Curt Lyon, Executive Director
Last year, I wrote a piece on our blog that described Transform Finance’s growing focus on the ownership economy. Since then, the team has worked on several projects geared towards building out capital market knowledge and infrastructure for the ownership economy: documenting capital needs for community-owned real estate (CORE) deals, educating funders on employee ownership (EO) ecosystem building, researching new models of enterprise ownership, and creating tools that support investor diligence in EO funds. Over the next few months, we’ll be sharing several new resources and tools from these projects.
I’m writing this piece to describe the context for our current work and upcoming resources, which take a broader lens beyond employee ownership and CORE. In particular, we are (1) tackling ownership and governance structuring from the perspective of the business in addition to the investor’s; and (2) investigating the impact potential for worthwhile innovations that are not typically thought of as part of the ownership economy.
This work has led to new program areas and partnerships: exploring strategic design decisions founders can make to protect purpose, assessing the impact potential of “mainstream” acquisition tools like holding companies and Entrepreneurship Through Acquisition, and documenting the stories of business leaders and investors doing innovative work.
Across these interconnected projects, we’re finding hope by seeing that:
- There are alternatives to status quo design options.
- While some conventional elements of business structure/practice are so baked in that they are seen as givens, not choices, a lot of experimentation is happening and the default can be overcome.
- Many economic actors, including business leaders and “conventional” investors,” are looking for alternative paradigms and are willing to take the leap.
Our goal is to enable economic decision makers to re-evaluate the guiding principles behind the entities they create and/or invest in, and support implementation.
Below is an overview of some of the new resources we’ll be sharing over the next few months. They represent our current thinking on what the field needs right now, as well as an invitation to engage with us on themes that most resonate with you.
Capital for Employee Ownership
The employee ownership (EO) capital markets continue to evolve, and we're tracking it closely. Our July we issued an update to our Fund Database, which now includes close to 100 funds and financing vehicles and includes funds in Europe for the first time (separately, we’re exploring opportunities to scale up capital for EO in the United Kingdom). Next week, we'll publish research with Ownership Capital Lab demonstrating where EO funds fit in investor portfolios.
We're also set to launch the first iteration of an impact measurement and management (IMM) framework and public guide for EO investors. The tool is currently being developed alongside asset owners, fund managers, and field builders through a series of working groups and feedback sessions.
Mapping New Paths to Scale Alternative Ownership, Such as Holding Companies
As baby boomers retire, more than $10 trillion in business assets is expected to change hands, and many owners see only three options: sell to a large corporation, sell to private equity, or close. We're mapping alternatives that keep value rooted in workers and communities, connecting Alternative Ownership Enterprises (AOEs) with emerging strategies like impact-oriented holding companies and Entrepreneurship Through Acquisition (ETA), building on our recent research on combining ETA with employee ownership. Later this year, you’ll be able to review our deep-dive briefing on holding companies, alongside an update to our seminal Alternative Ownership Enterprises report.
Values-Led Business
How a company incorporates, what terms it raises capital on, and who sits on its board all shape whether it can stay true to its purpose as it grows. Our Values-Led Business project helps founders navigate these choices with intention. This summer, we launched the Founders Hub, an open-source library of guides, case studies, and research on ownership and governance structures. Coming soon: in-depth case studies of founders building values-led businesses, plus ready-to-use legal templates for different ownership structures and financial agreements.
Community-Owned Real Estate
The ways in which communities across the country are purchasing, financing, and stewarding real estate assets are rapidly evolving. We’re seeing activity in many types of geographies across many different types of assets (e.g. housing, commercial space, mixed-use development, land ownership). We are addressing problems related to capital for these projects: documenting experiences and best practices, identifying roles of different capital providers, and convening stakeholders to work on fieldwide challenges. This Fall, we are releasing a set of materials that includes an in-depth CORE financing report, and just launched a podcast series – a first for Transform Finance – that highlights the stories of leaders making CORE possible.
How does it all fit together?
Across these main projects, we’re hoping to paint a broader picture of how the economy might work when we rethink the principles behind design choices. Large-scale corporate acquisitions, investing in high-growth startups, choosing a successor for a small family-owned business, creating place-based community assets – each is one brushstroke within the big picture.
Together, the practices documented in our work show that the Transformative Finance principles – broad stakeholder input, non-extractive capital structures, and fair balance of risks and returns – are not just relevant to the experimental edges of the economy. Through our work, we can imagine what the economy looks like when these principles are applied across the entire economy: wealth holders and inheritors take more intentional approaches to wealth stewardship, union pension funds operate hand-in-hand with rank and file workers, policy is passed that curtails harmful corporate governance practices, funders create large-scale catalytic funding pools that fill in gaps for community-facing investments, and more.
We hope the set of resources coming out in the next few months are useful, pragmatic, and motivating. As we look forward to next phases of work, we hope to find new partnerships and collaborations that advance our collective work – drop us a line!
