community capital raising strategies for worker cooperatives

Community Capital RaisingStrategies for Cooperatives

Alison Lingane, Kim Arnone & Sarah Kaplan

Community Capital Raising: Strategies for Cooperatives 2

Introductions

Kim ArnoneVice President

Cutting Edge Capital

Sarah KaplanAttorney

Cutting Edge Counsel

Alison LinganeCo Founder

Project Equity

Project Equity

Our mission

To foster economic resiliency in low-income communities

by demonstrating and replicating strategies that increase worker ownership

© Project Equity 2016Community Capital Raising: Strategies for Cooperatives

What are worker-owned cooperatives?

Businesses that are

owned and governed

by their workers


Employee ownership brings significant benefits

All citations are in Worker Cooperatives: Pathways to Scale

TO WORKERS Better pay and benefits

Assets (business ownership)

A voice in key decisions

TO BUSINESSES Higher productivity and growth

Lower employee turnover

Improved business longevity

TO SOCIETY Local spending multiplier

Higher voting levels

Correlation with other social benefits


A coop conversion is a sale of a business

Worker Coop Business Owner

Typically financed by lenders or investors© Project Equity 2016

to a new worker coop

Community Capital Raising: Strategies for Cooperatives

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Mission Statement

CEC’s mission is to engage more people (entrepreneurs, investors and supportingorganizations) in the new economy, a marketplace that emphasizes mission andimpact alongside return.

We work to develop capital markets that are resilient, equitable and inclusive;markets that contribute to a healthier planet and more sustainable communities.

Cooperatives are a key component to realizing a new economy.


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Cutting Edge: Dedicated to Democratizing the Economy

Funding Your

Venture

• Capital Raise Consulting• DPO Lab• Fund Formation• Financial Consulting• Business Plan Consulting• Marketing Services• Capital Markets & Market

Based Regulation

• Company Formation & Entity Selection

• Securities Compliance• Protection of Intellectual

Property• Governance & Compliance • Business Transactions• Employment Matters

Cutting Edge Capital Cutting Edge Counsel


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How Community Capital Works for Everyone


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Are You Ready for a Capital Raise?

Solid revenue generating business plan• Can be a Nonprofit, Cooperative, or For-profit (LLC, Corporation,

Benefit Corporation) Entity

Desire to raise Capital in the Next 3-18 months• Good Social Network to Support Community Investment

Campaign

Mission and Vision Well Established• Strong Social, Environmental, or Economic Impact Markers in

Place


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What’s Challenging About Raising Capital for Cooperatives?

Most Profits Must Go to Members

Co-op is Controlled by

Members

Sooo… What Do You Offer to Investors?


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What Can a Co-op Offer to Investors?

Membership Shares (common)

Preferred Shares (nonvoting)

Loans (notes/debt)

1

2

3


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Strategies for Cooperatives: Overview

Three often used cooperative capital raising strategies:

• State exemptions for sale of membership sharesExamples:

California - up to $1,000 per person up to $500kIllinois - up to $10,000 per person

• Direct Public Offerings• Title III: Federal Crowdfunding


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California Specific Cooperative Capital Raising Exemption

• Exemption for “any shares or memberships” issued by any cooperative incorporated under the California Cooperative Corporation Law.

• Increased limit from $300 to $1,000.

• Now defines “Community Investor Member”:Outside investor in a worker cooperativeAlmost never allowed to vote


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Comparing Community Capital Raising Strategies

Donation Crowdfunding

Title III Federal Crowdfunding

Direct Public Offering

CA Co-op Exemption

Cost $ $$-$$$ $$-$$$ $-$$

Is This a Security? No Yes Yes Yes

Advertising Permitted YesLimited to the

platformYes Yes

Community Investors Permitted? Yes Yes Yes Yes

# of Non-Accredited Investors Unlimited Unlimited 500 500

Raise Limit None $1mm/yr None or $1mm/yr $500k

Number of States ALL ALL Single or Multi-State CA Only

Registered at the State Level No No Yes No


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What Capital Raising Strategies are Available?

Community Capital

SpecializedCo-op

Strategies

Direct Public Offerings

FederalJOBS ActTitle III

Presale Crowdfunding

Donation Crowdfunding

Private Placements


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Capital Raise Checklist

To Do

Define capital raise amount ☑

Choose a regulatory strategy ☑

Define your investor base ☑

Define investor rights--Create investor class ☑

Amend Articles of Incorporation ☑

Amend Operating Agreement or Bylaws ☑

Create Offering Memorandum and Subscription Agreement ☑

Raise Capital! ☑


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Case Study: Real Pickles

"Real Pickles® is a small, worker-owned cooperativeproducing pickled products that are raw, vinegar-free,100% organic, and rich in probiotics."


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Case Study: CERO

"CERO provides food waste composting services and isproud to be part of a local food economy rooted inenvironmental and economic justice."


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Questions?

Sign up for a FREE 1 hour consultation HERE.

Download our free capital raise Marketing Guide.

Learn Moreproject-equity.orgcuttingedgecapital.comcuttingedgecounsel.com

Contact UsAlison Lingane: [email protected] Arnone: [email protected] Kaplan: [email protected]


http://www.cuttingedgecapital.com/dpolab-inquiry/

http://www.cuttingedgecapital.com/freedownload/

mailto:[email protected]

