Transform Finance is pleased to release a new database for investors interested in Alternative Ownership Enterprises (AOEs). Alternative Ownership Enterprises (AOEs) are firms that significantly shift economic value and decision-making power toward the non-investor stakeholders they impact, such as workers, producers, consumers, community members, or even a non-financial purpose. They include Cooperatives, Employee Stock Ownership Plans (ESOPs), Employee Ownership Trusts (EOTs) and many other models (for more information about AOEs and the models described below, please refer to our report: “Alternative Ownership Enterprises: An Introduction For Mission-Oriented Investors”.
The focus of this database is on funds operating within the United States and Canada. We hope this database provides a helpful starting point for deploying capital in a way that fosters an economy that works for the many, not just for the few.
42 AOE funds could collectively deploy $3 billion in the US and Canada
We identified 42 funds investing, at least partially, in Alternative Ownership Enterprises. 24 of those funds are currently raising capital. Together, the funds in the database have either raised or are aiming to raise over $3 billion in capital. Some of these funds invest exclusively in Cooperatives or in ESOP conversions while others include such financing as part of a broader portfolio that may encompass real estate, mission-oriented businesses, or non-ESOP private equity deals.
15 AOE-exclusive funds have raised or are aiming to raise $860 million
15 funds are exclusively focused on AOEs and have either raised or are aiming to raise $860 million. While this total is significant, it is grossly insufficient to meet the needs of this moment. With the greatest transfer of assets in history underway, estimated at $10 trillion, there is a significant opportunity to convert businesses owned by retiring owners to Alternative Ownership models, and the field needs to mobilize more resources to take advantage of this moment. In addition, the average size of the AOE-focused funds is under $60 million because many are run by first-time fund managers. The small size of the funds constrains their ability to build a deal pipeline and grow the field of AOEs.
Fund structures are diverse, as are their capital needs
The database includes a very diverse range of fund structures that extend beyond the common General Partner/Limited Partner (GP/LP) structure. The funds are structured to align with their goals and include:
- Evergreen loan funds managed by non-profit entities (e.g., Local Enterprise Assistance Fund)
- Dedicated funds managed by cooperative conglomerates that use the capital to acquire new companies (e.g. Obran, Evergreen Cooperatives)
- Leveraged buyout (LBO) funds which exit their investments by selling them to employees via an ESOP (e.g. HB Capital Management)
- Funds where the investment decisions are made by community members or external experts, not just the management team (e.g. Boston Ujima Project)
- Independent sponsor companies without a dedicated fund that put together deals and raise equity on a deal-by-deal basis (e.g. Southeast Acquisition Capital)
- Funds of funds making grants and investments from a Donor Advised Fund (e.g. Unlock Ownership Fund)
- Community Development Financial Institution (CDFI) loan funds with the express purpose of lending to startup and conversion cooperative deals (e.g. Cooperative Fund of the Northeast)
This range of structures is mirrored by a wide range of capital needs. Some funds seek philanthropic grants, while others aim to raise capital seeking competitive returns for their asset class. Many funds seek explicitly impact-first, non-extractive capital so the capital they provide companies can be most transformative.
ESOPs and Cooperatives are the AOE models that are most financed
Of the 15 funds exclusively focused on AOE models, most are focused on advancing a single model of employee ownership, either ESOPs or Worker-owned Cooperatives. We identified 3 funds focused exclusively on ESOP conversions with an average fund size of $170M. While there are more funds focused exclusively on Cooperatives (9 in total), they are much smaller with an average size of $40M. Common Trust is the only entity focused exclusively on converting companies to EOTs. There are not many funds working to advance purpose-centric models, in-part because many of those models do not require external financing (e.g. Benefit Corporations) or rely on donations by the owner (e.g. Foundation-Owned Companies) to be created and because they have only recently started to gain traction (e.g. PPTs, Golden Share)..
Important disclaimers
This database is still in beta. The information contained is based on desk research, with efforts made to validate data with investment teams where possible. Some data is not available or shared publicly (marked with “--” in the database), and there may be errors and omissions. Please email info@transformfinance.org with any recommendations, feedback, and edits.
The information provided in this database is intended for informational purposes only and does not constitute investment advice. It aims to serve as a starting point for investors looking to engage with and support Alternative Ownership Enterprises.
This list of funds is also accessible via ImpactAlpha’s Ownership Economy Fund Database.
Many thanks to the Capstone students at the NYU Wagner Graduate School of Public Service (Joe Liberatore, Ruoyu Cai, Rachel Fleischer, and Yiming Shan) for their work in compiling this database.
