One of the key factors in determining whether you can pursue steward-ownership and aligned financing is your current ownership structure. 

Can you make decisions autonomously? If existing shareholders hold blocking voting rights or have significant influence over decisions, moving toward steward-ownership and finding aligned financing can be difficult or even impossible without their support. If they are supportive – great! If not, while buying out existing investors might be an option (if they go along), note that this will make your journey more complex and eventually your capital needs will be higher. Particularly if your current market valuation (and thus the asset that the investors hold) is very high whilst your performance in terms of profits is not there yet, buying out old investors or getting their support for the transition to steward-ownership will be a big(ger) challenge.

Before pursuing steward-ownership-aligned financing, one relevant question is: do you have sufficient time? Preparing for and fundraising steward-ownership-aligned financing can generally speaking be more time-consuming than fundraising conventional investments. There are important questions and choices to consider within the process, which ideally should get the time they need. At the same time, depending on your situation and the market you are operating in, investors might be wholly unfamiliar with the concept of steward-ownership and have a lot of questions and roadblocks they face themselves, lengthening the fundraising process. We have seen successful cases of companies raising under a lot of time pressure so this is not necessarily a dealbreaker, just note that the higher the time constraints, the more difficult and pressured your journey will be.

Depending on the country you are operating in and the complexity of your finance solution, the legal costs for designing steward-ownership-aligned financing instruments can be significant. In any case, you will have to have your lawyers and tax experts review all contracts; this is a cost factor to account for.

There is, of course, never a guarantee to successfully fundraise, independent of what type of capital you are looking for. However, it should be noted that at the moment, the quantity of steward-ownership-aligned capital is not high enough to meet the demand for it in most markets. Particularly in countries and sectors in which steward-ownership and alternative forms of financing are not known yet, it will cost effort to find aligned investors – and you might fail.

What if things don’t go as planned? Consider the consequences of failure. If you don’t find aligned financing, what are the potential outcomes? This could include running out of capital, insolvency, or complications with existing bank loans. Be clear about the risks and prepared to face them. This applies particularly if you are combining your transition to steward-ownership with a fundraising round.

For some companies, steward-ownership-aligned financing is more accessible than for others. Generally, it can be said: the lower your risk, the more history, the more stability and track-record, the easier it is to raise capital. This is also and especially true when raising capital under alternative terms. Particularly for extremely early stage high-risk companies with high capital needs and without a clear picture of the future business case, steward-ownership aligned financing is usually more difficult to find and structure. At the same time, the transition process to steward-ownership is often easier for younger companies with less history and value, both on the legal and emotional side.

Additionally, we have found that there is more openness among investors who are also focused on impact – social or environmental – when it comes to steward-ownership-aligned financing. In this broader field, it can be easier to find aligned investors – even though not all impact investors are also open to steward-ownership. But don’t worry: We’ll cover the types of investors who might be interested and more open to steward-ownership-aligned financing later on.

Steward-ownership-aligned financing is still in its early stages, and there are many unresolved questions. It’s a pioneering approach with no one-size-fits-all solution – which is exactly what a lot of companies are looking for. Not following the mainstream of VC and PE and its predetermined pathways means finding more individual solutions, which can be more challenging and take longer – but will lead you to an option that is designed specifically for your company.

Are you ready for the challenges? If this financing model does not seem to address your specific challenges, does not resonate with you or even feels like it restricts you in a bad way, it might not be the right fit. The road ahead will have its difficulties, and unless you are fully convinced of the value this model can bring to your business, it might be hard to stay committed – and to get investors on board.

Are You Ready to Be a Pioneer? Transitioning to steward-ownership and aligned financing is not just about adopting a new model. At the moment, it is also about pioneering a path with a lot of potential for many more companies to come. If this approach aligns with your values and you’re ready to face the challenges head-on, you have the opportunity to create significant value and lead the way for others. Are you ready to take the leap?