A Field in Transition
The concept of steward-ownership is gaining traction among startups, medium-sized businesses and larger corporations. While the idea has been around for some time and has come a long way, it is now being newly embraced and explored also in the investment world. Both we and other key players in this field are continuously learning and adapting. There are no ready-made solutions, and not all scenarios and questions have been resolved yet.
Challenges in Steward-Ownership Aligned Financing
While we and many other players have found a lot of innovative approaches and solutions for steward-ownership-aligned financing, we must acknowledge that there are still significant challenges and hurdles. These can broadly be categorized into three main clusters:
The innovative structures and solutions being created by pioneering visionaries who are exploring new possibilities in this field will need ongoing refinement. This includes evolving suitable language and creating models and solutions that can be applied more universally. It also includes exploring ways to set up financing structures and run investment vehicles that align with the principles of steward-ownership. Through practice and over time, there will be more innovative financing options – some might be highly experimental, others may contribute to answering still open questions regarding steward-ownership aligned financing. This is particularly relevant in the context of very risky and/or very early stage-cases, where businesses require large amounts of capital. Here, the market is still developing approaches that can respond appropriately to high volatility.
Steward-ownership and the finance market supporting it are still in its early stages. There are many investors who have never heard of steward-ownership or aligned financing and who are not familiar with other types of financing besides conventional exit-oriented equity investments or loans. Common fund structures and regulations often reflect this, as they sometimes do not allow for financing instruments aligned with steward-ownership principles. This means that the burden on entrepreneurs to explain the concept to investors, who are unfamiliar with it, remains high and the freedom of fund managers is often very limited.
Another important aspect when considering market maturity is that the quantity of aligned capital (i.e. investors investing in a steward-ownership aligned way) is not high enough for the existing demand yet. And this poses a chicken-and-egg problem in two ways:
- Entrepreneurs are reluctant to choose steward-ownership for fear of not finding aligned capital; at the same time, investors do not want to spend a lot of energy and resources on adapting to invest in steward-ownership if there are not enough companies to invest in.
- Investors are concerned about further or follow-up financing – namely, the concern that there may not be enough aligned capital to support further growth or to allow structured exits from the investments (e.g. secondary markets).
As more players enter the scene and more and more entrepreneurs make their case for steward-ownership-aligned financing, the likelihood of a new, fluid capital layer and a secondary market increases.
Structural Disadvantages: There are structural disadvantages for steward-ownership and aligned financing due to a lack of legal options and challenges in accessing state subsidy programmes because they do not follow conventional models. These barriers need to be addressed to level the playing field for steward-ownership-aligned financing.
It is also essential to consider the critical role and dynamics of money within this context. Historically, philosophers like Aristotle have noted that the quality of money is measured solely by its quantity. Unlike other goods, money has no saturation point; more is always better. In steward-ownership, this dynamic is challenged by introducing limitations and redefining the role of money within companies. By limiting the influence of money and asking the question of “what is enough”, steward-ownership challenges fundamental beliefs and norms of our current economy and investment world. This makes it a structurally challenging, psychologically and emotionally charged topic, which many individuals do not feel equipped to dive into.
The Role of Individuals and the Emerging Movement
Despite these challenges, the most critical factor is the motivation and commitment of individuals. Many investors and venture capitalists admire what companies like Patagonia have done to stay true to their values – but how many actively work to help the next Patagonia emerge?
We see a growing trend across various sectors and major economies: an increasing demand for value-driven, mission-secure, resilient businesses that prioritize long-term orientation and regenerative thinking over short-term profit. Labor and capital markets are beginning to take notice, and among investors, too, there is a rising interest in alternatives to conventional IPOs and exit models.
Still, the field of steward-ownership is a collective experimental ground. There is no single answer, and being part of this movement means embracing the discomfort of uncertainty and co-creating solutions. But this field is not developing in isolation. Steward-ownership-aligned financing has evolved through ongoing conversations and exchanges with other movements, positioning itself as part of a broader landscape of alternative financing models. These movements share a common motivation: rethinking traditional investment structures to better align with today's reality of business and society. Initiatives such as Zebras Unite, Transform Finance, RSF Regenerative Social Finance, the Exit2Community movement, or ideas like Community Capital and Regenerative Finance, along with thought leaders like Aunnie Patton Power and Erinch Sahan, all contribute to this shared landscape to develop financing (and ownership) solutions beyond the conventional, exit-driven investment paradigm.
You may have already noticed – or will soon – that some of the ideas and approaches discussed in this guide overlap with practices found in other efforts in the larger ecosystem of alternative and non-exit-oriented financing models. Just as we have learned from others, the insights shared here may also inspire and inform innovation in other areas of financing.
It is a promising but still developing field, and we invite you to think with us, experiment, and shape what is next. With the collective effort of all involved, we can tackle these challenges above.
Want to learn more about actors and movements in this field?
- Book "Adventure Finance" by Aunnie Patton Power
- Transform Finance: Alternative Ownership Enterprise Models
- Zebras Unite | Zebras Fix What Unicorns Break
- Financing the Transition: Can We Still Make the Shift? | Erinch Sahan | Keynote x ChangeNOW2024
- State of Alternative Ownership in the US: Emerging Trends in Steward-ownership and Alternative Financing. Learning Journey Report 2019