Ask HN: Has anyone tried alternative company models (like a co-op) for SaaS?

I work at a worker-owned IT company that has offices in three states and has been in existence for 20 years. We do not provide any kind of SaaS service but I can assure you it is possible! My suggestion is to reach out to the Tech Worker Coop Peer Network for the USFWC:

https://www.usworker.coop/programs/peer-networks/

They will probably have ideas. Good luck!

PS an LLC is definitely a good way to go, but some states (e.g. NY, MA, CA, MN, etc) have dedicated worker coop company types you can create.

You might be interested in Subvert, a group of people (formerly?) from Bandcamp that are now founding a worker-/artist-owned version of Bandcamp and launching the platform soon. They basically want to avoid running into the same issues that came with Bandcamp’s recent ownership changes and the instability and worker-facing hostilities around it.

They also published a magazine explaining their thinking behind the setup, etc. – you can find out more on their website: https://subvert.fm/

Could be interesting to check out, even if just for inspiration or fun.

I established a limited liability company (LLC) for a business venture initiated with friends. My objective was to ensure that all contributors received a fair share of the equity while maintaining a simplified structure for tax purposes. Additionally, I wanted to ensure that equity shares did not confer voting rights, functioning instead as profit-sharing interests. Legal counsel assisted in structuring the entity as a single-member LLC, where I am the sole owner, with profit-sharing units allocated to other contributors. This arrangement entitles contributors to a defined percentage of the company’s profits and proceeds from events such as a sale of the company.

My only regret is that I spent a lot of money on legal fees and the company ended up not being profitable so a lot of the work went to waste. But now I can re-use the structure again if I wish to create a new venture.

I think the co-op structure makes more sense if your business is local.

For example, I’d love to have a local alternative to Uber/Doordash that was a co-op owned by the drivers and the customers together. 95% of my taxi trips and food delivery are within my home town. I’d love to support a company owned by the drivers who live here, instead of a massive multinational.

Co-ops are pretty successful in many European countries. In Finland, both the largest bank and largest grocery store chain are national co-ops owned by customers. It’s a model that can scale far, even though the big co-ops do develop internal politics very similar to any traditional corporation.

I developed a SaaS business to fund a nonprofit foundation, which is a little different from your situation.

The key thing was to keep the SaaS-y bit as boring as possible, which meant a corporation. This is in Europe but the equivalent would be Delaware C corp.

Shares in the corporation were then given to the wrapping organization (in my case the foundation, but this could be more-or-less any legal structure that can have assets). Downside is two sets of accounts, upsides are that M&A gets a ton easier later on, and taking on employees is simple and not colored by the legal quirks of the parent organization. The potential complexity of SaaS accounting (revenue recognition, R&D credits, etc) is also kept inside a simple, normal corporation which every CPA is super-familiar with, so you're not consulting niche experts every time something new comes up.

I advise a quick consult with a tax lawyer before doing anything, because it's easy to say you'll deal with this later but some changes have unforeseen implications if not done at the outset. (I punted on some of the setup for a year while I focused on finding product/market fit, and that turned out to be a mistake that the lawyers had to fix at some cost. A year more and it might have become unfixable.)

Reach out to the NWCDC (https://nwcdc.coop/) or NCBA (https://ncbaclusa.coop/) for resources on how to draft bylaws and structure a worker-owned business that meets your needs. In my experience, they're extremely passionate, knowledgeable and helpful.

I'm also very interested in alternative company/governance models. To me, the traditional company structure seems fairly effective but I don't like the feeling of being an employee. There's an ownership/power dynamic that feels inhumane but fixable.

Before suggesting anything, it would be useful to understand your goals with a co-op structure. What are you trying to improve over the status quo delaware c corp that stripe atlas will setup? Are you planning to take investment?

In terms of solutions, Flexile is an implementation I don't see mentioned yet: https://flexile.com

It seems to be geared towards software companies that might not need everyone as a full-time worker. Not sure how many of these there are. It's by the Gumroad founder.

Hey Dave,

Glad you're still doing cool things :)

Read the Docs is pretty much all open source, including the billing code (https://github.com/readthedocs/readthedocs.org/blob/main/rea...), but we are structured like a normal company, with some custom bylaws that protect the OSS codebase if ownership changes hands. We haven't found anyone else setting up a competing instance or anything, but that might also be because the product is kind of niche.

I kinda love the idea of having people in the community that use the service have some kind of ownership over the platform. It would likely lead to longer term loyalty of the userbase, which would help keep the project sustainable and avoid the enshittification cycle.

We've played around with sharing ad revenue that we generate on documentation pages split with the projects, which is partially a win/win way of sharing in the upside of success.

Anyway, I don't have a great answer here, but wanted to say hi, and give a bit of context from our place in the world.

PS: You might also talk with the folks here: https://zebrasunite.coop/ -- they are structured like a co-op and mostly come from the tech/design community.

There's a lovely managed web and Nextcloud host here in Vancouver Canada that's a co-op. Had a really nice chat with their leadership. https://cantrusthosting.coop/

I recommend the book: Reinventing the Organization. It has case studies of alternative models around the world.

A 49% employee, 49% customer (b2b or subscription), and 2% CEO/CFO model seems better for a long-term sustainable company, especially for companies providing critical services like Mozilla, Proton, Chrome (if it were divested),etc..

That aside, I think it's important to codify into the incorporation charter or a company as well as share holder agreements that the company will never go public. Or perhaps have a clause that forces dissolution of the company and sell of assets if an IPO ever went through. It makes sense for some companies to be publicly traded but if your intent with a company is to do the public, your employees or customers good, instead of a pure profit play, then even the possibility of an IPO is cancerous.

Yes, I've made LLCs with friends primarily in a profit sharing capacity according to work done as contractors, ie if the company got a client, the ones who worked on that particular project get a split of the profits after company expenses were taken into account.

I've also made and worked on some fully open source projects where the entire stack was open. I don't believe in those source avaliable licenses because you either believe in your abilities on the business side or you don't; if someone can take the exact same product and market it way better, then you honestly deserve to go out of business.

I haven't done it but it looks like an ESOP something you might to look into.

The folks at Muse discussed different ownership structures. I didn’t retain much from the podcast episode but I remember it was fun and informative:

https://museapp.com/podcast/4-partnership-freedom-responsibi...

You can always change it, so I would focus on not letting your product idea die until it’s on good footing. Then consult with some folks who have done this before.

I think there's this one in France https://coopcycle.org/

I predict this will be the future for many industries.

Shifting to worker cooperatives and innovation on the business ownership side.

Imagine Amazon as a coop?

Hot take, but anything is likely to work, as long as there is demand for your product. Some might make less or more money than the conventional approach, but if people really need your product, they will do anything needed. So just focus on demand, imo.

I’ve been curious to try starting an Aftok: https://aftok.com/

https://sourcehut.org/ is a sort of coop open source project and a SaaS with an interesting model.

There is also https://opencollective.com/ which provides a platform for collective ownership of an online business.

I work on a startup where the entire self-hosted SaaS is permissively licensed.

https://github.com/batteries-included/batteries-included https://www.batteriesincl.com/ https://www.batteriesincl.com/LICENSE-1.0

I started the company because I wanted to give the infrastructure team that FAANG companies have to smaller enterprises. Most of the best infrastructure is open source but too complicated to use or maintain. So we've built a full platform that will run on any Kubernetes cluster, giving a company a push-button infrastructure with everything built on open source. So you get Heroku with single sign-on and no CLI needed. Or you get a full RAG stack with model hosting on your EKS cluster.

Since most of the services and projects we're building on top of are open source, we wanted to give the code to the world while being sustainable in the long term as a team. I had also been a part of Cloudera, and I had seen the havoc that open core had on the long-term success of Hadoop. So, I wanted something different for licensing. We ended up with a license that somewhat resembles the FSL but fixes its major (in my opinion) problem. We don't use the competing use clause instead opting for a total install size requirement.

I'm happy to chat with anyone about this, my email is in my profile. Good Luck nd I hope it works for you.

i'm trying to do this with https://bookhead.net and https://sweetclay.net. i'm prototyping the coop with sweet clay bc the business is a side hustle and good for experimenting. and then i'll apply it to bookhead since that business has more earning potential and i wanna get the membership stuff right before risking that. setting up the legal stuff takes money that i could use for other stuff that could maybe bring revenue, so it's tricky situation, especially if you need labor asap. and it takes time to research/design governance and equity etc.

i wish there was stripe atlas for coops if anybody would like to start a new cooperative. i emailed the stripe PM asking for this and they said it's not on their roadmap. businesses in america are designed to be organized as capitalist enterprises so there are some extra things a coop needs to do which takes time and money.

would be cool to make an open source "stripe atlas for coops" project and help other coops start up. i'm too busy right now but could do the project if i had some collaborators. email me sam@bookhead.net if you're interested in a project like this.

A coop is a degenerate form of what has been called a Fair Shares Commons[0] company structure.

https://graham-boyd.biz/fairshare-commons/

I am co-founder of a residential trash collection cooperative: seegull.org I started in 2022. Bought a trash truck last year and we start picking up earnestly in May. We’re both part time cause we don’t have enough business yet to be full time.

No two cooperatives operate exactly the same and you should think about it more like a family than a business. It’s not a purely transactional thing I’m not keeping track of inflows and outflows because I don’t have anybody else to report to other than my cofounder and we treat it like a family business.

Really the only thing you have to keep in mind is that the single thing that makes you cooperative is that there is no distinction between worker and owner.

Depending on your state there are some obscure tax codes that make your org legally a “cooperative” but that doesn’t really mean anything because you’ll be taxed on revenue like everyone else

So you could set it up as an LLC and then within that LLC you run it as equal distribution based on whatever the cooperative agreement is between all the parties.

In our case there is no equity, there’s no assignment of shares, there’s nothing to cash out. Revenue comes in and is used for operations and then distributed to whomever did the work.

For a SaaS because capex is low you have a ton of options, but again if people join your org who want to make money or get rich, then the cooperative will eventually just turn into another company.

One of our new marketing efforts is: we have a brief weekly ops call that we’re just sharing only two so far: https://open.spotify.com/show/4jekdwCcjWKYJd7NSh6KlA?si=eFEI...

At the end of the day a cooperative is about creating an alternative and equitable social group of mutually supportive people, and the way you sustain it is secondary but important

If you start it as a money making enterprise then you will eventually turn into fully into a money making enterprise

However if you start as a social group that has a reason for existence more deeply rooted than financial gain, then you might actually have something that survives.

You could give equity to those who contribute.

I've looked at this for years, and have my (basically defunct) attempt at it over at mutual.email - the idea was customer owned email (+etc) service.

The main idea was to make a service covering people's "workspace" needs (comms, documents, collaboration etc) which would place things like data governance under end user control, mostly on the assumption that given the choice, people would never agree to having their data mined by eg, Google.

In practice I wasn't really ready for it, but doing this kind of thing as a co-operative society with worker or member ownership is a fabulous idea and one I'd love to see come to fruition.

A lot of the pitfalls I've seen from surveying not just my own attempt but other people's is that getting your initial collaborators on board is hard, and keeping a culture that promotes change rather than stagnation is even harder. Lots of coops in the email and hosting space show this: they'll sweat hardware way past when it is economical or sensible to do so, and are generally averse to raising cash to invest in the business. Customers go to them and pay a premium because they want something "ethical", which lets them off the hook for being uncompetitive. The spiral continues, tightening until the service is so poor and prices so high that literally nobody wants it anymore. My suggestion is whatever you do, avoid that situation: investment starvation kills coops.

How does a co-op exit?

I met some guys a decade ago at a tech meetup in silicon valley who did this. they all contributed like 5% and got themselves healthcare/dental and other benefits.

Interesting idea! Co-ops for SaaS are rare but possible. Some groups pool resources for benefits like healthcare. For open-source, a time-gated license like FSL could work, but it risks forking. Maybe focus on the product first, then revisit the structure later.

Why can't you just give your employees equity? If you want to make sure people have have ownership of their work that's a well understood model.