Before We Start
This chapter is supposed to provide an overview of the technical possibilities we've worked with, encountered, or been informed about.
But keep in mind: understanding the principles of steward-ownership always comes first. They (in combination with clarity about your very individual needs) are the foundation upon which tailored instruments are built. While we present examples here, the list and possibilities are not exhaustive. The aim is to equip you with the tools to think creatively and design your solutions based on what works best for your unique situation. It serves as an inspirational and informational guide to help you find and model the financing instruments and combinations that best meet your business’s needs.
One more note before we dive in: financing instruments are often described as equity, mezzanine, or debt – depending on the lens through which they’re viewed. Instruments can be classified based on their accounting treatment (how they appear on the balance sheet), economic function (how they work in practice), or tax terms (how they are treated for taxation purposes). It’s not uncommon for an instrument to be economically equity-like while being classified as debt on the balance sheet and treated differently again for tax purposes. This layered classification can add a layer of complexity, beyond the more straightforward distinction between a “bank loan” and “equity.” Having this distinction in mind can help you anticipate potential roadblocks and better prepare for conversations with financial institutions and funding partners – not only in steward-ownership-aligned financing.
DisclaimerThe appropriate financing instrument depends on many factors, such as the company's business model, life stage, and funding history. It varies based on whether you are a social startup nearing profitability, a high-risk/high-potential venture, or a mature company at a critical juncture, such as fundraising for succession. Additionally, the suitability of these instruments depends on the country and jurisdiction in which the company operates. The possibilities are not limited to the instruments outlined in this document. Once the underlying principles of steward-ownership are understood, they can be applied across different contexts and jurisdictions — enabling you to assess the relevance of various financing tools or even design new, tailored instruments that go beyond those presented here.
The information provided here is mostly shaped by our experiences in the German context and is meant to serve as a starting point on your financing journey. They do not serve as a comprehensive guide that can substitute years of financial experience. Although we have gained experience in financing with (some of) these instruments, we cannot and must not offer and carry out legal advice within the meaning of the Legal Services Act. We do not have the technical qualifications for that. We are happy to share our past experiences and present these instruments within the context of steward-ownership. However, decisions regarding specific financing strategies should always be made in collaboration with tax advisors and legal experts, especially concerning legal and tax implications. The individual adaptation and legal implementation are your responsibility.