Investing in steward-ownership and steward-ownership aligned financing
Throughout this guide, the role of steward-ownership is crucial for your journey. We can roughly differentiate between investing in steward-owned companies and steward-ownership-aligned financing. In the former scenario, you are already steward-owned or have already legally enshrined your transition, in the latter you are structuring your financing according to the principles of steward-ownership – without being legally committed to steward-ownership yet.
Where you are on your journey influences how you approach the topic of finding aligned financing, the role that steward-ownership can play in your fundraising and the types of investment structures you might be looking into. For those of you already steward-owned, the spectrum is slightly narrower in that some financing options will simply not be possible (e.g. conventional equity investment with significant voting rights). We will focus here on steward-ownership aligned financing that also works within most forms of steward-ownership.
Where are you on the journey?
Diving into this slightly more, there are several different positions you could be in on your journey and how you thus approach steward-ownership aligned financing. Perhaps you haven’t made the decision yet – so here’s an overview to help you decide more easily”:
- Already steward-owned
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Transition to steward-ownership before financing round with steward-ownership aligned financing
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Steward-ownership aligned financing and transition to steward-ownership during financing round
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Steward-ownership aligned financing and legal commitment to transitioning into steward-ownership after financing round
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Steward-ownership aligned financing and soft commitment to transition into steward-ownership after financing round.
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Steward-ownership aligned financing and communication of wish to transition into steward-ownership to investors in fundraising.
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Communicating your intention to transition to steward-ownership in the future to investors while setting up financing in a way that allows room for steward-ownership in the future (e.g. shares with a buyback potential).
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Financing structure that allows room for potentially changing structure and transitioning into steward-ownership in the future (e.g. shares with a buyback potential).
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Conventional financing structure with plans to potentially restructure and transition to steward-ownership in the future if possible.
We have seen all of the scenarios above before and it is completely up to you which path you choose. Some things to consider are:
- A conscious decision on whether or not to legally implement steward-ownership is relevant – if you approach this without reflection, you could find yourself stuck in structures that are hard to exit.
- Legally implementing steward-ownership provides clarity and security to all stakeholders and makes it necessary for you to answer relevant questions around your company, your needs and the vision for the future. At the same time, it will cost you time, money and resources, so depending on the situation, a legal commitment to transition within a certain time frame might work better for you.
- A legal commitment to steward-ownership doesn’t only give security to you but also provides security and credibility to investors that you will actually take the steps towards steward-ownership. It protects your company from future pressure and potentially even from a change in your own motivations.
- Not legally committing to steward-ownership (but using steward-ownership-aligned financing) gives you more flexibility to see whether you will raise sufficient funds in steward-ownership or not (if those options are available to you).
- A clear commitment to implementing steward-ownership later, transparent communication to all stakeholders (particularly investors) and using a steward-ownership-aligned structure ensures that you autonomously can make the decision to transition to steward-ownership later on.
- If you don’t use steward-ownership-aligned financing or structures that have a clear path of how you can restructure them, you may become locked into a financing structure where you don’t have the autonomy to move towards steward-ownership anymore. Be aware! We have seen many companies approaching us at a later stage and it was unfortunately too late or too expensive to enable this path.
For more concrete things to consider when you don’t want to transition to steward-ownership as of yet, see also: Investment today, steward-ownership tomorrow.