Corporate structure for humane tech startups?

#1

Andrew here, co-founder of Siempo, a humane and open source smartphone interface.

Since the dawn of time, we have wrestled with our corporate identity. We started out as and remain a for-profit c-corp, but have considered a variety of other options, namely re-incorporating as a Public Benefit Corporation (a la Kickstarter) and becoming hybrid for-profit / non-profit (a la Mozilla).

There are lots of considerations unique to our project. In general, the question I’m sitting with is what structure will setup humane tech companies for success (both impact and return)?

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#2

Super cool and a great initiative.
The movement should support experiments on all fronts - and this a great one.
(small note - a link on front page to humane tech is broken)

Can you make it modular in a way that entities, starting new interfaces, can grab pieces and quickly integrate them in their product’s rather than a “only works as a whole”? How would that change things?
Inappropriate Buzz word: Microservices :stuck_out_tongue:

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#3

On corporate structure:

#A. Can you list the options you are considering at the moment?

#B. If you are pursuing the “good” it’s possible you could:

  1. You’ve probably already considered the “go open source” and hope to benefit from being the leader of this code base.
  2. Non-profit structure with an “Angel Investor” - networking to find one or two key people who can fund you through a MVP phase and then review again at the end of that.
  3. Crowdsourcing - there’s a lot of like minded people out there - you might just touch a nerve.

You can always re-org later if you get to a more pivotal point. No need to pile on unnecessary overhead too soon.

anyone else have an answer for Andrew?

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#4

Great question! And something I too am grappling with.

Specifically, what structure and how to raise significant funds without going to wall street or the pathway of an IPO? Unfortunately, I have found the path to money always influences the type of company it becomes, so for me identifying new ways to approach fundraising without an IPO or VC (or any form of questionable money) has great appeal.

One radical approach to raising large funds without appealing to VC’s or launching an IPO is a variation of RegA+ Crowdfunding, and issuing security tokens against the companies assets (declaring them security, not a utility token like BTC).

This is basically like a mini IPO, except you’re not appealing to wall street, you can raise up to $50M every 12 months from non accredited investors (This is the US, I have no idea how it works anywhere else). The security tokens genuinely hold the value of company assets (stock, future revenue, etc) but represent the good will of the company’s trust, at least that is what we believe it can do.

Since we’re a C Corp, we can go down this pathway, I don’t know how the SEC treats other company types around fundraising. But I am really curious about alternate company models, employee ownership, co-ops, etc and its not an area I’m familiar with at all.

This should definitely be a list somewhere here at HTC, what do you think @aschrijver ?

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#5

Broadly speaking, you’ve covered your options.

What I’ve heard is that the hybrid Mozilla structure can be tricky, as you need two different sets of Boards of Directors. I imagine that sort of hybrid structure would work well for when there are two complementary but different threads of activity in an organization. For example, I could see a company that relies on original scientific research having a hybrid structure, where the academic side of things is more or less carried out independently from the business side. Then again, newspapers don’t adopt this sort of structure, and they get by.

I get that it is an important choice, and I hope the solution become clear to you soon.

I’ll note that I’ve also seen / experienced poorly run B-corps, and I know of wonderfully run companies with more traditional legal structures – like Patagonia. Without knowing anything further about your organization, a B-corp (whether it’s the certification or a legally designated public benefit corp) seems like a way to go.

As @NSaikiwiki has just pointed out, the incentive structures you set up for yourself vis-a-vis fundraising is one thing to be mindful of. On that note, Allbirds is a B-corp that has taken venture funding; and Impact Investing is becoming more mainstream. There are companies that have a successful exit and find a hands-off home under a larger company – Ben and Jerry’s, now owned but operationally independent from Unilever, springs to mind.

Have you read “Reinventing Organizations” by Laloux or “Maverick” by Ricardo Semler?

Speaking as someone in the early stages of my own venture, I think the best way to ensure one’s organization remains humane is to develop one’s leaderly abilities. Specifically, I mean a) coming into greater contact with one’s humanity, and b) increasing one’s capacity for critical self-reflection. In my experience, the aforementioned books help with the former, and practicing reflecting / thinking help with the latter.

Other related books that I’ve benefited from include:

  • The Inner Game of Tennis
  • The writings of both Carl Rogers and Marshall Rosenberg
  • I and Thou
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#6

wise words amigo, and since this post must be 20 characters at least or the algorithm wont let me post, I suppose now it will:)

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#7

Yes, definitely. This is also why we have the same breakdown structure as on the forum come back in the Community Hub. At that location we can record options and dedicate separate pages to each of them, etc.

Docs page: https://humanetech.community/society/sustainable-business/

BTW, Hacker News is a great source of information. We should do a search there for past discussions, as these document experiences in the field for alternative business models. In fact I was just reading up on one of these. Check out: Ask HN: Non-VC backed founders, any tips on growth?

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#8

Thanks @andrewmurraydunn for starting this thread. As an entrepreneur, this is a question I am thinking a lot about lately for my upcoming venture.
In France, I am seeing more and more sustainable businesses going into cooperative entities or through hybrid models with both cooperative and more traditionnal SA or SAS.
You can check out the following companies for inspiration:

Those are French companies, but you can find information about them in English.

What I like with the cooperative model is that it is create equality in terms of capital repartition right from the start. I am wondering if anyone has ever heard about similar models for tech companies?

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#9

Hi @JipDK, welcome to the community! We had a thread about cooperatives that I’d to crossref: Is shareholder model the root problem? Are platform cooperatives one of the key solutions?

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#10

Form follows function. Often times the best organisational structure is no legal structure. If there is little to no revenue and no salaries, no legal structure makes sense. Then the exotic legal structures mentioned here, they are useful but still not necessary for tiny organisations, as tiny organisations don’t need to respond to either shareholders, investors or donors (in the case of nonprofits) since they have none. They’re free to do what the founder or founders want, and imposing exotic legal structure is only going to restrict what they can do and case them to spend time on bureaucracy. In the rare chance that the organisation actually becomes larger, that is where these exotic “humane” legal structures become useful, such as benefit corporations, complex hybrid for-profit/nonprofit structures and the rest.

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#11

That comes close to Small Tech ‘stayups’ envisioned by Aral Balkan: Aral Balkan: The antidote to Big Tech is Small Tech

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#12

I’m feeling so energized by these responses! And I’m also holding an intention to stay offline for a few days (hosting visitors for my birthday!).

Looking forward to continuing this conversation. Thank you for your enthusiasm and patience.

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#13

@chris_davies_sanjose
-Thanks for the tip about the link!
-We absolutely want others to leverage aspects of our project to improve theirs
-Three main options: 1) c-corp with strong mission 2) c-corp as Public Benefit Corporation 3) hybrid for-profit non-profit
-We’ve pretty much done all of those - gearing up for a crowd equity campaign shortly! Understood we can always re-org, but it feels like a good time to lay the right foundation, as it sends a signal and may be more challenging to adjust in the future b/c of voting rights.

@NSaikiwiki
I hadn’t heard of Reg A+ - thanks so much for bringing that into my awareness. I could see that as a compelling alternative to a Series A.

@hmswaffles
I hear you re: complementary but different activities. I could see academic research being a key aspect of our organization, but it’s not mission critical at the moment.
I’m familiar with Reinventing Orgs but haven’t read it. Thanks for all these recs. I spend a lot of my free time working on myself - mindfulness, authentic relating, healing modalities… radical self care and exploration is a core value of our org :slight_smile:

@JipDK co-ops are interesting! The challenge for us is we already have angel investors and convertible debt, so converting would really mean dissolving the company and starting fresh.

@Free if I could go back in time :wink:

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#14

P.S. I’d be open to collaboratively drafting a charter for a public benefit corporation with this community. Lmk if any interest - that could be a fun exercise that leverages the wisdom of the variety of perspectives represented here, vs. my own head / lawyers / friends who I ask for copy feedback :stuck_out_tongue:

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#15

I’m really glad this is being discussed here. I have company called Verdant Trade, it’s a B2B wholesaling platform for trading ethical and sustainable goods. I’m exploring a multi stakeholder cooperative model. I’m not sure you couldn’t create a new investor class, and have that be the users. But it would take some research. It could even be done with your potential private/non profit hybrid structure. You probably know this already but B Corp certification is good but if a new CEO was installed for example, there is nothing to stop them from just ceasing the certification. A public benefit corp structure would embed it more in the by laws. I’ve recently connected with a group called the Democracy Collaborative, they’ve been experimenting with some of these hybrid models. Not with tech companies yet, but I’ve just primed them!

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#16

Confirming interest here!

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#17

Excellent thread. Count me in.

I’ve been thinking about this topic for years. (I read Reinventing Organizations in 2015.) In a world where everyone claims to be impact- or mission-focused, how do the organizations that truly are stand out? (And what does that even mean anyway?) Doublespeak is rampant across Silicon Valley so basically nothing can be taken at face-value.

I, for one, seriously don’t care about making money. I live a radically-simple nomadic life in a camper on a pickup truck. :stuck_out_tongue_winking_eye: Trying to prove my “impact-focus” was exhausting, so now I’m just focused on my company, Readup, and keeping costs extremely low so that I can focus my 100% attention on preventing a dystopia where nobody can read.

Perhaps the answer isn’t to figure out how we can prove that our companies are “good” but how we can make commitments to ourselves and each other to hold ourselves accountable.

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#18

@NSaikiwiki @loundy @JipDK

It seems like the important text of the charter is just a sentence or two embedded in the articles of incorporation:

Template
3. PURPOSE. The purpose of this Benefit Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporations Code. Notwithstanding the foregoing, the purpose of this Benefit Corporation shall be to create a general public benefit including, but not limited to, the specific public benefit of [insert specific benefit purpose]. The general and specific public benefits created by this Benefit Corporation shall be deemed to be in the best interests of the Benefit Corporation.

With that, I’m wondering how specific vs broad to keep it? Near term vs long term? Tie to humane tech movement?

Some ideas:

  • Helping people build healthier relationships with technology.

  • Accelerating the world’s adoption of humane technology.

  • Proliferating consumer technology tools designed to support mental health, wellbeing and human potential.

  • Reverse human downgrading by inspiring a new race to the top and realigning technology with humanity.

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#19

You should take a look at The Correspondent. This media business is entirely crowdfunded and follows a subscription model where the readers of their “Unbreaking News” can determine how much they pay in the subscription model they offer. The reader base is actively involved with the company itself and can help improve any news item. The way this is set up is very refreshing. The Correspondent looks to be an Exemplar of Humane Technology.

#20

The first is a bit too modest and undefined, the second is a bit too vague in its meaning, the fourth aligns with CHT but may be too broad and needs extra clarification.

The third description aligns best with the Mission of HTC of “Promoting Solutions that Help Improve Wellbeing, Freedom and Society” to attain HTC Vision of “Ubiquitous Humane Technology that Allows Humans to Flourish and Humanity to Thrive”

I would leave out ‘tools’ and ‘mental’ i.e. “Proliferating consumer technology designed to support health, wellbeing and human potential.”

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