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

[snide]

Long story short, I'm building a new product and will likely launch it as a yearly SaaS with a permissive license. I'm later in my career and am mostly building it for fun, but I think it has potential to be a good, small business that I'd have fun fiddling with for a long time.

I went through and set up the usual LLC, but was curious about how I could set it up to be a member or worker-owned company. Has anyone done anything like that from the beginning? Should I just worry about this later?

With licensing, the typical model has been to make your core permissive, and keep the hosting / billing application private. Has anyone made even that part of their SaaS open? I know that would make is really easy to fork the business, but was thinking something like a time-gated Functional Source License (FSL) might work?

I'm open to ideas. I don't see this discussed commonly on HN, so figured it was a good topic.

[yochaigal]

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.

[herrherrmann]

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.

[perfmode]

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.

[ellisv]

I wish more people know about profit sharing interests.

I was a part of a startup that offered profit sharing interests. When I joined the profit was X and left it was Y. I received a check for my percentage of the growth in profit. It felt pretty fair.

There was a relatively direct incentive to impact the company bottom line and I didn’t have to wait for the company to exit to get compensated.

[snide]

That's interesting, but I was thinking something possibly even farther. That the members of the co-op are the people that pay for the SaaS itself. Essentially the yearly fee is "dues" towards the organization.

[nickisnoble]

Any chance you'd share the docs for that?

[pavlov]

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.

[herrherrmann]

I agree with the idea of supporting local non-huge businesses that still (need to) for their customers. But I think the coop concept works for more spread-out organizations as well, especially when it comes to digital services. As you mentioned, some big organizations like banks and grocery stores (that operate country-wide or even internationally) exist in Europe. There are also remote-first design/tech cooperatives around.

[throwawaysleep]

I’ve heard of such models, but the problem is apparently maintaining quality (from the people I know who have tried this).

Drivers often need firing. How would a co-op approach that?

[Der_Einzige]

Co-ops, employee owned businesses, and credit unions are antithetical to American ruthless capitalist exploitation. They are economically "inefficient" since they don't maximize the exploitation of their customers.

Also, what good products do any of these groups make (besides credit unions which are superior to traditional banks)? Sure I can go to winco for cheap groceries, but REI isn't exactly the bastion of quality that its buyers pretend it is (their stuff is cheap crap).

The sad reality is that if you, the customer, want a good product, you want the company who makes it to exploit its workers. This is also the real reason why unions died in America. All the US car companies are unionized and that famously caused US company workers circa the late 70s and 80s to be literally drunk/high on the job all the time (see https://en.wikipedia.org/wiki/Fremont_Assembly) Meanwhile most Japanese car factories aren't unionized, and you get literally the most reliable and best fit/finish in the industry from doing it.

[tnjm]

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.)

[monodeldiablo]

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.

[snide]

Thanks. I didn't know about either of these groups.

[AndrewKemendo]

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.

[myheartisinohio]

Man, I love HN so much. This is really freaking cool. I have an app idea related to cleaning up litter. This makes me want to build it even more. Thanks for posting.

[hkt]

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.

[ericholscher]

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.

[snide]

Hey Eric! I think of you whenever I open Python documentation and see some of my old work!

That's good to know that at least I'm not crazy for also open sourcing the billing code. I feel less worried.

[ada1981]

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?

[prisenco]

There's a lot of potential and precedence even if there isn't much discussion. It's clear that while people may not always like the market for needs like housing and healthcare, they strongly prefer it for consumer goods and services. A cooperative is a way to engage with the market without running into the problems of large for-profit enterprises.

The hard parts are:

1. capitalization - once you have investors who have more say than employees, it's no longer very cooperative

2. legal - the structures for for-profit or hierarchical non-profits are well defined and there are any number of experienced law firms that can help structure a business, while for a cooperative not so much

3. structural - there are a thousand books published every year about for-profit businesses. There are comparatively few about starting and running a cooperative. Although the latter have more signal than the noise of the former.

These aren't insurmountable problems, though. They've been solved before.

| Amazon as a coop

A cooperative Amazon would probably work best as a federation of cooperatives.

[jrhusney]

Tom Thomison has been making alternative formation/governance models his life's work: https://www.encode.org/powershift-ecosystem

One of the many mechanisms they developed is the "Dynamic Equity Framework" where ownership is designed to be fluid and adaptive. Contributions of work, capital, or other resources translate into ownership stakes in fair, transparent ways, avoiding traditional hierarchical accumulation of power.

[rgbrgb]

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.

[rsingel]

I founded and run a SaaS technology company for publishers. I think there's a rich vein here that hasn't really been explored.

[Outpost](https://outpost.pub)

We work with pubs like 404Media and Platformer

Incorporated in California.

Happy to answer questions

[notepad0x90]

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.

[buildbuildbuild]

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

[satvikpendem]

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.

[connectsnk]

Can you elaborate more on how the expense split maths worked? Also why would the contractor wish to keep getting the business through the coop. Once they have the business, isnt it in their interest to make a direct deal for the next instalment of work?

[mcbishop]

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

[EligibleDecoy]

My first thought as well!

[lylo]

I’ve been thinking about this lately for my publish-by-email app, Pagecord (https://pagecord.com). I’ve made it open source (https://github.com/lylo/pagecord) but I’ve been thinking it would be really cool if paying customers had a stake in it somehow. The Subvert model is interesting for sure.

[skndr]

It's definitely possible (I'm part of a new tech worker cooperative). Cooperatives can be many legal structures, though you need your bylaws to reflect cooperative principles (one member one vote, etc). Here's a list of tech coops if you'd like to know some others: https://github.com/hng/tech-coops

I'm happy to share more - I'll send you an email.

[flamboyant_ride]

Hey, I'm looking to learn more about joining a tech coop. Would like to get in touch to understand better (email is on my profile).

[fallinditch]

The DAO, decentralized autonomous organization, holds some promise for new types of cooperative business models. For example, you can define a governance structure that is appropriate for your business. Many DAOs are operating in the Web 3 space, often using Discord as the main communication platform, some with crypto-powered tokens that reward users and participants.

There are examples of successful DAOs, while others have stumbled - governance rules are hard to get right, and it can take a disproportionate amount of time for discussions, voting, admin, etc.

I think we're still in the early stages of the DAO concept and with new governance models and platforms to facilitate building and managing DAOs with best practices we'll start to see a lot more success in this area.