract more investment, but this hasn’t happened yet and the lack of capital has hampered our ability to grow and invest in server infrastructure.

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One group that may be worth talking with, is The Ecological Land Co-operative, :smiley:

They organise group-based buying of farm-land, that is then leased out to the smallholder-farming co-operatives. Those farming co-operatives also become Worker Members of the land-owning Ecological Land Co-operative.

Becoming an Investor Member is like buying a bond.

The Investor Members receive a fixed percentage return for a given time period, at which point the original bond value is returned to the Investor Member.

Most of the Investor Members choose to add the interest payment to the overall bond value, so as to get the accumulating return, but also so that the co-operative doesn’t have to start paying out cash straight away.

In the long run, once the Investor Members have had their bond repaid, then the Ecological Land Co-operative will be owned by the farming co-operatives that are their leaseholders, so it’s very similar in operation to a housing co-operative. :slight_smile:

Disclaimer: I’m an investor Member of the Ecological Land Co-operative. As i am working on OSHW for the Primary Industry sectors, i look at this as a way of helping future co-operative business partners get their feet on the ground. :slight_smile:

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It needn’t (and perhaps shouldn’t) really impact those things. But of course if could do so, even if not legally so (i.e. someone who has invested £100k might not technically/ legally have any more power than anyone else in the co-op, but culturally they inevitably will, especially if they are the only big investor).

They can’t have more than 25% (to ensure ‘user members’ ie. who the co-op is for always remain in overall control and to keep co-op principles intact. It’s actually surprisingly common to give them 0% (i.e. the just get financial returns, no power). Organiclea did this when they used the Somerset Rules to create a seperate co-op to raise the finance for the solar panels (I know because I advised them a bit at the time).

But the question still remains: how to choose what percentage to give them between 0-25%?

I think a good answer is: as little as you can give them whilst still attracting the investment you require. With things like solar (when there was a good Feed in Tariff), it’s pretty much a guaranteed return, so you don’t need to offer them any power to protect their investments. For higher risk things they you may need to offer the full maximum 25%

I think the reality is that in order to grow the co-operative economy as much as it needs to grow we need to attract investors. I personally don’t think there is real worry about tensions: the regulations around withdrawable share capital in Registered Societies (which is what we’re normally talking about when it comes to investment in co-ops, although it’s also possible to do it with Companies Limited by Shares too) state that investors shouldn’t be primarily investing for purely financial gain and I think in most cases that is true, i.e. people invest in things they want to see more of in the world and have shared values with.

Hope that helps :slight_smile:

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This is what happened with Big Table in the early 1990’s. They’re a wood-working co-operative that makes and sells furniture.

They had one Member Investor, who was owed most of the money that got them set up, so while on paper he was only another member, in practice he did end up with more influence in the decisions that were made.

AFAIK, the only way that they found to mitigate this effect, was to pay back the bonds/loans as quickly as possible.

Another group of people that would be worth talking with is Ethex, :smiley:

They ran the financial admin for the share/bond offers for the Ecological Land Co-operative, and organised compliant with the FCA regulations on investments.

They may have some suggestions about how to go about things in a fair, ethically-compliant, and, legally-compliant, manner. :smiley:

This is all incredibly interesting! Thank you all for the replies.

This is really interesting! I know very few people who invest for anything other than financial gain and even less who do it with significant amounts of money (essentially limited to impact investors).

This seems to treat investment very similarly to shares, doesn’t it? Except for the shares expiring eventually.

I’m sorry to hear it didn’t work out as well as you planned. I’ve been following web architects since I’ve moved here and it looks like y’all do great work. Hopefully we can work together in the future.

I can imagine the financial pay off in a coop is almost certainly less than it would be when compared to investing in shares of a company. There’s a direct incentive of having both greater pay off and greater control of your investment because the more money you invest, the more shares you get.

As a note: The cooperative that I am helping build operates pretty much exclusively in the non profit sector. We work with open source communities, humanitarian aid NGOs, and international donors, foundations, and development funders such as DFID here in the UK.

One idea we have is to only grant membership to those who are producing our work (which is software in our case and would be open source communities and employees) and those who are consuming our work (which would be the NGOs we are working with).

We would seek long term grant funding from the same donors, foundations, and countries that fund the NGOs we work with. Our value proposition to donors would be that we are creating software to help make their other programs more effective. As a further incentive, depending on the amount they donate, we would allow them to nominate some of their funded programs for membership.

Members in our case get the usual voting rights for our board of directors, general meetings, etc. They also get free access to our hosted software services and potentially access to our consulting services as well.

I think a lot of the stories I’ve heard here are really valuable and don’t want to turn this thread into a “This is a new coop, what do you think?” sort of thing but I would be interested in hearing feedback on this model I proposed and if any other coops follow a similar structure :slight_smile:

This sounds a reasonable approach on the assumption that the NGOs you seek to serve are actually interested in taking on the rights and responsibilities of membership.

Also I’m very happy to see lots of “This is a new coop, what do you think?”


This is a big assumption and one I’m really interested in finding out if it’s true or not. :grimacing:


Remember that on paper he just had one vote same as every other member, but in practice he was listened to more, and given more influence by the other members as the whole enterprise owed him money.

It’s an unavoidable side-effect that comes from the pack-hierarchical behaviour that we inherited from the monkeys we evolved from.

The compensatory behaviours need to be built-in from the start, so that no single member can cause problems for any of the other members.

There are four roles that need to be fulfilled in any project;

  • To innovate;
  • To Maintain;
  • To Manage;
  • To Defend.

The Defence functionality needs to be both External and Internal, in order to protect from bad actors from outside the co-operative, but also to protect from bad actors operating within the co-operative.

Dealing with the social aspects is a problem that will continue to take place, so work on getting to profitability and bond repayment as soon as possible, that way once the bonds are repaid, you can all start from a clean slate. :smiley:

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Depends on the cooperative and the situation - there is no silver-bullet fix on how to fund cooperatives, but rather the solution lies in providing large variety of different options for cooperatives to choose from to best suit their situation.

Ideally of course cooperatives would never need investment or even a loan to start and operate, and the members would provide all the funding needed. But in the imperfect reality the choice people can face is between a conventional capitalist company or a cooperative with investor shares. This is good to remember as the discussion about investor shares in cooperatives is often on whether a cooperative with or without investor shares is more ideal.

There are situations where a loan makes sense and other situations where receiving an investment can be a better option.

If a group of 10 people have an idea for a venture that needs 100,000$ in seed-capital with a 1 in 10 chance to start making a surplus in 3 years, it’s unreasonable to ask the founder members to take the risk of most likely losing 10,000$ each and 3 years of work. You also cannot expect a credit union to risk their members money to a loan that is most likely not paid back. Turning down every single one of such ventures and letting them operate as capitalist firms is a choice the cooperative movement cannot afford to take if it wants to challenge the capitalist system.

I’m afraid the lack of sources of funding like investor shares have made cooperatives rare in some important areas of the economy where they are desperately needed. Even though we must do things fundamentally differently, there is a need for something that resembles venture capital in terms of funding cooperatives that require taking risks that are not reasonable to ask for the early members alone to take, but that can attract other people willing to take the risk in exchange for a possibility of a return in the future. Otherwise, certain type of ventures will be formed as capitalist firms instead of cooperatives.

If there are investors, ideally they have no voting rights, and if they do, ideally the voting power is shared equally, not to a proportion to their investment. Otherwise the first cooperative principle of one-member-one-vote is broken. It can therefore be argued that it if a cooperative has investors with voting power in proportion to their investment, it’s not a cooperative. On the other hand it could be argued that if the investors only hold 10% of the votes, it’s 90% cooperative and 10% capitalist. Therefore the case can also be made that it’s a cooperative with capitalist characteristics, not the other way around. If the choice is between a 100% capitalist firm and 10% capitalist firm, we should choose the latter. Another factor is the number of investors - having 100 investors having similar amount of voting power is closer to one member one vote than 1 investor that has more voting power than the 99 other investors combined.

Ideally the loan and the investment comes through a cooperative - so the loan comes from a credit union or a Coop Loan Fund and the investment through a cooperatively owned crowd-investment site solely dedicated for non-voting investor shares cooperatives like Coop Exchange. This way the returns are circulated in the cooperative ecosystem, instead of cooperatives paying part of their returns to capitalist firms.


Interestingly CECOP, the European Worker Coop Federation, regards ‘investor membership’ as a potential threat to the autonomy of worker co-ops.

The Somerset Rules (weighted voting by member category) was regarded with hostility by ICOF (Industrial Common Ownership Finance) for a number of years precisely because it was deemed to be against the spirit of 1 member 1 vote, as @BillySmith says; although weighted voting has been the practice for many years in Co-operatives UK itself, but that’s a secondary/enterprise co-op rather than a co-op of ‘natural persons’.

The best example I know is New Internationalist, a worker co-op publisher that needed to raise money to transition the business to a digital platform. They did it by extending membership to their readership/supporters and doing a share issue, which raised something like £680k. However these investor (‘non-user’) members have limited representation on the board/management committee (max 25%), and the things they’re allowed to vote on at General Meetings/AGM are also limited to the highest level decisions (such as amending mission/purpose). Thus the workers remain effectively in control. You can see their new rules, registered on 11/4/17, here.

‘User members’ are defined as ‘qualifying workers engaged by the co-operative or its subsidiaries’, so as per the ICA statement on co-op identity, in this case the primary use purpose of the co-op is to provide jobs.


Sorry the correct link to NI’s rules is


Have you ever actually tried to take advantage of this? i.e. by writing a business plan and share offer document and then advertising on Ethex or Crowdfunder (or getting Somerset Co-operative Services to email their large list of co-op friends ethical angel investors? I doubt there are any examples of co-ops just magically raising more capital just because their rules allow for it :stuck_out_tongue:

You get more withdrawable shares in Registerd Societies the more you invest too, it’s just that’s it’s one member one vote, not one share one vote, so you don’t get more power.

Yeah, although having investor members is fairly standard in much of the continent as far as I understand it.

I’ve also chatted with ICOF about this once before and I think they said it is only certain funds which are strictly restricted to one member one vote co-ops.

And yeah, the principles state:

In primary cooperatives members have equal voting rights (one member, one vote) and cooperatives at other levels are also organised in a democratic manner.

So multi-stakeholder co-ops can kinda be thought of as a type of secondary co-op.

As I said then chatting with ICOF, I actually think multi-stakeholder co-ops are more democratic than single stakeholder co-ops. How is it democratic that e.g. workers in the the Co-op Group are completely excluded from decision-making? Or that customers (without which they couldn’t exist) are excluded from worker co-op decision-making?

It is really fair and democratic that e.g. in most non-multistakeholder Community Benefit Socities anyone who joins for £1 gets as much legal power as people who’ve spend countless hours of blood sweat and tears setting up and running the whole thing. No, it isn’t imho.

I like how multi-stakeholder co-ops approximate the nice decision-making principle from Participatory Economics, i.e. everyone should have a say in decisions proportionate to the degree to which they are affected by them.

BTW, here are the rules of the solar investment co-op Organiclea set-up called GREEN (Growing Resilient and Energy Efficient Neighbourhoods) I mentioned previously:

When doing the random reading over the morning’s coffee, i came across this article,

Part 3, section A, has an interesting description of how even with a PLC, the use of more than one class of share can allow the founders of a company to take it to IPO, but still retain control of the company.

Class A “Common Stock” shares give one vote for each share to the owner of those shares.

Class B “Preferred Stock” shares give multiple votes per share, ( Number of votes is defined in the A&M of the company.)

I realised that this was how a number of techies got ripped off during the dotcom boom in '99, as they didn’t know that there was a difference.

It’s something to consider when thinking about the differences in power-differential between Investor-Members and Worker-Members.

KSR had a good description of this process for co-operatives in his Mars trilogy. :smiley:

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