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Cake day: November 8th, 2023

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  • tfehring@alien.topBtoStartupsStartup without equity
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    1 year ago

    The structure you’re looking for is closer to a cooperative than a nonprofit. These do have equity, but they don’t have outside shareholders - instead, the company is owned entirely by its employees and/or customers. Financial services companies with similar structures include credit unions, mutual insurance companies, and Vanguard.

    The main unique challenge faced by this type of organization is its limited access to capital. It’s hard to raise enough money to build a product that can generate revenue without offering the potential for any kind of return to your investors. (Yes, in principle you can raise debt, but in practice that’s generally not viable pre-revenue, save for de facto equity instruments like convertible notes.) Many categories of financial services firms have relatively high fixed regulatory and compliance costs, so if you’re trying to bootstrap, finding a way to generate revenue without falling into those categories will help.