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Day 28 — Exit to Community

By their very nature, startups are high-growth companies that often require a large influx of capital to launch and grow. The venture capital industry exists solely to serve this purpose, in hopes of one of two outcomes in order to see a return on investment: IPO (going public on the stock market) or acquisition by another company.

That causes problems, specifically for non-investor stakeholders. A company's customers, employees, and second-order stakeholders generally aren't aligned on incentives — they have no reason to want the company to grow as fast as possible for a traditional exit. In fact, these stakeholders are often harmed in the process, either by predatory business practices or deteriorating product quality.

I recently came across a third option: "exit-to-community."

The idea is simple. Rather than exiting in the traditional way, what if startups could transition to community ownership? This could include users, customers, workers, local community members, or some combination of these stakeholders.

This model is interesting specifically because it allows for the development of institutions within the current system, and then "exits" them into a community-based economy. Essentially, it acts as a transfer of power: we will leverage the resources at our disposal to grow this product or service and then place those resources into the hands of those who have had their hands on it all along.

From the team at the Media Enterprise Design Lab who developed the idea:

Exit to Community (E2C) is a strategy in the making. Its endgame is to be a long-term asset for its community, co-owned and co-governed by those who give it life.

I'm excited to dig in.