
A document to help you start a tech cooperative - morisy
https://feeltrain.com/blog/operating-agreement/
======
marricks
Back in 19th century USA, during industrialization, the idea of working for
someone came across to many as a form of wage-slavery. Going from farming or
trade-skills to factories working, one gave up any control in their own worker
rights and planning of their business.

It seems fundamentally unfair that in most industries you don't have any real
share of the company, or any say in the direction of it. People who control
those companies are solely executives or wall street share holders, not the
people who spend countless hours making the company run and function, thinking
about it for even a moment reveals how messed up our system is. Things have
only gotten worse recently too with the decline of unions, workers rarely even
get a say in their own rights, wages, or working conditions!

In short, sharing information like this is great, I'm all for more co-ops!

~~~
Alex3917
> People who control those companies are solely executives or wall street
> share holders, not the people who spend countless hours making the company
> run and function

As an entrepreneur, it's actually pretty difficult to find folks who prefer
getting compensated primarily in shares rather than cash. If you want to have
significant ownership in a company that usually isn't much of a challenge.

~~~
Barrin92
I think that's largely a cultural issue though. We've trained people to
believe in this extreme form of specialisation. They don't even expect to take
on responsibility any more because they believe that this is solely the domain
of management, owners and so on.

It's probably going to take some effort if we want to bring the idea back that
employees should have a say in the direction and leadership of a business.

~~~
dahauns
"They don't expect to take on responsibility"? No. It's just that most of the
time, employees having a say in leadership decisions is a pipe dream in
practice, ergo: Paid in shares = all of the risk and none of the authority.

And people don't like to get played.

------
yochaigal
I have founded two worker co-ops; both in the tech sector.

Whenever one of these posts hits reddit or this website, there is a surge of
interest - and then nothing. Our rate of growth (400 or so worker co-ops in
the US) is abysmally slow; if anything I've seen more co-ops fold than start
anew! Our conferences seem to bring more and more each year, though - just not
workers; instead we get specialists, folks from social justice and non-
profits... Just very few workers. At the East coast conference two years ago,
75% of the speakers were non-owners, just co-op specialists; do-gooders and
SJWs.

The only new co-ops I seem to see are those that get created by top-down
institutions; non-profits and the like. I'm talking Evergreen, WAGES, etc.
Once in a while we get web co-ops (like the one liked here); more often than
not, they too have a political bent (beyond worker-ownership).

Not sure why I'm saying all this here; I suppose I just wanted to offer a
different perspective on all this. I love worker co-ops, and think they should
be everywhere. But I'm not sure culture in the US is yet compatible!

Checkout [http://reddit.com/r/cooperatives](http://reddit.com/r/cooperatives)
it you want to know more.

~~~
morisy
I seriously considered it for my organization a little over a year ago, and
while ultimately it wasn't the right fit I think a clear document and
explanation of how someone else would do it would have been very useful to
think about.

I think part of the reason that they haven't succeeded is the necessary
capital and scale of technology organizations these days. It seems there's a
hollowing out of the mid-tier of bootstrapped organizations where a co-op
would be feasible, and if you're a founder who is going to put in years of
unpaid or low paid work and funding, giving up ownership is a tough sell.

~~~
yochaigal
Yeah, this is one of the reasons why it is so important to start as a co-op,
rather than convert later.

------
jacquesm
From one of the annotations:

> I'm fundamentally opposed to making people buy their way into the company,
> it feels like a scam to me. You don't have to demonstrate your value "to"
> the company -- we each as individuals hold far more value than this taxable
> structure that can be dissolved when it no longer benefits the members.
> Also, whatever value a person has is being brought by their skills,
> thinking, and experience, not by cash. You aren't creative with cash.

I strongly disagree with this. People who have 'skin in the game' are _much_
more likely to perform well than people for who joining up is a freebie and
it's a lot easier to take someone on board than it is to remove them again if
they don't work out in a collective like this. In fact, they might demand to
be bought out and before you know it you're in court even though your
'collective rules' were made on the assumption that everybody would always be
nice and play nice.

This would also allow them to reduce the candidacy period to something more
reasonable, now you are essentially asked to give up a year of your life on
the gamble you will be accepted. Better to put down some money then, which you
can recover if and when you leave, hopefully with a bonus because the company
has appreciated in value.

Also: people change over time.

I've seen this in practice in one of my own companies, the people who actually
put money down for their shares were all hard workers and super dependable,
the people that got their shares 'for free' (or in some cases with money
borrowed from the company) were a lot less likely to work hard and were the
first to run off when there was a speedbump (which we weathered).

On another note: I'm investing in a company that is a strange cross between a
traditional company and a cooperative like this. It's been running for the
better part of 10 years now, it's also a consultancy business and it's one of
the most interesting companies that I've ever dealt with. The CEO is a very
inspiring young man who manages to make all the employees of the company
stakeholders, who has made it possible to account for project based income to
be fairly distributed amongst the employees and who is now in the process of
streamlining all this so the idea can be applied to other companies.

I really should do a write-up on that company and their story one of these
days, it's been fascinating to see this idea take root and flourish over the
years.

~~~
josephg
Wouldn't this effect be much stronger in a worker-owned cooperative? Having an
equal 20% stake seems much more motivating to me than the 0.4% that you might
get as an early employee of a traditional tech startup, even if the shares
diminish after you leave.

~~~
Kalium
By this logic, worker-owned cooperatives can and should be expected to out-
perform traditionally structured businesses. Do I interpret correctly?

If that's true, then why do you think traditionally structured businesses
generally out-perform cooperatives? People _have_ tried.

~~~
icebraining
Outperform by what metric?

~~~
Kalium
If employees are more motivated, one would expect a greater level of employee
productivity. So by the metrics of productivity, productivity growth, and most
of the metrics used to measure corporate performance.

The obvious response, of course, is that none of these metrics matter because
they only apply to traditionally structured highly inequitable corporations.
There's a lot of truth to this! Yet it perhaps attempts to dodge the question.
If cooperatives are more efficient at convincing people to be more productive,
you would expect that this would allow efficient, motivated cooperatives to
outperform traditional corporations and their inefficient, demotivated,
dehumanized structures by financial metrics.

~~~
josephg
> by financial metrics.

There are three stakeholders in any company:

* The owners (stockholders)

* Employees

* Customers

When a company makes profit (eg, they manufacture a mattress for $500 thats
worth $1000), the profit is divided between those three groups of people. How
the money gets divided depends on the relative power those groups hold.

\- In a market with lots of competition, the price goes down and the customers
get a windfall through cheaper products

\- When there's not enough supply of labour (like in software), the employees
can demanding higher wages, better working conditions or shorter hours

\- And otherwise, usually the owners get the profits.

The easiest metric of a company is to evaluate profit to shareholders. Thats
not what coops are trying to optimize for. Instead they want a high quality of
life for their employees. So I would expect you would see coops rated poorly,
even when they're functioning (for their employees) very well.

~~~
Kalium
You're right! Cooperatives have a fundamentally different structure that makes
the typical metrics of return to non-employee shareholders hard to use or make
sense of.

Fortunately, I think this is addressable. Cooperatives still have owners, be
they employees or customers. The structure works by merging two of the three
legs you sketch out. For worker-owned cooperatives, it should still be
possible to evaluate how effectively they return profits to owners. You just
have to evaluate it a little differently, perhaps by classing worker pay as
dividends (or maybe the premium over non-coop competition).

Plus, you can look at things like their offerings and the cost or quality
thereof. I don't know _anyone_ who goes to Rainbow Grocery Coop for reasonable
prices.

To recap, you're absolutely right. Coops are not optimizing for returning
profits to uninvolved investor/owners. Instead, they are optimizing for
returning profits to _actively involved_ who act as one of the active groups
above. As a result, I would think that metrics for evaluating a business could
still be calculated and examined for a enterprise. After all, cooperative
enterprises are still businesses.

------
nathan_f77
This is so awesome: [https://feeltrain.com/blog/hello-feel-
train/](https://feeltrain.com/blog/hello-feel-train/)

I've had the same ideas over the last few years, even the hard limit on the
number of people. It sounds like they are just doing some paid consulting work
and sharing profits. But what I would like to do, is that everyone only works
around 10 hours per week on consulting work, and we spend the rest of the time
working on our own app or website ideas. Then we could share in all the risk /
reward. So it would be like a self-funding startup incubator. And if we came
up with a couple of things that were really successful, then everyone could
just retire, or at least switch to "maintenance mode" where we only release
bugfixes and minor updates. No need to take over the world, I would just love
to have a few little apps bringing in some passive income.

I guess that's the tricky part though.. what happens if someone wants to
leave? Do they keep some shares and continue to share profits, or do they have
to give up everything? I couldn't find anything in the linked operating
agreement.

~~~
andreareina
They're a consulting shop, so it would be natural to say that people who leave
don't share in the future profits.

For your idea where considerable income is expected to come from past work,
I'd say it makes more sense to have ownership of the app assigned to an ad-hoc
company that owns just the app, owned by the people there at the time the app
was written. The coöp might take a hand in marketing the app and performing
other administrativa, in which case it would collect a fee from each sale.

App_1_Co is owned by A, B, C, D and owns App_1. App_2_Co is owned by A, C, E,
F and owns App_2. Coöp_Co is owned by C, E, F, G and sells App_1 and App_2
(taking a 10% cut) as well as providing consulting services.

~~~
bisRepetita
Interesting ideas. One challenge is when App 1 needs an update, F and G doing
some of the work. Or when App 1 becomes a building block of App 3.

------
ksdale
This operating agreement doesn't really differ from a regular LLC agreement
except that it does away with members putting capital into the business, which
is usually where the entire difference in voting rights comes into play.

Minor nitpick with the note about forming in Oregon vs Delaware - Businesses
generally pay tax where they do business instead of/in addition to where they
are incorporated. The discussion of corporate taxes also isn't particularly
relevant to a usual LLC situation where all the income is passed through, and
the members will just pay tax where they live.

In addition Delaware has a very complete body of business case law that is a
major reason businesses choose to incorporate there. It's not generally for
dodgy tax reasons. I will definitely concede that a lot of people start
business in Delaware when they definitely don't need to because of some
magical perceived advantage but there are real benefits for some businesses
that don't involve ripping off your home state.

I also take slight issue with the note about the business not existing to make
a profit for itself. Every business exists for the benefit of the people who
own it. Obviously not all businesses are owned by the people who work in it,
but nowhere is there a business that exists solely for the purpose of loading
up a corporate bank account with no shareholder as the ultimate recipient.

The note as it's written points more to the distinction between big C-Corps
and every other entity than it does to the distinction between business as
it's done today and co-ops.

It's basically a justification for self employment rather than a justification
for a co-op specifically.

Quick edit: I love the spirit this is written in but I feel like it's
unnecessarily critical of the way businesses are formed today. In my
experience, people who run small businesses think a lot about fairness, and
just because that doesn't always manifest itself in all equal everything
doesn't mean it's not fair.

~~~
decasia
Some of these points are fair but I want to clarify the co-op idea has less to
do with an argument that "all small business owners aren't fair," and more
about wanting to get rid of the very distinction between labor, ownership and
management.

In other words, fair management is one thing; abolishing management as such is
something else. Like you point out, "Obviously not all businesses are owned by
the people who work in it" \-- I think that's the heart of this issue.

(That said, in what I've seen of the co-operative movement, there do end up
being some sort of specialized managerial people much of the time. So it's far
from clearcut on the ground, as you're pointing out.)

------
ryanmarsh
Is a co-op really best for tech work? If so why?

Don't studies show that when there's a profit motive creative people perform
more poorly than when they're just paid enough to make money not a
distraction?

I have so many questions seriously.

How do decisions get made? What if it's really successful and people get lazy
and decide to chill on a boat? So many more... where can I find a great
argument explaining the benefits and tradeoffs of starting a tech cooperative?

~~~
nathan_f77
> Don't studies show that when there's a profit motive creative people perform
> more poorly than when they're just paid enough to make money not a
> distraction?

Whoever did that study, they didn't interview me.

I mean, it's true that I care more about doing good work, learning new things,
and making an impact. But I can do that on my own, and I've been self-employed
for the last few years. The only reason I would join or start a new company is
for the money.

> How do decisions get made? What if it's really successful and people get
> lazy and decide to chill on a boat?

If I started a coop, that would actually be our goal. I think it's funny that
people don't admit this.

~~~
dahauns
>Whoever did that study, they didn't interview me.

More like decades of studies. Read "Drive" by Dan Pink.

~~~
nathan_f77
That looks like a good recommendation, thankyou.

> he asserts that the secret to high performance and satisfaction-at work, at
> school, and at home—is the deeply human need to direct our own lives, to
> learn and create new things, and to do better by ourselves and our world.

> He examines the three elements of true motivation—autonomy, mastery, and
> purpose

I totally agree with that. I guess I am in the very fortunate position where I
feel like I can achieve all of these things without being an employee at a
company. I've been freelancing for a few years now (sometimes very part-time),
so I feel like I'm "out of the system", and I have no desire to become an
employee at a company. I feel like money is the only thing that would make me
change my mind (and it would have to be a lot.)

I admit that I am using a strange definition of "work". To me, work is
something that is boring and difficult. When I am "working" 12 hours per day
on my own apps, or if I'm volunteering full-time for a cause that I care
about, then I don't consider that to be work. Yes, I know it's still work, but
it doesn't feel like it.

I suppose if I found the right company, where I have a high degree of
autonomy, I had access to a lot of resources, and I can learn and invent
things all day, then I would consider that. But in my mind, when I think of
"company", I'm picturing "yet another SaaS or mobile app".

And so I guess that might be the gist of these studies.

------
sriharis
If someone is interested in doing this in India, here's our LLP agreement:

\- [https://github.com/nilenso/cooperative-
agreement](https://github.com/nilenso/cooperative-agreement).

We've also written and talked about it a bit:

\- [https://blog.nilenso.com/blog/2014/11/19/huh-a-software-
coop...](https://blog.nilenso.com/blog/2014/11/19/huh-a-software-cooperative/)

\-
[https://www.youtube.com/watch?v=b7K3E1Q_MBk](https://www.youtube.com/watch?v=b7K3E1Q_MBk)

~~~
stefek99
Nice!

Added as a reference to our incorporation documents:
[https://github.com/astralship/astralship.github.io/issues/47](https://github.com/astralship/astralship.github.io/issues/47)

Our rules: 1 page max.

If something more complicated - create a separate 1 page document.

~~~
deobald
We would love a rule like that. Unfortunately, Indian LLP (Limited Liability
Partnerships -- the only way of creating a technology co-op in India at the
moment) Partnership Agreements are easily 6 pages at a bare legal minimum. :)

------
bpchaps
I'd be very interested if something like this could work well to complement
the existing "civic tech" field. It has some pretty substantial problems in
its current form and a movement towards co-ops looks pretty damn appealing.

Anyone know if any civic tech co-ops exist? Or would folks be willing to start
some up? ;)

~~~
thistle
We do a lot of civic tech work re election monitoring software: sassafras.coop

------
BucketSort
Excellent topic and resource. A friend and I were discussing this prospect
today. What we are thinking of is something of: University + NPO + Business. I
think having a cooperative tandemed to some sort of training system is
important... for many reasons if anyone is interested in discussing this
further. See ELSE[1] for something similar in spirit ( which I just learned
about today from a professor that used to run it ), but still quite different.

[1][http://www.elseinstitute.org/](http://www.elseinstitute.org/)

------
vinceguidry
I've tried starting a few companies and it eventually became clear that
without significant revenue coming in, the cofounders need to be either
particularly motivated by the vision and capable of putting aside personal
politics to achieve it, the former being easier to achieve than the latter,
immediate personal goals are going to slowly take priority and your startup
will die a sad death.

Once revenue is there, everybody can buy in. The enterprise does not need to
actually be profitable or even have a workable plan to profit or exit or
anything like that. What it needs is revenue.

Someone has to be the pig that gets the enterprise from zero to revenue. Smart
pigs become politically-adroit capitalist "pigs", dumb pigs get slaughtered.
But someone has to take the lead, and the rest have to follow.

Uniting collectively behind a vision seems to be one of those things humans
just can't do very well. They can unite behind a _person_ with a vision, but
not the vision by itself.

Workers cooperatives were a big thing back in the heady days of the early
1800s. Most died out fairly quickly but a few caught on and lasted for a good
while. The story was the same throughout, the cooperative eventually ossified
and could not retain the magic in the face of broader economic change.

~~~
ci5er
> Uniting collectively behind a vision seems to be one of those things humans
> just can't do very well. They can unite behind a person with a vision, but
> not the vision by itself.

That's insightful. Can you speak more about this?

~~~
vinceguidry
Sure. A vision is an imagining of what the future might hold. If you don't
have _someone_ keeping the vision, a visionary, calling the shots and
resolving conflicts, then the vision gets diluted amongst all the different
people believing in it. It's a game of telephone only the end result is the
livelihoods of everyone involved. It's easy to lose faith in.

Whereas if you have a person where the buck stops, vision-wise, then you don't
have to know every little detail, you can just trust the person to make
everything work. Most people aren't very imaginative, they want to deal with
their own stuff and leave the kingdom-building to someone else. It's just
enough for them to keep the faith.

Picture it this way. Say you have a plan for a better world. If the plan is,
"hope X will happen," then that's a very different thing to believe in than
"do X, Y, and Z, and if we do those things right, then A will happen." Both
are imagined sequences of events, but one is more concrete than the other. A
person in charge of the vision makes the vision that much more concrete than
if it's spread out amongst random others.

------
scandox
I met some guys from a Spanish software coop called Igalia and as I understood
it they have a kind of apprenticeship/ probation period after which you get
voted on as a partner - or in some cases NOT.

It was quite a long process but I got the impression that people knew after a
reasonable time if things were going in the right direction.

------
amingilani
I mean absolutely no offense by this, but the logo has an uncanny resemblance
to DickButt. Maybe change the logo? Or, not, if it's not a problem.

I don't know what I would do if I were in your position and someone pointed
this out to me.

~~~
tomcam
Says a lot more about you than the logo

~~~
amingilani
Shoot the messenger, why don't you.

------
FlyingSnake
Has anyone tried this in Germany/EU? What would be the appropriate term for
this in the EU/Germany?

~~~
tiatia
The equivalent to a COOP could be many things, depending what you want to do
and achieve. I would look into GmbH/AG (inc/LLC), gGmbH (non profit Inc),
eingetragener Verein e.V. (not sure there is such a thing in the US), or, most
likely, Genossenschaft e.G.
[https://de.wikipedia.org/wiki/Genossenschaft](https://de.wikipedia.org/wiki/Genossenschaft)

------
im3w1l
Regarding the bullet point lists in 3.2 and 4.2. They don't explicitly state
that whether it's an "and" or an "or" condition list. Is that really safe? Are
lists like this by convention assumed to be of the "and" type?

~~~
Gaelan
There is an "and" in the list.

------
RunawayGalaxy
If you somehow automated organization and payment through blockchain contracts
and had a way to describe requirements by code, I think it would be killer.

~~~
Animats
That worked out great for Etherium and the DAO.

~~~
gmt2027
In pursuing radical new ideas, costly failures are inevitable. This is hardly
reason to quit and never try again.

------
rmason
Whether you're planning a worker cooperative or just open to sharing the
businesses financials with the workers there's a book you should read, Jack
Stack's the great game of business:

[https://www.amazon.com/Great-Game-Business-Expanded-
Updated/...](https://www.amazon.com/Great-Game-Business-Expanded-
Updated/dp/0385348339/ref=sr_1_1_twi_pap_1?s=books&ie=UTF8&qid=1492483380&sr=1-1&keywords=jack+stack)

He practices what he preaches and hundreds visit his company every year to see
how it works in practice.

