To implement steward-ownership, the fundamental structure of the company (as outlined in its by-laws) must be changed. In most countries, this step requires a qualified majority, which can vary depending on the legal framework. Additional approvals may also be necessary if existing rights are to be restricted, and in some jurisdictions, even a shareholder with few voting rights could potentially block this step. The safest approach is to proactively assess the legal requirements in your jurisdiction to ensure that the path to steward-ownership remains open and cannot be blocked. Some companies maintain this option by not granting any voting rights, special rights or far-reaching approval rights, while still allowing for certain consultation, information, and approval rights on selected transactions.

Actively holding voting rights is important to some investors, because they e.g. want to retain power over their investment (and think that holding voting rights is the only possible way to do so -> learn more about other options in Deep Dive Governance) or to strengthen their emotional ties to the company. This is especially true for investors who are very involved in the company. It may be possible to cultivate this bond through functions such as a legal or non-legal advisory board (for further information, see this document on Distribution of Voting Rights and Steward-Ownership). Another alternative is consultation duties, which enable the investor to be heard on certain issues without being able to legally block the decision or to give the investor “investor provision rights” with which they can protect their stake and have influence. 

In steward-ownership-aligned financing, entrepreneurial power (control) remains with the company’s stewards. However, this does not mean investors cannot be involved. There are multiple ways beyond voting rights that can be used to involve investors in decision-making, from consent or veto rights to consultation, information or interference rights. 

That said, control isn’t defined by voting rights alone – other contractual rights can also influence decision-making power. If not carefully structured, certain investor rights, such as consent or veto rights, can shift control away from the stewards, undermining the company’s autonomy.

To avoid this, contracts should strike a thoughtful balance of recognizing the vital role of investors as enablers, partners and sometimes mentors, without compromising the company's autonomy. Thoughtfully calibrated minority rights and consent provisions for investors can respect shared interests while still making sure that core business decisions are ultimately conducted by those stewarding the company. The same applies to transactions that may require the approval of the investors, for instance when certain investments, new management hires, etc. are subject to a veto. In some cases, specific veto rights for investors can be beneficial and justified. The aim is here then to thoughtfully balance the company’s decision-making freedom with investor involvement, allowing them to actively support and engage without taking control.

After all, an investment relationship should be a partnership, recognizing the importance of one of the company’s key stakeholder groups and enablers and the fact that investors often play a crucial role as partners (and sometimes mentors) for entrepreneurs. 

In steward-owned companies, it is certainly possible for investors to achieve high returns on their investments. However, returns must be limited in some way (either limited in terms of duration, amount, or influence). At the latest, when planning the actual implementation of steward-ownership, it must be clarified that the investors' return is limited in accordance with the steward-ownership principles. Ideally, no unrestricted rights to dividends or returns have been granted in the first place – this makes a transition to steward-ownership much smoother. However, if investors already hold unlimited profit participation rights, renegotiating these terms can be challenging. That said, if steward-ownership should not be the chosen path after all, these restricted rights can always be adjusted accordingly.

Valuation methods always aim to speculatively answer the same question: How much will the company generate now and in the future, creating free cash flow for investors? This question does not differ in steward-ownership, and in an ideal world, there wouldn’t be much difference in how this question is approached. However, in practice, various interests and biases come into play, often leading to inflated valuations and even entire overvalued markets.

If a valuation method is used, make sure that you use (and fix) one that does not inflate the valuation. Not only to avoid unnecessary pressure for rapid growth, but also to not make it practically impossible to buy back the investors’ shares (without forcing the company into an unhealthy growth trajectory that brings a mission shift). Keep in mind: While these considerations might seem more prominent in equity investments, the same applies when determining appropriate multiples, yields, or interest rates.

If you are already sure that you want to implement steward-ownership at a foreseeable point in time, it is important to clearly communicate your intentions or plan to investors. This will help to avoid unpleasant surprises (on either side) in the future. Even if you are not sure yet, but do not want to sell, make it clear and explicit: I/we do not intend to sell the entire company, the company valuation method will be fixed (now or at a certain point in the future), control will remain with those actively stewarding the company. This clarity allows agreements to be established under mutually understood conditions, potentially even including exit terms if needed.

Additionally, you might want to consider having investors sign a Letter of Intent (LOI) or a contract that signals their willingness to transition to steward-ownership in the future if the founders decide to do so and a suitable process is agreed upon. "Suitable" in this context could mean ensuring that investors receive a fair and mutually agreed-upon return, while the process respects the principles of steward-ownership and aligns with the company’s goals. Furthermore, you could also include clauses in financing contracts that explicitly state the intention to transition the company to steward-ownership over time — either by referencing a target date and, where possible, a specific legal structure, or by describing the intent more generally, including the core principles of steward-ownership, to be implemented when feasible and appropriate.

If these points are observed and communicated during financing rounds, the door is open for a later conversion into steward-ownership. In any case, the company can continue to be stewarded by the entrepreneurs in an autonomous manner.