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Community Capital RaisingStrategies for Cooperatives
Alison Lingane, Kim Arnone & Sarah Kaplan
Community Capital Raising: Strategies for Cooperatives 2
Introductions
Kim ArnoneVice President
Cutting Edge Capital
Sarah KaplanAttorney
Cutting Edge Counsel
Alison LinganeCo Founder
Project Equity
Project Equity
Our mission
To foster economic resiliency in low-income communities
by demonstrating and replicating strategies that increase worker ownership
© Project Equity 2016Community Capital Raising: Strategies for Cooperatives
What are worker-owned cooperatives?
Businesses that are
owned and governed
by their workers
© Project Equity 2016Community Capital Raising: Strategies for Cooperatives
Employee ownership brings significant benefits
All citations are in Worker Cooperatives: Pathways to Scale
TO WORKERS Better pay and benefits
Assets (business ownership)
A voice in key decisions
TO BUSINESSES Higher productivity and growth
Lower employee turnover
Improved business longevity
TO SOCIETY Local spending multiplier
Higher voting levels
Correlation with other social benefits
© Project Equity 2016Community Capital Raising: Strategies for Cooperatives
A coop conversion is a sale of a business
Worker Coop Business Owner
Typically financed by lenders or investors© Project Equity 2016
to a new worker coop
Community Capital Raising: Strategies for Cooperatives
7
Mission Statement
CEC’s mission is to engage more people (entrepreneurs, investors and supportingorganizations) in the new economy, a marketplace that emphasizes mission andimpact alongside return.
We work to develop capital markets that are resilient, equitable and inclusive;markets that contribute to a healthier planet and more sustainable communities.
Cooperatives are a key component to realizing a new economy.
Community Capital Raising: Strategies for Cooperatives
8
Cutting Edge: Dedicated to Democratizing the Economy
Funding Your
Venture
• Capital Raise Consulting• DPO Lab• Fund Formation• Financial Consulting• Business Plan Consulting• Marketing Services• Capital Markets & Market
Based Regulation
• Company Formation & Entity Selection
• Securities Compliance• Protection of Intellectual
Property• Governance & Compliance • Business Transactions• Employment Matters
Cutting Edge Capital Cutting Edge Counsel
Community Capital Raising: Strategies for Cooperatives
9
How Community Capital Works for Everyone
Community Capital Raising: Strategies for Cooperatives
10
Are You Ready for a Capital Raise?
Solid revenue generating business plan• Can be a Nonprofit, Cooperative, or For-profit (LLC, Corporation,
Benefit Corporation) Entity
Desire to raise Capital in the Next 3-18 months• Good Social Network to Support Community Investment
Campaign
Mission and Vision Well Established• Strong Social, Environmental, or Economic Impact Markers in
Place
Community Capital Raising: Strategies for Cooperatives
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What’s Challenging About Raising Capital for Cooperatives?
Most Profits Must Go to Members
Co-op is Controlled by
Members
Sooo… What Do You Offer to Investors?
Community Capital Raising: Strategies for Cooperatives
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What Can a Co-op Offer to Investors?
Membership Shares (common)
Preferred Shares (nonvoting)
Loans (notes/debt)
1
2
3
Community Capital Raising: Strategies for Cooperatives
13
Strategies for Cooperatives: Overview
Three often used cooperative capital raising strategies:
• State exemptions for sale of membership sharesExamples:
California - up to $1,000 per person up to $500kIllinois - up to $10,000 per person
• Direct Public Offerings• Title III: Federal Crowdfunding
Community Capital Raising: Strategies for Cooperatives
14
California Specific Cooperative Capital Raising Exemption
• Exemption for “any shares or memberships” issued by any cooperative incorporated under the California Cooperative Corporation Law.
• Increased limit from $300 to $1,000.
• Now defines “Community Investor Member”:Outside investor in a worker cooperativeAlmost never allowed to vote
Community Capital Raising: Strategies for Cooperatives
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Comparing Community Capital Raising Strategies
Donation Crowdfunding
Title III Federal Crowdfunding
Direct Public Offering
CA Co-op Exemption
Cost $ $$-$$$ $$-$$$ $-$$
Is This a Security? No Yes Yes Yes
Advertising Permitted YesLimited to the
platformYes Yes
Community Investors Permitted? Yes Yes Yes Yes
# of Non-Accredited Investors Unlimited Unlimited 500 500
Raise Limit None $1mm/yr None or $1mm/yr $500k
Number of States ALL ALL Single or Multi-State CA Only
Registered at the State Level No No Yes No
Community Capital Raising: Strategies for Cooperatives
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What Capital Raising Strategies are Available?
Community Capital
SpecializedCo-op
Strategies
Direct Public Offerings
FederalJOBS ActTitle III
Presale Crowdfunding
Donation Crowdfunding
Private Placements
Community Capital Raising: Strategies for Cooperatives
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Capital Raise Checklist
To Do
Define capital raise amount ☑
Choose a regulatory strategy ☑
Define your investor base ☑
Define investor rights--Create investor class ☑
Amend Articles of Incorporation ☑
Amend Operating Agreement or Bylaws ☑
Create Offering Memorandum and Subscription Agreement ☑
Raise Capital! ☑
Community Capital Raising: Strategies for Cooperatives
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Case Study: Real Pickles
"Real Pickles® is a small, worker-owned cooperativeproducing pickled products that are raw, vinegar-free,100% organic, and rich in probiotics."
Community Capital Raising: Strategies for Cooperatives
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Case Study: CERO
"CERO provides food waste composting services and isproud to be part of a local food economy rooted inenvironmental and economic justice."
Community Capital Raising: Strategies for Cooperatives
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Questions?
Sign up for a FREE 1 hour consultation HERE.
Download our free capital raise Marketing Guide.
Learn Moreproject-equity.orgcuttingedgecapital.comcuttingedgecounsel.com
Contact UsAlison Lingane: [email protected] Arnone: [email protected] Kaplan: [email protected]
Community Capital Raising: Strategies for Cooperatives