What is Coop Exchange

15th January 2019
by Leo Sammallahti
Marketing Officer, Coop Exchange

What are cooperatives and do they work?

Cooperatives are democratic businesses, owned by the workers or the customers with each member having one share. Approximately one billion people are members of cooperatives, and they employ around 10% of global employed population. Cooperatives can be found in practically all industries, from worker owned factories to customer owned grocery stores.

Cooperative financial institutions, such as cooperative banks, credit unions and building societies are a major part of the world economy. In the US, over 100 million people are members of credit unions, and in Europe, cooperatives make up 20% of the banking sector. Even before the 2008 financial crisis, cooperative financial institutions were performing better or equally well as their competitors, but the crisis truly revealed the advantages of the model. In the US, credit unions were five times less likely to go bust than other banks and in Europe, the cooperative banks share of write-downs and losses was nearly three times smaller than their market share. The higher survival rate of cooperatives is not limited to finance, but applies to other types of cooperatives as well.

What is Coop Exchange and what makes us unique?

We are building an app that will allow everyone to invest in cooperatives around the world. The cooperatives remain fully owned by their members but we enable them to issue special shares for investors. The investors receive a dividend of the profits but have no voting rights. Unlike any other cooperative financial institution, we will enable participation across time and space, from everywhere in the world at any time of the day, with few clicks.

Coop Exchange seeks to solve two problems that many cooperatives face.

1. It's difficult for small cooperatives to operate on a loss while developing and spreading innovations. Uber lost $891 million in 2018. It can do this by covering the losses with venture capital investment. It's harder for a worker cooperative of taxi drivers to do the same: because everyone owns one share in a cooperative, equity investment to cover the losses is trickier.

2. One-member-one-share principle can also make founders who put a lot of initial effort into the company reluctant on adopting the cooperative model, as it makes giving sweat-equity more tricky.

Coop Exchange fixes these problems by enabling cooperatives to issue investor and founder shares. These two type of shares give a dividend of the profits, but no voting rights. The members have full and democratic ownership, but they can accept investment from anyone across the world and reward the founders. This will make it easier for driver owned cooperative alternatives to Uber to operate on a loss while they grow, as they can shift the initial losses from workers to investors in exchange of giving a share of the profits to them when they become profitable.

Coop Exchange is itself a cooperative and takes a small commission from investments above a certain threshold.

The big vision

We want an economic system where the stakeholders, whether they be workers or customers, can democratically hold accountable those who make decisions affecting them.

We want to turn business from a force that suppresses democracy into a force that supports it. We want internet to be a space where users own the value they create, instead of being products that are sold. Our mission is to beat the 1% at their own game and do so in a way that changes the rules by making it fair for the 99%.

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