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How to fundraise for a cooperative startup

This playbook is designed for cooperative entrepreneurs looking to raise their initial funding. It can guide the first one to two years of getting your organization off the ground and is informed by my experience raising capital for The Drivers Cooperative, a worker cooperative in New York State. I need to start by reminding you that before raising any money, please always check with an attorney who is better positioned to speak to your individual circumstances. So let’s jump right in:

First, regardless of how you raise capital there are two core things to keep in mind:

  1. Revenue is the best source of financing

Raising capital inevitably takes time and resources. If you have a B2B or B2G business where a chunky contract could bring in significant revenue or could secure advisory work based on your sector expertise, focus on that. Given that most existing cooperative financing infrastructure is built on debt, it is much easier to get funds today if you have secured future cash flows.

2. You need to make it easy for an investor to defend his or her decision to fund you

Investors need to feel like they have cover for giving you money. This can manifest in powerful earned media or other investors coming on board. They need to be able to go to their investors and Board and justify any decisions made, so make their job easier by showing broad participation, impact metrics and signals of external validation.

Second, there are different approaches and strategies that you should consider depending on the amount you are looking to raise. If you need to raise:

$25,000 or less

Prize competitions

Our first capital beyond the research phase was from the Workers Lab through their Innovation Fund, a biannual competition in which 10 finalists are selected. Winners receive $150,000, but finalists are typically given something. My previous company, a portable benefits company, was a finalist and won $25,000, and the Workers Lab was generous enough to let me move it to the cooperative.

Another prize competition we entered was The David Prize, which awards five New Yorkers $200,000 each. While my co-founder Ken did not win, he was still awarded $25,000. There are likely local prizes that may be available to your geographic region, or your specific sector.

While prize competitions do take a long time to come to decisions (anywhere from three to nine months), it is free money and, even if you don’t win, finalists are often given consolation checks. Also, the application process does take effort, but nearly all applications ask the same questions. Invest time upfront in creating powerful responses to your problem statement, solution, theory of change, budget, and other core tenants of the application then copy them across applications.

Crowdfund donations

After the Workers Lab grant, our next capital was from a crowdfunding donation campaign launched on Giving Tuesday. You can see the campaign here. ioby was a great partner because they only charge three percent on funds raised to cover payment processing costs and are focused on community-led positive change. If you do not have a 501c3 associated with your non-profit, they will provide fiscal sponsorship (allowing your donors to deduct contributions from their taxes), for an additional five percent of funds raised. Other groups, such as and Zebras Unite, also offer fiscal sponsor services, sometimes for cheaper than ioby’s five percent. Payment processing fees are often more than paid for by match funding coordinated by ioby, supplied by big philanthropies such as the Rockefeller Foundation. You can view match funding criteria here. Campaigns regularly change, but we saw $7,000 in matching funds from ioby partners. In addition to the funding, you can say that these philanthropies who offer matching funds support your cooperative, giving credibility to other funders.

To ensure a successful crowdfunding donation campaign, do enough work before the launch to know who within your network you can turn to to circulate the campaign. Start with an achievable fundraising goal then ratchet it up as you meet the goal. At this stage, we did not have social media followings and had a network of around 2,000 drivers. Donations came primarily from personal networks and shares on cooperative-focused listservs and social media accounts (e.g., Ownership Works, DAWI).

Seed-stage accelerators

While it has not been around long, is now considered by many to be the preeminent seed-stage accelerator for coops. If you are accepted, their program will introduce you to fellow cooperative entrepreneurs, qualify you for investments from The Equitable Economy Fund, and introduce you to other investors active in the cooperative space. Applications for acceptance into the accelerator are highly competitive but, if selected to participate, you will receive $10,000 cash and pay back 2.5 percent of your revenue quarterly until you pay back $30,000. While this is a higher payback multiple than you’ll see elsewhere, nearly every philanthropy or investor you approach as a seed-stage cooperative will ask you if you’ve been through the program. Through the program, TDC connected with another participant, Zebras Unite, which helped broker a relationship with the One Project, a private philanthropy that granted over $100,000 to the cooperative before the end of the accelerator and has provided additional grants since then.

Even if you are not accepted into, you can still access most of their approach via their Lean Coop course, and by using the Build section of their website.

$25,000 — $500,000

Cooperative loan funds

Cooperative loan funds will write checks ranging from $10,000 to $500,000, with average check sizes being $50,000 — $200,000. These funds generally have less than $50M available to lend, with most being smaller (e.g., Shared Capital’s total loan portfolio is $13M). These lenders, registered as community-development financial institutions, are generally comfortable giving you a loan of up to 30 percent of future cash flows. For instance, if you have a guaranteed $1,000,000 contract to be paid out in the next 12 months, they can advance $300,000. has a list of cooperative loan funds.

The loan funds are also able to mobilize financing from the Small Business Administration, which offers financial institutions a 85% guarantee for loans up to $150,000 and 75% for loans greater than $150,000. However, the SBA requires a personal guarantee for the majority of loans, meaning that a founder would have to risk personal assets for a collectively-owned company.

If you don’t have a contract with cash flows you can use to finance growth, the best approach is to mobilize lending from several different funders to diversify the risk. For instance, TDC raised $200,000 from Shared Capital, $10,000 from Loan Enterprise Assistance Fund, and $15,000 from the Lower East Side People’s Federal Credit Union. Expect to pay around one percent of funds on closing and membership fees.

These loans were two to five year loans at 7–8 percent annual interest, so very cheap financing given the level of risk at the early stage of the cooperative. Note that any loan fund that asks for a percentage of revenue or profits in perpetuity is offering expensive capital compared to traditional term debt. A challenge, however, of term debt is that there is typically only a short grace or interest-only period before having to make interest and principal payments, typically before the cooperative is profitable. So without strong revenue soon after taking on the debt, this approach could require raising additional financing to pay back initial lenders or defaulting on payments. When negotiating, try to maximize the interest-only payment period or propose a balloon repayment of principal after a period of years to extend your runway.


In the early days before you have revenue and a reputation, philanthropies will likely steer you towards prize competitions or accelerators that they fund. Once you can show that you have market validation, you will be more likely to be able to secure grants of $100,000 or more, and philanthropies will be more open to direct conversations. Generally, it is difficult to raise philanthropic support for general operating expenses, and philanthropic funds cover initiatives that scale the impact of your work, such as worker organizing or training. Cold outreaches are typically ineffective. With a warm introduction to a passionate program officer, however, you have an internal ally who can guide you on how to structure your application in line with the organization’s strategy and how to expedite approvals with different ask amounts. and other cooperative developers might be able to help you identify aligned funders who may be interested in learning more and supporting your co-op. Similar to prize competitions, look for funders by both your geography and by sector.

$500,000 or more

Debt or equity raise from angel investors or the public

Higher volumes of capital can be raised in a more traditional raise process. Before starting this process, you will need to create a pitch deck, three-year profit and loss statement, a term sheet, and a data room with incorporation documents, existing financing contracts, and customer contracts.

If you are issuing outside equity in a cooperative, usually this will take the form of preferred stock. Spend some time upfront to decide on what percentage of company equity, revenue or profit your cooperative is willing to allocate to investors. Investors focused on risk capital tend to get returns at a single point of liquidation, rather than through dividends, and expect voting rights, both of which are incongruous with the cooperative model.

Ultimately, we chose to offer a revenue share to investors, but paid back as debt (not equity). Here is a link to our crowdfunding campaign, and we agreed to allocate 2.5% of our revenue until investors received back 2.5X of their initial amount. We raised $1.48M.

When issuing debt, set terms at a rate that generates a competitive internal rate of return. Given the risk profile, that return should be higher than what an investor would get in the public markets, but, given the value systems of a cooperative, should not be usurious. Given these constraints, we targeted an IRR of 15 to 35 percent, enforced by the multiple cap and time duration of a revenue share agreement. Personally, I don’t like paying out of profits because then debt investors meddle in your cost structure. By paying a percentage of revenue, you align incentives for growth with the team and investors. To reinvest in growth, you should maximize the grace period in which you are not issuing payments, but this grace period needs to be included in your return estimates.

Personally, I do not think there are enough funds to raise exclusively from institutional funds. While there is roughly $715B under management by impact investors, most are expecting to invest in C-Corporations in a way that is largely indistinct from commercial venture investing. Debt agreements or terms involving capped returns are generally difficult to get through their investment committees. If the cooperative wants to raise from individuals, a cooperative must decide whether or not it wants to raise from non-accredited investors. Accredited investors must meet one of these three requirements by the Securities and Exchange Commission.

If you want to raise anything other than donations from non-accredited investors, you must do a regulation crowdfunding campaign (which also allows you to raise from accredited individual investors). There are several platforms that help facilitate this. The three largest are Republic, StartEngine, and WeFunder, with CrowdFund Mainstreet having an impact focus. The cheapest option when I reviewed options was WeFunder, which charges a reduced fee of 6.5% of each investment if you are affiliated with a partner, such as or Zebras Unite. Fees are waived if an investment is above $25,000 and was sourced by your organization. In addition to platform fees, be sure to ask about escrow fees that are charged to investors when sending payments (on WeFunder this is 2% of funds up to $75).

In addition to the variable fees of raising capital on crowdfunding platforms, expect $10,000 — $25,000 in fixed legal and accounting costs, which is why this type of raise does not make sense for a low target amount. A securities lawyer will need to draft a subscription agreement, promissory note, term sheet, and fill out your Schedule C, a SEC requirement that outlines the nature and risks of your business. Lawyers can also advise on what you can and cannot say about your fundraise, given the sensitive nature of non-accredited investor participation. Again, talk to an attorney before you raise any money, because it can be a major legal problem if you publicly share a fundraising offer that is not in compliance with securities law. It is also important to secure directors and officers insurance via a platform like Embroker to protect your executives and Board members.

A certified public accountant will need to do reviewed financials if raising less than $1.07M, and you will need to pay for audited financials if raising over $1.07M. I recommend Mongio & Associates CPA as an accounting firm well-versed in regulation crowdfunding.

In addition to considering the fee structure of each crowdfunding platform, you should also consider how potential investors will learn about your campaign on a given platform. Learn what percentage of investors are likely to discover your campaign organically through the platform, as well as what marketing efforts the site will do on your behalf at different raise thresholds (e.g. investing in Facebook marketing or including the campaign in a newsletter to tens of thousands of the platform’s investors).

People experienced with crowdfunding will tell you that you need to plan to bring in 50–70 percent of the raise amount through your own networks. So plan to do the vast majority of the marketing efforts. Having a mailing list of at least 10,000 people is considered the gold standard for ensuring you reach your fundraising goals. When we started our crowdraise, we had just been featured in The New York Times and an AOC Instagram story. As a result of this and our earlier outreach efforts, we had an email list of 40,000 customers, over 10,000 Twitter followers, and over 5,000 Instagram followers. Sharing news of your crowdraise to all members, partners and customers is essential (with language approved by your lawyer!), as is circulating your crowdraise on social media and proactively asking pro-cooperative accounts with large followings to circulate on all social accounts. Just as with donation-based crowdfunding discussed earlier, increasing the target as each goal is met can build important momentum.

It is early days of figuring out how to finance growth-focused cooperatives aiming for significant scale. We as a sector need to figure out how to get entrepreneurs the capital they need, especially given the distributed financial upside, while rewarding investors for taking a risk on an early-stage organization. The proliferation of players financing cooperatives and precedents to guide the next generation of entrepreneurs gives me hope for a flourishing and well-financed future for cooperatives.

Additional resources on cooperative financing:

The content herein is for educational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. This playbook reflects the specific experience of the author’s experience at one cooperative, and may not reflect the unique needs of your cooperative and/or the specific legal requirements of your geographic area. Always consult with an attorney before creating an offering to investors, or raising money. Nothing contained in these materials constitutes a recommendation, or endorsement. All content is information of a general nature and does not take into account the circumstances, objectives, financial condition, or needs of any particular individual or entity. Nothing in the content constitutes a professional and/or financial recommendation or advice, nor does any information provided constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. The authors are not a fiduciary by virtue of any person’s use of or access to the content. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content here before making any decisions based on such information or other content. In exchange for using the content, you agree not to hold the authors, their affiliates or any third party service provider liable for any possible claim for damages arising from any decision you make based on information or other content made available to you.



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